10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549

FORM 10-K

[X]    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
            For the fiscal year ended February 3, 2001 or

[   ]    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1394.
            For the transition period from _______________ to __________________

Commission File Number 1-13113

 
(Exact Name of Registrant as Specified in Its Charter)

Tennessee (State or Other Jurisdiction of Incorporation)	62-0331040 (IRS Employer Identification No.)
750 Lakeshore Parkway Birmingham, Alabama (Address of Principal Executive Offices)	35211 (Zip Code)

(205) 940-4000
(Registrant's Telephone Number, Including Area Code)

        Securities to be registered pursuant to Section 12(b) of the Act:  None

        Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 and Preferred Stock Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes (X)   No (   )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be continued, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  (X)

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 15, 2001 was approximately $1,689,327,138.

As of March 15, 2001, the number of shares of the Registrant's Common Stock outstanding was 141,848,226.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of the Saks Incorporated Annual Report to Shareholders for the Fiscal Year Ended February 3, 2001 as incorporated by reference into Part II.

(2) Portions of the Saks Incorporated Proxy Statement dated April 30, 2001 for the Annual Shareholder's Meeting to be held on June 13, 2001 are incorporated by reference into Part III.

The Exhibit Index is on page 21 of this document.

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TABLE OF CONTENTS

Item			Page
Part I	1	Business.	3
	2	Properties.	9
	3	Legal Proceedings.	10
	4	Submission of Matters to a Vote of Security Holders.	10
	Executive Officers of Registrant.		11
Part II	5	Market for Registrant's common Equity and Related Stockholder Matters.	13
	6	Selected Financial Data.	13
	7	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
	7A	Quantitative and Qualitative Disclosures about Market Risk	13
	8	Financial Statements and Supplementary Data	13
	9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	14
Part III	10	Directors and Executive Officers of Registrant.	15
	11	Executive Compensation.	15
	12	Security Ownership of Certain Beneficial Owners and Management.	15
	13	Certain Relationships and Related Transactions.	15
Part IV	14	Exhibits, Financial Statement Schedules, and Reports on Form 8-K.	16
Signatures			18

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PART I

Item 1. Business

General

Saks Incorporated (formerly Proffitt's, Inc.) was founded in 1919. The Company and its subsidiaries (together the "Company") operate the Saks Department Store Group ("DSG") with 243 stores in 24 states under the following nameplates: Parisian (40 specialty department stores), Proffitt's (26 traditional department stores), McRae's (29 traditional department stores), Younkers (50 traditional department stores), Herberger's (40 traditional department stores), Carson Pirie Scott (28 traditional department stores and 5 free-standing furniture stores), Bergner's (14 traditional department stores), and Boston Store (11 traditional department stores). DSG stores are principally anchor stores in leading regional or community malls, and the stores typically offer a broad selection of upper-moderate to better fashion apparel, shoes, accessories, jewelry, cosmetics, and decorative home furnishings, as well as furniture in selected locations.

The Company also operates Saks Fifth Avenue Enterprises ("SFAE"), which includes Saks Fifth Avenue ("SFA") (62 luxury department stores in 23 states), Off 5th Saks Fifth Avenue Outlet ("Off 5th") (50 outlet stores in 23 states), and Saks Direct (Saks Folio and Bullock & Jones catalogs and saks.com). Saks Fifth Avenue stores are principally free-standing stores in exclusive shopping destinations or anchor stores in upscale regional malls, and the stores offer a wide assortment of distinctive luxury fashion apparel, shoes, accessories, jewelry, cosmetics, and gifts. Off 5th stores are located in upscale mixed-use and off-price centers and offer apparel, shoes, accessories, cosmetics, and decorative home furnishings at exceptional prices, targeting the value-conscious customer. The Folio catalogs primarily offer fashionable women's apparel, accessories, home furnishings, and gifts. saks.com, launched in September 2000, offers a broad selection of merchandise of the type carried in SFA stores.

The Company experienced significant growth between 1994 and 1998, primarily through a series of acquisitions. The Company's major acquisitions are outlined below:

 

Name	Headquarters	Number of Stores Acquired	Locations	Date Acquired	Accounting Treatment
McRae's	Jackson, MS	31	Southeast	March 31, 1994	Purchase
Younkers	Des Moines, IA	50	Midwest	February 3, 1996	Pooling
Parisian	Birmingham, AL	40	Southeast/ Midwest	October 11, 1996	Purchase
Herberger's	St. Cloud, MN	37	Midwest	February 1, 1997	Pooling
Carson Pirie Scott,   Boston Store, and   Bergner's	Milwaukee, WI	55	Midwest	January 31, 1998	Pooling
Saks Holdings   (Saks Fifth Avenue,   Off 5th, and Folio)	New York, NY	95	National	September 17, 1998	Pooling

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In addition to acquisitions, the Company historically has grown through opening new stores and by expanding and renovating selected stores. The Company opened two DSG stores, two SFA stores, and four Off 5th stores during the fiscal year. The Company has announced plans to open two DSG stores, three SFA stores (including one international licensed operation in Riyadh, Saudi Arabia), and three Off 5th stores in 2001.

The Company also may sell or close stores in the normal course of business. The Company closed or sold five DSG stores in 2000. In addition, in March 2001, the Company sold nine DSG store locations and related assets to The May Department Stores Company.

Merchandising, sales promotion, and certain store operating support functions are conducted in multiple locations. Certain back office sales support functions for the Company, such as accounting, credit card administration, store planning, and information technology, are centralized.

Merchandising

The Company's merchandising strategy is to provide its customers a wide assortment of quality fashion apparel, shoes, accessories, cosmetics, and decorative home furnishings at appropriate prices. In both the DSG and SFA stores, the Company's commitment to a branded merchandising strategy, enhanced by its merchandise presentation and high level of customer service, makes it a preferred distribution channel for premier brand-name merchandise.

Key brands featured in the Company's DSG traditional department stores include Liz Claiborne, Susan Bristol, Sigrid Olsen, Calvin Klein, Polo/Ralph Lauren, Tommy Hilfiger, Nautica, Hart Schaffner & Marx, Estee Lauder, Clinique, Lancome, Chanel, Nine West, Enzo, Waterford, and Bali. In addition to the above brands, Parisian stores carry certain brands typically carried only at specialty stores which include: Karen Kane, BCBG, Garfield & Marks, Tahari, Robert Talbott, Tommy Bahama, Joseph Abboud, Hugo Boss, Bobbi Brown, Trish McEvoy, MAC, Donald Pliner, Via Spiga, and Brighton. Saks Fifth Avenue has key relationships with the leading fashion houses, including Giorgio Armani, Chanel, Dolce and Gabbana, Salvatore Ferragamo, Gucci, Donna Karan, Calvin Klein, Ralph Lauren, Judith Leiber, Prada, Oscar de la Renta, St. John, Yves St. Laurent, J.P. Tod, Ermenegildo Zegna, and Max Mara.

The Company supplements its branded assortments at both DSG stores and SFA stores with private brand merchandise in selected areas. Management expects to continue to enhance the private brand programs at both DSG and SFA. Management believes that these private brand programs will improve merchandise margins and create differentiation from competitors through unique, high-quality product offerings at attractive prices.

The Company has developed a knowledge of each of its trade areas and customer bases for its DSG, SFA, and Off 5th stores. This knowledge is gained through the Company's regional merchandising structure in conjunction with store visits by senior management and merchandising personnel and use of on-line merchandise information. The Company strives to tailor each store's merchandise assortment to the unique characteristics of its trade areas and customer bases.

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Certain departments in the Company's stores are leased to independent companies in order to provide high quality service and merchandise where specialization and expertise are critical and economics do not justify the Company's direct investment in the business. The leased departments vary by store to complement the Company's own merchandising departments. The principal leased department in the DSG stores is fine jewelry and in the SFA stores is furs. The terms of the lease agreements typically are between one and seven years and require the lessee to pay for fixtures and provide its own employees. Management regularly evaluates the performance of the leased departments and requires compliance with established customer service guidelines.

