Saks Fifth Avenue 2011 Annual Report Download - page 8

Download and view the complete annual report

Please find page 8 of the 2011 Saks Fifth Avenue annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 91

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91

At SFA and OFF 5TH, the Company seeks to enable its customers to discover both accessible and high-end
fashion in a warm, welcoming environment, guided by knowledgeable sales associates. For the SFA stores,
compensation for sales associates is generally a commission-based program. These sales associates undergo
extensive service, selling, and product-knowledge training and are encouraged to maintain frequent, personal
contact with their customers. Sales associates are encouraged to utilize detailed customer data available
through the Company’s point-of-sale equipment and software for their clienteling efforts, send personalized
thank-you notes, and routinely communicate with customers to advise them of new merchandise offerings and
special promotions. Typical SFA stores also provide comfortable seating areas, and most SFA stores offer a
complimentary personal shopping service called “The Fifth Avenue Club.”
The Company believes that it offers a high level of service for customers shopping online at saks.com through
easy-to-use site navigation and functionality and many customer-friendly features such as product reviews,
runway videos of apparel, detailed product descriptions, sizing information, interviews with designers, and
multiple angle shots of merchandise. In addition, the Company places high importance on quick, accurate
product delivery and an efficient and friendly call center.
Seasonality
The Company’s business, like that of many retailers, is subject to seasonal influences, with a significant portion
of its sales and net income realized during the second half of the fiscal year, which includes the holiday selling
season. Approximately 30% of the Company’s sales are generated during the fourth quarter, and normally a
large portion of its operating income is generated during the fall season.
Competition
The retail business is highly competitive. The Company’s stores and e-commerce operations primarily compete
with several national and regional department stores, specialty apparel stores, designer boutiques, outlet
stores, and e-commerce and mail-order retailers. Management believes that its omni-channel approach to the
business, knowledge of its trade areas and customer base, high level of customer service, broad selection of
quality fashion merchandise at appropriate prices, innovative marketing, strategic store locations, and
e-commerce presence positions the Company for a competitive advantage.
Associates
As of January 28, 2012, the Company employed approximately 13,500 associates, of which approximately 25%
were employed on a part-time basis. The Company hires additional temporary associates and increases the
hours of part-time associates during seasonal peak selling periods. Less than 1.0% of the Company’s associates
are covered by collective bargaining agreements. The Company considers its relations with its associates to be
good.
Inflation and Deflation
Inflation and deflation affect the costs incurred by the Company in its purchase of merchandise and in certain
components of its selling, general and administrative expenses. The Company does not believe that inflation has
had a material effect on its results of operations during the periods presented; however, there can be no
assurance that the Company’s business will not be affected by inflation in the future.
Discontinued Operations
As of January 31, 2009, the Company discontinued the operations of its Club Libby Lu (“CLL”) business, the
operations of which are presented as discontinued operations on the Consolidated Statements of Income and
the Consolidated Statements of Cash Flows for the prior year periods. CLL consisted of 98 leased, mall-based
specialty stores, targeting girls aged 4-12 years old. CLL generated revenues of approximately $52.2 million for
2008 and was not profitable. The Company incurred nominal charges in 2010 and 2009 associated with closing
the stores.
6