Saks Fifth Avenue 2011 Annual Report Download - page 5

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For the year ended January 28, 2012, the Company’s percentages of net sales (exclusive of sales generated by
leased departments) by major merchandise category were as follows:
Women’s apparel ...................................... 34.8%
Women’s accessories ................................... 19.3%
Cosmetics and fragrances ................................ 12.2%
Men’s apparel, shoes, and accessories ...................... 16.2%
Women’s shoes ........................................ 12.2%
Other ................................................ 5.3%
Total ................................................ 100.0%
Inventory Purchasing and Distribution
Consistent with practices in the retail industry, the Company purchases merchandise assortments and volumes
to coincide with the seasonality of the business and expected customer demand. Retailers typically purchase
and receive larger amounts of merchandise in the fall as they prepare for the holiday shopping season
(primarily November and December).
The Company purchases merchandise from many vendors. Management monitors profitability and sales history
with vendors and believes it has alternative sources available for each category of merchandise it purchases.
Management believes it maintains good relationships with its vendors.
The Company has two distribution facilities serving its stores. Refer to “Item 2. Properties” for additional
information about these facilities.
The Company’s distribution facilities operate on a modern warehouse management system that leverages
electronic data interchange (“EDI”) technology in conjunction with high-speed automated conveyor systems in
order to receive and distribute merchandise as economically as possible to the Company’s stores. Many of the
Company’s vendors also utilize EDI technology which permits merchandise to be ‘cross docked’ from the
receiving department to the shipping department, with very little handling. The distribution centers also use
efficient radio frequency hand-held devices to scan barcodes on merchandise that is too large or fragile for the
conveyor system. The warehouse management system is interfaced to the Company’s mainframe to execute
‘booking’ of the merchandise to the stores and to pass the appropriate records to accounting for invoice
payment and reconciliation.
In 2010, the Company installed an advanced robotics system for receiving and fulfilling Saks Direct orders in its
primary distribution facility located in Aberdeen, Maryland. The automation provided by the robotics system
has significantly increased productivity, improved space utilization, and improved customer service since
becoming fully operational in mid-2011.
In February 2012, the Company announced its plans to expand its distribution and fulfillment capacity by adding
a new facility in Tennessee in mid-2012. The new facility, which totals approximately 564,000 square feet and
will be leased, is necessary to support the Company’s omni-channel strategy and planned sales growth in Saks
Direct. The Company will continue to operate its existing distribution facilities located in Aberdeen, Maryland
and Ontario, California.
Return Policy
The Company offers its customers a fair and liberal return policy, consistent with other luxury retailers, at SFA
stores, online at saks.com, and at OFF 5TH stores. Merchandise purchased on saks.com may be returned to SFA
stores. Approximately 22% of merchandise sold is later returned, and a large percentage of merchandise
returns occur within a matter of days of the selling transaction. The Company uses historic return patterns to
estimate expected returns.
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