For the year ended February 3, 2001, the Company's percentages of owned sales by major merchandise category were as follows (excludes sales generated from Off 5th stores and Saks Direct):

	DSG	SFA
Women's Apparel	23.8%	43.3%
Men's Apparel	16.6	14.6
Home and gifts	14.5	1.0
Cosmetics	13.0	14.7
Shoes	7.8	6.0
Women's Accessories	7.3	16.3
Children's Apparel	6.9	0.9
Junior's Apparel	4.2	0.0
Intimate Apparel	4.1	1.9
Outerwear	1.8	1.3
Total	100.0%	100.0%

Purchasing and Distribution

The Company purchases merchandise from many vendors. Management monitors profitability and sales history with each supplier and believes it has alternative sources available for each category of merchandise it purchases. Management believes it has good relationships with its suppliers.

The Company has six distribution facilities serving its stores. Refer to "Item 2. Properties" for a listing of these facilities.

Each of the Company's distribution facilities is linked electronically to the Company's merchandising staffs through a computerized purchase order management system, facilitating rapid re-order and replenishment of merchandise. The Company utilizes electronic data interchange ("EDI") technology with its top vendors which is designed to move merchandise onto the selling floor more quickly and cost-effectively by allowing vendors to deliver floor-ready merchandise to the distribution facilities. For example, high speed automated conveyor systems are capable of scanning bar coded labels and diverting cartons to the proper merchandise processing areas. Many types of merchandise are being processed in the receiving area and immediately "cross docked" to the shipping dock for delivery to the stores. Certain processing areas are staffed with personnel equipped with hand-held radio frequency terminals that can scan a vendor's bar code and transmit the necessary information to a computer to record merchandise on hand.

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Information Technology

Company management believes that technological investments are necessary to support its business strategies, and, as a result, the Company has continually upgraded its information systems to improve operations and support future growth.

The Company's information systems provide information necessary for management operating decisions, cost reduction programs, and customer service enhancements. Individual data processing systems include point-of-sale and sales reporting, purchase order management, receiving, merchandise planning and control, payroll, human resources, general ledger, credit card administration, and accounts payable systems. Bar code ticketing is used, and scanning is utilized at all point-of-sale terminals. Information is made available on-line to merchandising staff and store management on a timely basis.

The use of EDI technology allows the Company to speed the flow of information and merchandise in order to capitalize on emerging sales trends, maximize inventory turnover, and minimize out-of-stock conditions. EDI technology includes an advance shipping notice system ("ASN"). The ASN system identifies discrepancies between merchandise that is ready to be shipped from a vendor's warehouse and that which was ordered from the vendor. This early identification provides the Company with a window of time to resolve any discrepancies in order to speed merchandise through the distribution facilities and into its stores.

Marketing

For the DSG stores, advertising is balanced among fashion and image advertising, price promotions, and special events. The Company uses a multi-media marketing approach for the DSG stores, including newspaper, television, radio, and direct mail. To promote its image as the fashion and style leader in its trade areas, the Company also sponsors fashion shows and in-store special events highlighting the Company's key brands and offerings.

For the SFA stores, the Company's marketing principally emphasizes the latest fashion trends in luxury merchandise and primarily utilizes direct mail and upscale magazine advertising. To promote its image as the primary source of luxury goods in its trade areas, SFA sponsors numerous fashion shows and in-store special events highlighting the core and emerging designers represented in the SFA stores.

Regional in-house advertising and sales promotion staffs in conjunction with outside advertising agencies produce the Company's advertising for both DSG and SFAE.

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For both DSG and SFA, the Company utilizes data captured through the use of proprietary credit cards to develop segmented advertising and promotional events targeted at specific customers who have established purchasing patterns for certain brands, departments, and store locations.

Proprietary Credit Cards

The Company's credit card bank, National Bank of the Great Lakes (the "Bank"), is a wholly owned national credit card bank subsidiary and issues all proprietary credit cards to certain of the Company's customers and makes all credit card loans.

Frequent use of these proprietary credit cards by customers is an important element in the Company's marketing and growth strategies. The Company believes that proprietary credit card holders shop more frequently with the Company, purchase more merchandise, and are generally more loyal to the Company than are customers who pay with cash or third-party credit cards. As previously mentioned, the Company also makes frequent use of the names and addresses of its proprietary credit card holders in direct marketing efforts.

The Company seeks to expand the number and use of the Bank's proprietary credit cards by, among other things, providing incentives to sales associates to open "instant credit" accounts, which can generally be opened within approximately three minutes. Also, customers who open accounts are entitled to certain discounts on initial and subsequent purchases. Proprietary credit card customers are offered private shopping nights, direct mail catalogs, special discounts, and advance notice of sale events. The Company has created various loyalty programs that reward customers for frequency and volume of proprietary charge card usage.

The Bank has approximately 3.9 million credit accounts that have been active within the prior six months. Approximately 43% of the Company's 2000 sales were transacted on these proprietary credit cards.

The Bank's credit card programs are subject to government regulations, including consumer protection laws, that impose restrictions on the making and collection of consumer loans and on other aspects of credit card operations. There can be no assurance that the existing laws and regulations will not be amended or that new laws or regulations will not be adopted, in a manner that could adversely affect the Bank's credit card operations.

Trademarks and Service Marks

The Company owns many federally registered trademarks and service marks, including, but not limited to, "Saks Fifth Avenue," "SFA," "S5A," "The Fifth Avenue Club," and "Off 5th," along with its various other store names and its private brands. The Company has filed a federal trademark registration for the name "Saks." Management believes its trademarks and service marks are important and that the loss of certain of its trademarks or trade names, particularly the store nameplates, could have a material adverse effect on the Company. Many of the Company's trademarks and service marks are registered in the United States Patent and Trademark Office. The term of these registrations is generally ten years, and they are renewable for additional ten-year periods indefinitely, so long as the marks are still in use at the time of renewal. Saks Incorporated is not aware of any claims of infringement or other challenges to its right to register or use its marks in the United States.

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Reliance on Fifth Avenue Store

The Company's flagship Saks Fifth Avenue store on Fifth Avenue in New York City accounted for approximately 7% of total Company owned sales in 2000 and plays a significant role in marketing the Saks Fifth Avenue brand name.

Customer Service

The Company believes that personal customer attention builds loyalty. The Company's strategy is to staff each of its DSG, SFA, and Off 5th stores with knowledgeable, friendly sales associates skilled in salesmanship and customer service. Sales associates maintain customer records, send personalized thank-you notes, and communicate personally with customers to advise them of new merchandise offerings and special promotions. Superior customer service is encouraged through the development and monitoring of sales/productivity goals and through specific award and recognition programs.

Seasonality

The Company's business, like that of most retailers, is subject to seasonal influences, with a significant portion of its net sales and net income realized during the fourth quarter of each year, which includes the Christmas selling season. Generally, more than 30% of the Company's sales and over 50% of its net income are generated during the fourth quarter.

Competition

The retail business is highly competitive. The Company's stores compete with several national and regional department stores, specialty apparel stores, designer boutiques, outlet stores, discount stores, general and mass merchandisers, and mail-order and electronic commerce retailers, some of which have greater financial and other resources than those of the Company. Management believes that its knowledge of its trade areas and customer base, combined with providing superior customer service and a broad selection of quality fashion merchandise at appropriate prices in prime store locations, provides a competitive advantage.

Associates

As of March 15, 2001, the Company employed approximately 55,000 associates, of which approximately 40% were employed on a part-time basis. The Company hires additional temporary associates and increases the hours of part-time employees during seasonal peak selling periods. Approximately 150 of the Company's associates are covered by collective bargaining agreements. The Company considers its relations with its associates to be good.

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Item 2. Properties.

The Company currently operates six distribution facilities as follows:

Stores Served	Location of Facility	Square Feet	Owned/Leased
Proffitt's, McRae's, and Parisian	Steele, Alabama	180,000	Owned
Younkers	Green Bay, Wisconsin	182,000	Owned
Younkers	Ankeny, Iowa	102,000	Leased
Carson Pirie Scott, Bergner's, Boston    Store, and Herberger's	Rockford, Illinois	585,000	Owned
Saks Fifth Avenue and Off 5th	Aberdeen, Maryland	514,000	Leased
Saks Fifth Avenue and Off 5th	Ontario, California	120,000	Leased

During 2000, the Company consolidated its St. Cloud distribution facility, serving the Herberger's stores, into its Rockford, Illinois center. In spring 2001, the Company is closing three separate distribution facilities located in Birmingham, Alabama (serving Parisian); Jackson, Mississippi (serving McRae's); and Maryville, Tennessee (serving Proffitt's) and consolidating these centers into a new 180,000 square foot state-of-the-art facility in Steele, Alabama.

The Company's principal administrative offices are as follows:

Office	Location of Facility	Square Feet	Owned/Leased
Proffitt's/McRae's stores support Office	Alcoa, Tennessee	72,000	Leased
Younkers stores support offices	Des Moines, Iowa	127,000	Leased
Parisian stores support offices and    corporate administrative offices	Birmingham, Alabama	125,000	Owned
Carson Pirie Scott, Bergner's, Boston    Store, and Herberger's stores support    offices	Milwaukee, Wisconsin	156,000	Owned
Corporate Operations Center	Jackson, Mississippi	272,000	Owned
Northern credit center	Elmhurst, Illinois	41,500	Leased
Saks Fifth Avenue support offices	New York, New York	298,000	Leased
Saks Fifth Avenue support offices	Hickory Ridge, Maryland	70,000	Leased

Also during 2000, the Company consolidated the support functions for the McRae's stores, headquartered in Jackson, Mississippi, into the Proffitt's support offices located in Alcoa, Tennessee, and the support functions for the Herberger's stores, headquartered in St. Cloud, Minnesota, into the Carson Pirie Scott support offices located in Milwaukee, Wisconsin.

The following table sets forth information about the Company's stores as of March 15, 2001. The majority of the Company's stores are leased. Store leases generally require the Company to pay the greater of a fixed minimum rent or an amount based on a percentage of sales. Generally, the Company is responsible under its store leases for a portion of mall promotion and common area maintenance expenses and for certain utility, property tax, and insurance expenses. Typically, the Company contributes to common mall maintenance and is responsible for property tax and insurance expenses at its owned locations. Generally, store leases have primary terms ranging from 20 to 30 years and include renewal options ranging from 5 to 15 years. Off 5th leases typically have shorter terms.

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	Owned Locations		Leased Locations		Total
Store Name	Number of Units	Gross Square Feet (in mil.)	Number of Units	Gross Square Feet (in mil.)	Number of Units	Gross Square Feet (in mil.)	Locations
Proffitt's	8	1.0	18	1.5	26	2.5	Southeast
McRae's	15	2.0	14	1.3	29	3.3	Southeast
Younkers	3	.4	47	4.5	50	4.9	Midwest
Parisian	9	1.1	31	3.7	40	4.8	Southeast and Midwest
Herberger's	4	.5	36	2.3	40	2.8	Midwest
Carson Pirie Scott	8	1.8	25	3.3	33	5.1	Midwest
Boston Store	8	1.6	.3	.3	11	1.9	Midwest
Bergner's	5	.6	9	.9	14	1.5	Midwest
Saks Fifth Avenue	30	4.0	32	2.4	62	6.4	National
Off 5th			50	1.3	50	1.3	National
Totals	90	13.0	265	21.5	355	34.5

Item 3. Legal Proceedings.

The Company is involved in several legal proceedings arising from its normal business activities and has accruals for losses where appropriate. Management believes that none of these legal proceedings will have an ongoing material adverse effect on the Company's consolidated financial position, results of operations, or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

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Executive Officers of the Registrant.

The name, age, and position held with the Company for each of the executive officers of the Company are set forth below.

Name	Age	Position
R. Brad Martin	49	Chairman of the Board of Directors and Chief Executive Officer
James A. Coggin	59	President and Chief Administrative Officer; Director
Douglas E. Coltharp	39	Executive Vice President and Chief Financial Officer
Brian J. Martin	44	Executive Vice President of Law and General Counsel
Donald E. Wright	43	Executive Vice President of Finance and Chief Accounting Officer
Julia A. Bentley	42	Senior Vice President of Investor Relations and Communications; Corporate Secretary

R. Brad Martin has served as a Director since 1984 and became Chairman of the Board in February 1987 and Chief Executive Officer in July 1989. R. Brad Martin is the brother of Brian J. Martin.

James A. Coggin was named President and Chief Administrative Officer of Saks Incorporated in November 1998. Mr. Coggin served as President and Chief Operating Officer of the Company from March 1995 to November 1998 and served as Executive Vice President and Chief Administrative Officer of the Company from March 1994 to March 1995. From 1971 to March 1994, Mr. Coggin served in various management and executive positions with McRae's, Inc.

Douglas E. Coltharp joined the Company in November 1996 as Executive Vice President and Chief Financial Officer. Mr. Coltharp was with NationsBank (now Bank of America) from 1987 to November 1996, where he held a variety of senior positions including the post of Senior Vice President of Corporate Finance.

Brian J. Martin was promoted to Executive Vice President of Law and General Counsel of the Company in May 1997. He served as Senior Vice President of Human Resources and Law and General Counsel from August 1995 to May 1997 and served as Senior Vice President and General Counsel of Proffitt's from March 1995 to August 1995. Prior to joining the Company in 1994 as Vice President and General Counsel, Mr. Martin was affiliated with the Indianapolis, Indiana law firm of Barnes and Thornburg and served as Assistant Solicitor General of the United States. Brian J. Martin is the brother of R. Brad Martin.

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Donald E. Wright was promoted to Executive Vice President and Chief Accounting Officer in February 2001. Prior to that, he served as Senior Vice President of Finance and Chief Accounting Officer since joining the Company in April 1997. Prior to joining the Company, Mr. Wright was a Partner with the international accounting firm of Coopers & Lybrand LLP (now PricewaterhouseCoopers LLP).

Julia A. Bentley has served as Senior Vice President of Investor Relations and Communications and Secretary of the Company since September 1997. Between March 1994 and September 1997, she held the post of Senior Vice President of Investor Relations and Planning and Secretary. Ms. Bentley joined the Company in 1987 and has held various financial positions, including Chief Financial Officer. Prior to joining the Company, she was an audit manager with an international accounting firm.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

The information set forth under the caption "Market Information," appearing on page 74 of the Saks Incorporated Annual Report to Shareholders for the Fiscal Year Ended February 3, 2001 (the "Annual Report"), is incorporated herein by reference.

Item 6. Selected Financial Data.

The information set forth under the caption "Five-Year Financial Summary" appearing on page 33 of the Annual Report is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The information set forth under the caption "Management's Discussion and Analysis" appearing on pages 34 through 42 of the Annual Report is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company's exposure to market risk primarily arises from changes in interest rates. The effects of changes in interest rates on earnings generally have been small relative to other factors that also affect earnings, such as sales and operating margins. The Company seeks to manage exposure to adverse interest rate changes through its normal operating and financing activities, and if appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as part of an overall risk management program in order to manage the costs and risks associated with various financial exposures. The Company does not enter into derivative instruments for trading purposes, as clearly defined in its risk management policies. The Company is exposed to interest rate risk primarily through its securitization, borrowing, and derivative financial instrument activities, which are described in Notes 4, 7, and 12 to the Consolidated Financial Statements appearing on pages 50 through 52, 55 and 56, and 62, respectively, of the Annual Report and are incorporated herein by reference.

Based on the Company's market risk sensitive instruments (including variable rate debt and derivative financial instruments) outstanding at February 3, 2001, the Company has determined that there was no material market risk exposure to the Company's consolidated financial position, results of operations, or cash flows as of such date.

Item 8. Financial Statements and Supplementary Data.

The consolidated Financial Statements and the Report of Independent Accountants appearing on pages 43 through 73 of the Annual Report are incorporated herein by reference.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant.

The information set forth under the caption "Election of Directors" contained on pages 5 through 8 of the Saks Incorporated Proxy Statement dated April 30, 2001 (the "Proxy Statement"), with respect to Directors of the Company, is incorporated herein by reference.

The information required under this item with respect to the Company's Executive Officers is incorporated by reference from Part I of this report under "Executive Officers of the Registrant."

The information set forth under the caption "Section 16(a) of the Securities Exchange Act of 1934" contained on page 19 of the Proxy Statement, with respect to Director and Executive Officer compliance with Section 16(a), is incorporated herein by reference.

Item 11. Executive Compensation.

The information set forth under the captions "Directors' Fees" and "Executive Compensation" contained on pages 8 and 9 through 13, respectively, of the Proxy Statement with respect to executive compensation is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information set forth under the caption "Outstanding Voting Securities" contained on pages 3 through 5 of the Proxy Statement with respect to security ownership of certain beneficial owners and management is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

The information set forth under the captions "Further Information Concerning Directors" and "Certain Transactions" contained on pages 8 and 9 and 14, respectively, of the Proxy Statement with respect to certain relationships and related transactions is incorporated herein by reference.

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PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)  (1), (2), and (3) -- The responses to these portions of Item 14 are submitted as a separate
     section of this report.

(b)  Reports on Form 8-K filed during the fourth quarter.

     None.

(c)  Exhibits -- The response to this portion of Item 14 is submitted as a separate section of this
     report.

(d)  Financial statement schedules -- The response to this portion of Item 14 is submitted as a
     separate section of this report.

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ITEM 14(a)(1) AND (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

(a)  The following documents are filed as a part of this report:

(1)  Consolidated Financial Statements
     The following Consolidated Financial Statements and Report of Independent Accountants of
     Saks Incorporated and Subsidiaries, included on pages 43 through 73 of the Saks
     Incorporated Annual Report to Shareholders for the Fiscal Year Ended February 3, 2001, are
     incorporated by reference in Item 8:

• Consolidated Balance Sheets as of February 3, 2001 and January 29, 2000
• Consolidated Statements of Income for Fiscal Years Ended February 3, 2001, January 29, 2000, and January 30, 1999
• Consolidated Statements of Changes in Shareholders' Equity for Fiscal Years Ended February 3, 2001, January 29, 2000, and January 30, 1999
• Consolidated Statements of Cash Flows for Fiscal Years Ended February 3, 2001, January 29, 2000, and January 30, 1999
• Notes to Consolidated Financial Statements

(2)  Schedules to Financial Statements

     The following Consolidated Financial Statement Schedule of Saks Incorporated and
     Subsidiaries and the Related report of Independent Accountants are included in item 14(d):     

Saks Incorporated
Valuation and Qualifying Accounts

The following schedule has been restated to reflect the Company's acquisition of Saks Holdings, Inc., which was accounted for as a pooling of interests.

	Balance at Beginning of Year	Charged to Costs and Expenses	Charged to Other Accounts		Deductions	Balance at End of Year
Year Ended January 30, 1999    Allowance for Doubtful Accounts	$    9,770	-	(9,770)	(a)	-	$            -
Year Ended January 29, 2000     Allowance for Doubtful Accounts	$            -	-	-		-	$            -
Year Ended February 3, 2001     Allowance for Doubtful Accounts	$            -	-	-		-	$            -

_____________________________
(a) Adjustment related to the Carson's accounts receivable that were subsequently sold into the Company's securitization program on February 2, 1998.

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

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PART IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

        See attached Exhibit List following Signatures.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                                                                                                  Saks Incorporated

Date: April 26, 2001

/s/                   Douglas E. Coltharp
Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
Principal Accounting Officer

/s/                      Donald E. Wright
Donald E. Wright
Executive Vice President of Finance and
Chief Accounting Officer
Principal Accounting Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the dates indicated.

/s/                       R. Brad Martin
R. Brad Martin
Chairman of the Board
Chief Executive Officer
Principal Executive Officer

/s/                      Ronald de Waal
Ronald de Waal
Vice Chairman of the Board

/s/                 Bernard E. Bernstein
Bernard E. Bernstein
Director

<PAGE> 18

/s/                  Stanton J. Bluestone
Stanton J. Bluestone
Director

/s/                   John W. Burden, III
John W. Burden, III
Director

/s/                      James A. Coggin
James A. Coggin
President and Chief Administrative Officer
Director

/s/                      Julius W. Erving
Julius W. Erving
Director

/s/                     Michael S. Gross
Michael S. Gross
Director

/s/                       Donald E. Hess
Donald E. Hess
Director

/s/                        G. David Hurd
G. David Hurd
Director

/s/                       George L. Jones
George L. Jones
President and Chief Executive Officer of
Saks Department Store Group
Director

/s/                       Philip B. Miller
Philip B. Miller
Director

<PAGE> 19

/s/                       C. Warren Neel
C. Warren Neel
Director

/s/                     Stephen I. Sadove
Stephen I. Sadove
Director

/s/                 Marguerite W. Sallee
Marguerite W. Sallee
Director

/s/                 Christopher J. Stadler  
Christopher J. Stadler
Director

/s/                        Gerald Tsai, Jr  
Gerald Tsai, Jr.
Director

/s/                      Julia A. Bentley 
Julia A. Bentley
Senior Vice President and Secretary

<PAGE> 20

FORM 10-K -- ITEM 14(a)(3) AND 14(c)
SAKS INCORPORATED AND SUBSIDIARIES
EXHIBITS

Exhibit   No.	Description
3.1	Amended and Restated Charter of Saks Incorporated (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 29, 2000)
3.2	Amended and Restated Bylaws of the Company (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
4.1	Indenture, dated as of November 9, 1998, among the Company, the Subsidiary Guarantors, and The First National Bank of Chicago, as trustee ($500 million of 8-1/4% Notes due 2008) (incorporated by reference from the Exhibits to the Form 8-K of Saks Incorporated dated November 9, 1998)
4.2	Indenture, dated as of November 25, 1998, among the Company, the Subsidiary Guarantors, and The First National Bank of Chicago, as trustee ($350 million of 7-1/4% Notes due 2004) (incorporated by reference from the Exhibits to the Form 8-K of Saks Incorporated dated December 2, 1998)
4.3	Indenture, dated as of December 2, 1998, among the Company, the Subsidiary Guarantors, and The First National Bank of Chicago, as trustee ($250 million of 7-1/2% Notes due 2010) (incorporated by reference from the Exhibits to the Form 8-K of Saks Incorporated dated December 2, 1998)
4.4	Indenture, dated as of February 17, 1999, among the Company, the Subsidiary Guarantors, and The First National Bank of Chicago, as trustee ($200 million, 7-3/8% Notes, due 2019) (incorporated by reference from the Exhibits to the Form 8-K of Saks Incorporated dated February 18, 1999)
4.5	Registration Rights Agreement between Proffitt's, Inc. and Parisian, Inc. dated July 8, 1996 (incorporated by reference from the Exhibits to the Form S-4 Registration Statement No. 333-09043 of Proffitt's, Inc. dated August 16, 1996)
4.6	Registration Rights Agreement between Proffitt's, Inc. and certain specified stockholders of Saks Holdings, Inc. dated July 4, 1998 (incorporated by reference from the Exhibits to the Form 8-K of Proffitt's, Inc. dated July 8, 1998)
4.7	Stockholders' Agreement between Proffitt's, Inc. and certain specified stockholders of Saks Holdings, Inc. dated July 4, 1998 (incorporated by reference from the Exhibits to the Form 8-K of Proffitt's, Inc. dated July 8, 1998)
4.8	Rights Agreement, dated as of March 28, 1995, by and between Proffitt's, Inc. and Union Planters National Bank, as Rights Agent (incorporated by reference from the Exhibits to the Form 8-K of Proffitt's, Inc. dated April 3, 1995)
4.9	Amendment No. 1, dated as of March 25, 1998, to the Rights Agreement, dated as of March 28, 1995, between the Registrant and Union Planters Bank, N.A., as Rights Agent (incorporated by reference to the Exhibits to the Form 8-K of Proffitt's, Inc. dated March 26, 1998).
4.10	Indenture, dated as of July 23, 1999, by and among the Company, the Subsidiary Guarantors and The First National Bank of Chicago, as trustee ($350 million, 7% Notes, due 2004 (incorporated by reference from the Exhibits to the Saks Incorporated 8-K dated July 27, 1999)
10.1	LC Account Agreement dated February 2, 1998, by and between Proffitt's, Inc. and NationsBank, N.A., as Agent (incorporated by reference from the Exhibits to the Form 8-K of Proffitt's, Inc. dated February 17, 1998)
10.2	Series 1997-2 Supplement dated as of August 21, 1997, by and among Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank Minnesota, National Association, as Trustee (incorporated by reference from the Exhibits to the form 8-K/A filed by the Proffitt's Credit Card Master Trust and Proffitt's Credit Corporation on September 23, 1997)
10.3	Series 1998-1 Supplement dated as of May 6, 1998, by and among Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank Minnesota, National Association, as Trustee (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.4	Series 1998-2 Supplement dated as of May 21, 1998, by and among Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank Minnesota, National Association, as Trustee (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.5	Second Amended and Restated Credit Agreement among Saks Incorporated, Bank of America, N.A. as Agent, several other Banks as Agents, and several Banks as Lenders, dated as of August 26, 1999 (incorporated by reference from the Saks Incorporated Form 10-Q for the fiscal quarter ended July 31, 1999)
10.6	Series 1999-1 Supplement dated as of July 21, 1999, to the Master Pooling and Servicing Agreement dated as of August 21, 1997, among Saks Credit Corporation, as Transferor, Saks Incorporated, as Servicer, and Norwest Bank Minnesota, National Association, as Trustee (incorporated by reference from the Saks Credit Card Master Trust Form 8-K dated July 28, 1999)
10.7	Master Pooling and Servicing Agreement dated as of August 21, 1997, by and among Saks Credit Corporation, Saks Incorporated, and Norwest Bank Minnesota, National Association, as Trustee, as amended by Amendment No. 1 dated as of February 2, 1998, and Amendment No. 2 dated as of July 1, 1999 (incorporated by reference to Exhibits to the Proffitt's Credit Card Master Trust Current Report on Form 8-K filed on September 23, 1997, Exhibits to the Current Report on Form 8-K filed on February 18, 1998 and Exhibits to the Current Report on Form 8-K filed on July 2, 1999).
10.8	Receivables Purchase Agreement dated as of July 1, 1999 by and among National Bank of the Great Lakes, Saks Credit Corporation, and Saks Incorporated (incorporated by reference to Exhibits to the Saks Credit Card Master Trust Current Report on Form 8-K filed on July 2, 1999).
10.9	Transfer and Administration Agreement dated as of July 1, 1999 among Enterprise Funding Corporation, Saks Transitional Credit Corporation, Saks Incorporated, and NationsBank, N.A. (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 29, 2000)
10.10	Receivables Purchase Agreement dated as of July 1, 1999 among National Bank of the Great Lakes, Saks Transitional Credit Corporation, and Saks Incorporated (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 29, 2000)
10.11	Series 2001-1 Supplement dated as of March 1, 2001 among Saks Credit Corporation, Saks Incorporated, and Wells Fargo Bank Minnesota, National Association, as trustee, under the Master Pooling and Servicing Agreement dated as of August 21, 1997 (incorporated by reference from the Exhibits to the Form 8-K filed by Saks Credit Card Master Trust on April 19, 2001)
10.12	Certificate Purchase Agreement dated as of March 1, 2001 among Saks Credit Corporation, Saks Incorporated, Enterprise Funding Corporation, and Bank of America, N.A. (incorporated by reference from the Exhibits to the Form 8-K filed by Saks Credit Card Master Trust on April 19, 2001)
10.13	Proffitt's, Inc. 1987 Stock Option Plan, as amended (incorporated by reference from the Exhibits to the Form S-8 Registration Statement No. 33-46306 of Proffitt's, Inc. dated March 10, 1992)
10.14	Saks Incorporated Amended and Restated Employee Stock Purchase Plan (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.15	Saks Incorporated Amended and Restated 1994 Long-Term Incentive Plan (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.16	*Saks Incorporated Amended and Restated 1997 Stock-Based Incentive Plan
10.17	Saks Incorporated 401(k) Retirement Plan (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.18	Trust Agreement for the Saks Incorporated 401(k) Retirement Plan (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.19	Saks Incorporated Supplemental Savings Plan (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.20	Trust Agreement for the Saks Incorporated Supplemental Savings Plan (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 30, 1999)
10.21	First Amendment to Proffitt's, Inc. Supplemental Savings Plan (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.22	Second Amendment to Proffitt's, Inc. Supplemental Savings Plan (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31, 1998
10.23	Third Amendment and Restatement of the Parisian, Inc. Stock Option Plan for Officers (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended February 1, 1997)
10.24	First Amendment and Restatement of The Parisian, Inc. Management Incentive Plan (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended February 1, 1997)
10.25	Younkers, Inc. Stock and Incentive Plan (incorporated by reference from the Exhibits to the Form S-1 Registration Statement No. 33-45771 of Younkers, Inc.)
10.26	Younkers, Inc. Management Stock Option Plan (incorporated by reference from the Exhibits to the Form S-1 Registration Statement No. 33-45771 of Younkers, Inc.)
10.27	Younkers, Inc. 1993 Long-Term Incentive Plan (incorporated by reference from the Exhibits to the Form S-8 Registration Statement No. 33-59224 of Younkers, Inc.
10.28	Form of Younkers, Inc. Deferred Compensation Plan (incorporated by reference from the Exhibits to the Form 10-Q of Younkers, Inc. for the quarter ended May 1, 1993)
10.29	Carson Pirie Scott & Co. Supplemental Executive Retirement Plan (incorporated by reference to Carson Pirie Scott & Co. Common Shares Registration Statement No. 33-67514)
10.30	Carson Pirie Scott & Co. Deferred Compensation Plan (incorporated by reference from the Exhibits to the Form 10-K of Carson Pirie Scott & Co. for the fiscal year ended January 28, 1995)
10.31	Carson Pirie Scott & Co. 1993 Stock Incentive Plan as Amended and Restated as of March 19, 1997 (incorporated by reference from the Exhibits to the Form 10-K of Carson Pirie Scott & Co. for the fiscal year ended February 2, 1997)
10.32	Carson Pirie Scott & Co. 1996 Long-Term Incentive Plan (incorporated by reference from the Exhibits to the Form 10-K of Carson Pirie Scott & Co. for the fiscal year ended February 2, 1997)
10.33	Saks Fifth Avenue Retirement Savings Plan (incorporated by reference from the Exhibits to the Form S-8 Saks Incorporated Registration Statement No. 333-66759)
10.34	Saks Holdings, Inc. 1996 Management Stock Incentive Plan (incorporated by reference from the Exhibits to the Form S-1 of Saks Holdings, Inc. filed with the Commission on August 29, 1996)
10.35	Saks Fifth Avenue Supplemental Pension Plan, effective July 2, 1990 (incorporated by reference from the Exhibits to the Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.36	Saks Holdings, Inc. Senior Management Stock Incentive Plan, dated as of October 17, 1990 (incorporated by reference from the Exhibits to the Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.37	Saks Holdings, Inc. 1996 Management Stock Incentive Plan, dated as of February 1, 1996 (incorporated by reference from the Exhibits to the Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.38	Amendment to the Saks Holdings, Inc. 1996 Management Stock Incentive Plan, dated as of February 1, 1996 (incorporated by reference from the Exhibits to the Form 10-K of Saks Holdings, Inc. for the fiscal year ended January 31, 1998)
10.39	$500,000 Loan Agreement between Proffitt's, Inc. and R. Brad Martin dated February 1, 1989 (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 28, 1989)
10.40	*Promissory Note for $885,000 between Saks Incorporated and R. Brad Martin dated April 28, 2000
10.41	*Promissory Note for $265,000 between Saks Incorporated and James A. Coggin dated April 14, 2000
10.42	*Promissory Note for $250,000 between Saks Incorporated and Douglas E. Coltharp dated April 14, 2000
10.43	*Promissory Note for $110,000 between Saks Incorporated and Brian J. Martin dated April 14, 2000
10.44	*Promissory Note for $200,000 between Saks Incorporated and Donald E. Wright dated April 14, 2000
10.45	Form of Seventh Amended and Restated Employment Agreement by and between R. Brad Martin, Chairman and Chief Executive Officer, and Saks Incorporated dated November 1, 2000 (incorporated by reference from the Exhibits to the Form 10-Q of Saks Incorporated for the quarter ended October 28, 2000)
10.46	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to R. Brad Martin dated October 11, 1996 (incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.47	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1997 Stock-Based Incentive Plan granted to R. Brad Martin dated January 31, 1998 (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.48	Form of Employment Agreement by and between Saks Incorporated and James A. Coggin, President and Chief Administrative Officer, dated November 1, 2000 (incorporated by reference from the Exhibits to the Form 10-Q of Saks Incorporated for the quarter ended October 29, 2000)
10.49	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to James A. Coggin dated October 28, 1996 (incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.50	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1997 Stock-Based Incentive Plan granted to James A. Coggin dated January 31, 1998 (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.51	Form of Employment Agreement between Saks Incorporated and Douglas E. Coltharp, Executive Vice President and Chief Financial Officer, dated November 1, 2000 (incorporated by reference from the Exhibits to the Form 10-Q of Saks Incorporated for the quarter ended October 29, 2000)
10.52	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to Douglas E. Coltharp dated November 25, 1996 (incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.53	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1997 Stock-Based Incentive Plan granted to Douglas E. Coltharp dated January 31, 1998 (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.54	Form of Employment Agreement between Saks Incorporated and Brian J. Martin, Executive Vice President and General Counsel, dated November 1, 2000 (incorporated by reference from the Exhibits to the Form 10-Q of Saks Incorporated for the quarter ended October 29, 2000)
10.55	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to Brian J. Martin dated October 28, 1996 (incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's, Inc. for the quarter ended November 2, 1997)
10.56	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1997 Stock-Based Incentive Plan granted to Brian J. Martin dated January 31, 1998 (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.57	Form of Employment Agreement by and between Saks Incorporated and Donald E. Wright, Executive Vice President of Finance and Chief Accounting Officer, dated November 1, 2000 (incorporated by reference from the Exhibits to the Form 10-Q of Saks Incorporated for the quarter ended October 29, 2000)
10.58	Form of Restricted Stock Grant Agreement under the Proffitt's, Inc. 1997 Stock-Based Incentive Plan granted to Donald E. Wright dated January 31, 1998 (incorporated by reference from the Exhibits to the Form 10-K of Proffitt's, Inc. for the fiscal year ended January 31, 1998)
10.59	Form of Employment Agreement by and between Saks Holdings, Inc., Proffitt's, Inc. and Philip B. Miller dated as of September 3, 1998 (incorporated by reference from the Exhibits to the Form 8-K of Saks Incorporated dated September 23, 1998)
10.60	Form of Saks Incorporated 1998 Senior Executive Bonus Plan (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 29, 2000)
10.61	Form of Saks Fifth Avenue Pension Plan -- 1998 Restatement (incorporated by reference from the Exhibits to the Form 10-K of Saks Incorporated for the fiscal year ended January 29, 2000)
10.62	Proffitt's, Inc. 1998 Senior Executive Bonus Plan (incorporated by reference from Exhibit A to the Proffitt's, Inc. proxy statement dated May 4, 1998)
10.63	*Saks Incorporated Executive Severance Plan effective September 13, 2000.
13.1	*Annual Report to Shareholders for the fiscal year ended February 3, 2001 (not to be deemed filed except for those portions thereof which are incorporated herein by reference in this filing)
21.1	*Subsidiaries of the registrant
23.1	*PricewaterhouseCoopers LLP Consent (re: Saks Incorporated Financials)
	*PricewaterhouseCoopers LLP Consent (re: Saks Incorporated Employee Stock Purchase Plan Financials)
99.1	*Cautionary Statements Relating to Forward-Looking Information
99.2	*Saks Incorporated Employee Stock Purchase Plan Financial Statements for the years ended December 31, 2000 and January 31, 2000

________________________________
* Filed as a current year Exhibit.

EX-10

SAKS INCORPORATED
AMENDED AND RESTATED
1997 STOCK-BASED INCENTIVE PLAN

1.     Purpose.

        The purpose of the SAKS INCORPORATED AMENDED AND RESTATED 1997 STOCK-BASED INCENTIVE PLAN (the "Plan") is to further the earnings of SAKS INCORPORATED, a Tennessee corporation, and its affiliated companies (collectively, the "Company") by assisting the Company in attracting, retaining and motivating employees and directors of high caliber and potential. The Plan provides for the award of stock-based incentives to certain employees and directors who make substantial contributions to the Company by their loyalty, industry and invention.

2.    Administration.

        The Plan shall be administered by a committee (the "Committee") selected by the Board of Directors of the Company (the "Board of Directors") consisting solely of two or more non-employee directors. The Committee shall have full and final authority in its discretion to interpret the provisions of the Plan and to decide all questions of fact arising in its application. Subject to the provisions hereof, the Committee shall have full and final authority in its discretion to determine the employees and directors to whom awards shall be made under the Plan; to determine the type of awards to be made and the amount, size and terms and conditions of each such award; to determine the time when awards shall be granted; to determine the provisions of each agreement evidencing an award; and to make all other determinations necessary or advisable for the administration of the plan.

3.    Stock Subject to the Plan.

        The Company may grant awards under the Plan with respect to not more than a total of 20,600,000 shares of $.10 par value common stock of the Company (the "Shares") (subject, however, to adjustment as provided in paragraph 21, below). Such shares may be authorized and unissued Shares or treasury Shares and may be purchased on the open market or otherwise. Except as otherwise provided herein, any Shares subject to an option or right which for any reason is surrendered before exercise, or expires or is terminated unexercised as to such Shares, shall again be available for the granting of awards under the Plan. Similarly, if any Shares granted pursuant to restricted stock awards are forfeited, such forfeited Shares shall again be available for the granting of awards under the Plan.

4.    Eligibility to Receive Awards.

        All employees and directors of the Company are eligible to receive awards under the Plan.

5.    Form of Awards.

        Awards may be made from time to time by the Committee in the form of stock options to purchase Shares, stock appreciation rights, performance units, restricted stock, bonus shares or any combination of the above. Stock options granted under the Plan are nonqualified stock options, which are not intended to qualify as incentive stock options within the meaning of Section 422(b) of the Internal Revenue Code.

6.    Stock Options.

        Stock options for the purchase of Shares shall be evidenced by written agreements in such form not inconsistent with the Plan as the Committee shall approve from time to time; provided that the maximum number of options which may be granted to any one grantee during any twelve-month period is 1,000,000 (as adjusted pursuant to paragraph 21, below). Such agreement shall contain the terms and conditions applicable to the options, including in substance the following terms and conditions:

(a) Number of Option. Each option agreement shall set forth the number of Shares subject to the options.

(b) Option Price. The option exercise price to be paid by the optionee to the Company for each Share purchased upon the exercise of an option shall be determined by the Committee, but shall in no event be less than the fair market value of a Share on the date the option is granted.

(c) Exercise Term. Each option agreement shall state the period or periods of time within which the option may be exercised, in whole or in part, as determined by the Committee, and subject to such terms and conditions as are prescribed for such purpose by the Committee, provided that no option shall be exercisable after ten years from the date of grant thereof. The Committee, in its discretion, may provide in the option agreement circumstances under which the option shall become immediately exercisable, in whole or in part, and, notwithstanding the foregoing, may accelerate the exercisability of any option, in whole or in part, at any time.

(d) Payment for Shares. The purchase price of the Shares with respect to which an option is exercised shall be payable in full at the time of exercise in cash, shares at fair market value, or a combination thereof, as the Committee may determine and subject to such terms and conditions as may be prescribed by the Committee for such purpose. If the purchase price is paid by tendering Shares, the Committee in its discretion may grant the optionee a new stock option for the number of Shares used to pay the purchase price.

(e) Rights Upon Termination. In the event of Termination (as defined below) of an optionee's status as an employee or director of the Company for any cause other than Retirement (as defined below), death or Disability, (as defined below), the optionee shall have the right to exercise the option during its term within a period of three months after such Termination to the extent that the option was exercisable at the time of Termination, or within such other period, and subject to such terms and conditions, as may be specified by the Committee. (As used herein, "Termination" means the cessation of the grantee's employment or service by the Company for any reason, and "Terminates" has the corresponding meaning. As used herein, "Retirement" means retirement from active employment or service with the Company on or after age 65, or such earlier age with the express written consent for purposes of the Plan of the Company at or before the time of such retirement, and "Retires" has the corresponding meaning. As used herein, "Disability" means a condition that, in the judgment of the Committee, has rendered a grantee completely and presumably permanently unable to perform any and every duty of his regular occupation, and "Disabled" has the corresponding meaning.) In the event that an optionee Retires, dies or becomes Disabled prior to the expiration of his option and without having fully exercised his option, the optionee or his Beneficiary (as defined below) shall have the right to exercise the option during its term within a period of (i) one year after Termination due to Retirement, death or Disability, or (ii) one year after death if death occurs either within one year after Termination due to Retirement or Disability or within three months after Termination for other reasons, to the extent that the option was exercisable at the time of death or Termination, or within such other period, and subject to such terms and conditions, as may be specified by the Committee. (As used herein, "Beneficiary" means the person or persons designated in writing by the grantee as his beneficiary with respect to an award under the Plan; or, in the absence of an effective designation or if the designated person or persons predeceases the grantee, the grantee's Beneficiary shall be the person or persons who acquire by bequest or inheritance the grantee's rights in respect of an award). In order to be effective, a grantee's designation of a Beneficiary must be on file with the Committee before the grantee's death, but any such designation may be revoked and a new designation substituted therefor at any time before the grantee's death.

(f) Transferability. Except as provided in paragraph 12, options granted under the Plan shall not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered, other than by will or by the laws of descent and distribution until such options become vested.

7.    Stock Appreciation Rights.

        Stock appreciation rights ("SARs") shall be evidenced by written SAR agreements in such form not inconsistent with the Plan as the Committee shall approve from time to time; provided that the maximum number of SARs which may be granted to any one grantee during any twelve-month period is 125,000, (as adjusted pursuant to paragraph 21, below). Such SAR agreements shall contain the terms and conditions applicable to the SARs, including in substance the following terms and conditions:

(a) Award. SARs may be granted in connection with a previously or contemporaneously granted stock option, or independently of a stock option. SARs shall entitle the grantee, subject to such terms and conditions as may be determined by the Committee, to receive upon exercise portion of the excess of (i) the fair market value at the time of exercise, as determined by the Committee, of a specified number of Shares with respect to which the SAR is exercised, over (ii) a specified price which shall not be less than 100% of the fair market value of the Shares at the time the SAR is granted, or, if the SAR is granted in connection with a previously issued stock option, not less than 100% of the fair market value of the Shares at the time such option was granted. Upon exercise of an SAR, the number of Shares reserved for issuance hereunder shall be reduced by the number of Shares covered by the SAR. Shares covered by an SAR shall not be used more than once to calculate the amount to be received pursuant to the exercise of the SAR.

(b) SARs Related to Stock Options. If an SAR is granted in relation to a stock option, (i) the SAR shall be exercisable only at such times, and by such persons as the related option is exercisable; (ii) the grantee's right to exercise the related option shall be canceled if and to the extent that the Shares subject to the option are used to calculate the amount to be received upon the exercise of the related SAR; (iii) the grantee's right to exercise the related SAR shall be canceled if and to the extent that the Shares subject to the SAR are purchased upon the exercise of the related option; and (iv) the SAR shall not be transferable other than by will or by the laws of descent and distribution until the SAR vests, at which time the vested portion of the SAR will become transferable as provided in paragraph 12, below.

(c) Term. Each SAR agreement shall state the period or periods of time within which the SAR may be exercised, in whole or in part, as determined by the Committee and subject to such terms and conditions as are prescribed for such purpose by the Committee, provided that no SAR shall be exercisable earlier than six months after the date of grant or later than ten years after the date of grant. The Committee may, in its discretion, provide in the SAR agreement circumstances under which the SARs shall become immediately exercisable, in whole or in part, and may, notwithstanding the foregoing, accelerate the exercisability of any SAR, in whole or in, Part, at any time.

(d) Termination. SARs shall be exercisable only during the grantee's tenure as an employee or director of the Company, except that, in the discretion of the Committee, an SAR may be made exercisable for up to three months after the grantee is Terminated for any reason other than Retirement, death or Disability, and for up to one year after the grantee is Terminated because of Retirement, death or Disability.

(e) Payment. Upon exercise of an SAR, payment shall be made in cash, in Shares valued at fair market value on the date of exercise, or in a combination thereof, as the Committee may determine at the time of exercise.

(f) Other Terms. SARs shall be granted in such manner and such form, and subject to such additional terms and conditions, as the Committee in its sole discretion deems necessary or desirable, including without limitation, in order to avoid any insider-trading liability in connection with an SAR under Section 16(b) of the 1934 Act.

8.    Restricted Stock Awards.

        Restricted stock awards under the Plan shall consist of Shares free of any purchase price, or for such purchase price as may be established by the Committee, restricted against transfer, subject to forfeiture, and subject to such other terms and conditions (including attainment of performance objectives) as may be determined by the Committee. Restricted stock shall be evidenced by written restricted stock agreements in such form not inconsistent with the Plan as the Committee shall approve from time to time, which agreement shall contain the terms and conditions applicable to such awards, including in substance the following terms and conditions:

(a) Restriction Period. Restrictions shall be imposed for such period or periods as may be determined by the Committee. The Committee, in its discretion, may provide in the agreement circumstances under which the restricted stock shall become immediately transferable and nonforfeitable, or under which the restricted stock shall be forfeited, and, notwithstanding the foregoing, may accelerate the expiration of the restriction period imposed on any Shares at any time.

(b) Restrictions Upon Transfer. Restricted stock and the right to vote such Shares and to receive dividends thereon, may not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered, except as herein provided, during the restriction period applicable to such Shares. Notwithstanding the foregoing, and except as otherwise provided in the Plan, the grantee shall have all of the other rights of a stockholder, including, but not limited to, the right to receive dividends and the right to vote such Shares.

(c) Certificates. A certificate or certificates representing the number of restricted Shares granted shall be registered in the name of the grantee. The Committee, in its sole discretion, shall determine when the certificate or certificates shall be delivered to the grantee (or, in the event of the grantee's death, to his Beneficiary), may provide for the holding of such certificate or certificates in escrow or in custody by the Company or its designee pending their delivery to the grantee or Beneficiary, and may provide for any appropriate legend to be borne by the certificate or certificates.

(d) Lapse of Restrictions. The restricted stock agreement shall specify the terms and conditions upon which any restriction upon restricted stock awarded under the Plan shall expire, lapse, or be removed, as determined by the Committee.

9.    Performance Units.

        Performance unit awards under the Plan shall entitle grantees to future payments based upon the achievements of preestablished long-term performance objectives and shall be evidenced by written performance unit agreements in such form not inconsistent with this Plan as the Committee shall approve from time to time. Such agreements shall contain the terms and conditions applicable to the performance unit awards, including in substance the following terms and conditions:

(a) Performance Period. The Committee shall establish with respect to each unit award a performance period.

(b) Unit Value. The Committee shall establish with respect to each unit award value for each unit which shall not thereafter change, or which may vary thereafter pursuant to criteria specified by the Committee.

(c) Performance Targets. The Committee shall establish with respect to each unit award maximum and minimum performance targets to be achieved during the applicable performance period. Achievement of maximum targets shall entitle grantees to payment with respect to the full value of a unit award. Grantees shall be entitled to payment with respect to a portion of a unit award according to the level of achievement of targets as specified by the Committee for performance which achieves or exceeds the minimum target but fails to achieve the maximum target.

(d) Performance Measures. Performance targets established by the Committee shall relate to corporate, subsidiary, division, unit or individual performance and may be established in terms of growth in gross revenue, earnings per share, stock price, ratios of earnings to equity or assets, individual sales, or such other measures or standards as may be determined by the Committee in its discretion. Multiple targets may be used and may have the same or different weighing, and they may relate to absolute performance or relative performance measured against other companies or businesses.

(e) Adjustments. At any time prior to the payment of a unit award, the Committee may adjust previously established performance targets or other terms and conditions, including the Company's financial performance for Plan purposes, to reflect major unforeseen events such as changes in laws, regulations or accounting practices, mergers, acquisitions or divestitures or other extraordinary, unusual or non-recurring items or events.

(f) Payment of Unit Awards. Following the conclusion of a performance period, the Committee shall determine the extent to which performance targets have been attained and any other terms and conditions satisfied for such period. The Committee shall determine what, if any, payment is due on the unit award and whether such payment shall be made in cash, Shares, or a combination thereof. Payment shall be made in a lump sum or installments, as determined by the Committee, commencing as promptly as practicable following the end of the performance period unless deferred subject to such terms and conditions and in such form as may be prescribed by the Committee.

(g) Termination. In the event that a grantee is Terminated as an employee by the Company prior to the end of the performance period by reason of death, Disability, or Retirement with the consent of the Company, any unit award, to the extent earned under the applicable performance targets may, in the Committee's sole discretion, be payable at the end of the performance period according to the portion of the performance period during which the grantee was employed by or provided services to the Company, provided that the Committee shall have the power to provide for an appropriate settlement of a unit award before the end of the performance period. Upon any other Termination, participation shall terminate forthwith and all outstanding unit awards shall be canceled.

10.    Loans and Supplemental Cash.

        The Committee, in its sole discretion to further the purpose of the Plan, may provide for supplemental cash payments or loans to employees or directors in connection with all or any part of an award under the Plan. Supplemental cash payments shall be subject to such terms and conditions as shall be prescribed by the Committee at the time of grant, provided that in no event shall the amount of payment exceed:

(a) In the case of an option, the excess fair market value of a Share on the date of exercise over the option price multiplied by the number of Shares for which such option is exercised, or

(b) In the case of an SAR, performance unit, or restricted stock award, the value of the Shares and other consideration issued in payment of such award.

        Any loan shall be evidenced by a written loan agreement or other instrument in such form and containing such terms and conditions (including, without limitation, provisions for interest, payment schedules, collateral, forgiveness or acceleration) as the Committee may prescribe from time to time.

11.    Stock Bonuses

        The Committee may, in its sole discretion, award a bonus to any employee or director in the form of Company Shares in addition to, or in lieu of a cash bonus. In addition, the Company may, in its sole discretion, permit an employee to elect to receive a cash bonus in the form of Company Shares.

12.    Restrictions on Transfer of Awards.

        Except as permitted by this paragraph 12, no awardholder may sell, transfer, assign, convey or otherwise dispose of or alienate any of his awards or any right or interest therein (whether voluntarily, by operation of law, by gift or otherwise) or enter into any contract or agreement or grant any option with respect to the sale, transfer, assignment, conveyance or other disposition of his awards or any right or interest therein. Any purported transfer of awards in violation of this paragraph shall be void and ineffective and shall not operate to transfer any interest in or title to such awards to the purported Award Transferee and the Company shall not record any such purported transfer in its transfer records.

(a) Permitted Transfers of Awards by Participants. Upon ten (10) days prior written notice to the Company (or such lesser number of days as the Company may agree to in writing) an awardholder may sell, transfer or assign all or any number of his awards to an Award Transferee who (or which) is an Award Transferee (defined below) only if, prior to such transfer, such Award Transferee has agreed in writing, in form and substance satisfactory to the Company, in its sole discretion, that such Award Transferee and the award transferred to him shall be bound by the provisions of this Plan including, without limitation, those of this paragraph 12. Such notice shall specify the name and address of the proposed Award Transferee, the relationship between the Participant and the proposed transferee which establishes the proposed transferee as an Award Transferee of the Participant and the number and prices (if any) of the awards to be transferred to such proposed Award Transferee. Notwithstanding the foregoing provisions of this paragraph, if awards are transferred to an Award Transferee which is a Qualified Trust and the written document pursuant to which such Qualified Trust was established is later amended without the prior written approval of the Company then, on the effective date of such amendment, ownership of all awards then owned by such Qualified Trust shall revert to its Transferor.

(b) Permitted Transfers of Awards By Other Awardholders. Upon ten (10) days prior written notice to the Company (or such lesser number of days as the Company may agree to in writing), an awardholder other than a Participant may sell, transfer or assign all or any number of his awards to his Transferor if, prior to such transfer, such Transferor has agreed in writing, in form and substance satisfactory to the Company, that such Transferor and the awards transferred to him shall be bound by the provisions of this Plan including, without limitation, those of this paragraph 12. Such notice shall specify the number and prices (if any) of the awards to be transferred to such Transferor.

(c) Effect of Transfer of Awards. The provisions of this subparagraph (c) shall apply in the event a participant transfers awards to an Award Transferee pursuant to subparagraph (a).

(i) Forfeitures of Awards. All of an Award Transferee's awards shall be forfeited on the date any awards owned by his Transferor are or would be forfeited pursuant to paragraph 20. On the date an Award Transferee's awards are forfeited pursuant to this paragraph 12, the rights of such Award Transferee shall be terminated.

(ii) Exercise of Awards. An Award Transferee shall be entitled to exercise his awards at such times, in such manner, upon such terms and subject to such conditions, limitations and restrictions as his Transferor is or would be entitled to exercise any awards owned by such Transferor.

(iii) Beneficiaries. Upon an Award Transferee's receipt of any awards, the provisions of the Plan governing the determination of a participant's Beneficiary shall apply to such Award Transferee as if such Award Transferee were a participant.

(iv) Deemed Ownership of Awards. Each Participant shall be deemed to own all of the awards actually owned by his Award Transferees for the purpose of determining the number of awards to be granted to a Participant pursuant to paragraph 12.

(d) Rights of Award Transferees. Notwithstanding anything to the contrary contained in this Plan, the rights of an Award Transferee with respect to all awards owned by such Award Transferee shall be the same as those of the individual who first owned such award determined as if such individual then owned such award.

(e) Definitions. Unless otherwise provided, for purposes of the Plan, the following terms have the following meaning:

(i) Award Transferee. With respect to a participant, his spouse and lineal descendants who have attained age 21 and a Qualified Trust, the sole beneficiaries of which may not include anyone other than the participant, his spouse and lineal descendants.

(ii) Qualified Trust. A trust established pursuant to a written document which has been approved in writing by the Company in its sole discretion and which, by its terms:

(1) authorizes the trustee of such trust to: acquire, own and dispose of shares of stock and other securities and awards under which shares of stock and other securities may be issued; exercise any award; grant proxies to vote any securities owned by such trust; and enter into agreements with respect to such securities, the term of which may extend beyond the term of the trust;

(2) provides that awards and Shares held by the trustee of such trust shall only be distributed to a beneficiary of such trust if such beneficiary is an Award Transferee of the grantor of such trust, and prior to such distribution, has agreed in writing, in form and substance satisfactory to the Company, in its sole discretion, that such beneficiary and the awards and Shares distributed to him shall be bound by the provisions of this Plan including, without limitation, those of this paragraph 12;

(3) cannot be amended without the prior written approval of the Company which approval may be withheld by the Company in its sole discretion;

(4) provides that any such amendment which is not so approved by the Company shall be invalid; and

(5) contains such other terms and provisions as the Company, it its sole discretion, shall determine to be appropriate.

(iii) Transferor. With respect to an Award Transferee, the participant to whom the awards owned by such Award Transferee were originally granted.

13.    General Restrictions.

        Each award under the Plan shall be subject to the requirement that if at any time the Company shall determine that (i) the listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any regulatory body, or (iii) an agreement by the recipient of an award with respect to the disposition of Shares, or (iv) the satisfaction of withholding tax or other withholding liabilities is necessary or desirable as a condition of or in connection with such award or the issuance or purchase of Shares thereunder, such award shall not be consummated in whole or in part unless such listing, registration, qualification, consent, approval, agreement, or withholding shall have been effected or obtained free of any conditions not acceptable to the Company. Any restriction affecting an award shall not extend the time within which the award may be exercised; and neither the Company nor its directors or officers nor the Committee shall have any obligation or liability to the grantee or to a Beneficiary or Award Transferee with respect to any Shares with respect to which an award shall lapse or with respect to which the grant, issuance or purchase of Shares shall not be effected, because of any such restriction.

14.    Single or Multiple Agreements.

        Multiple awards, multiple forms of awards, or combinations thereof may be evidenced by a single agreement or multiple agreements, as determined by the Committee.

15.    Rights of the Stockholder.

        The recipient of any award under the Plan, shall have no rights as a stockholder with respect thereto unless and until certificates for Shares are issued to him, and the issuance of shares shall confer no retroactive right to dividends.

16.    Rights to Terminate.

        Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any person the right to continue in the employment or service of the Company or affect any right which the Company may have to terminate the employment or service of such person.

17.    Withholding.

(a) Prior to the issuance or transfer of Shares under the Plan, the recipient shall remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements. The recipient may satisfy the withholding requirement in whole or in part by electing to have the Company withhold Shares having a value equal to the minimum amount required to be withheld. No additional amount may be withheld. The value of the Shares to be withheld shall be the fair market value, as determined by the Committee, of the stock on the date that the amount of tax to be withheld is determined (the "Tax Date"). Such election must be made prior to the Tax Date, must comply with all applicable securities law and other legal requirements, as interpreted by the Committee, and may not be made unless approved by the Committee, in its discretion.

(b) Whenever payments to a grantee in respect of an award under the Plan are paid in cash, such payments shall be net of the amount necessary to satisfy any federal, state or local withholding tax requirements.

18.    Non-Uniform Determinations.

        The Committee's determinations under the Plan (including without limitation determinations of the persons to receive awards, the form, amount and timing of such awards, the terms and provisions of such awards and the agreements evidencing same, and the establishment of values and performance targets) need not be uniform and may be made selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated.

19.    Change In Control Provisions.

(a) In the event of (1) a Change in Control (as defined) or (2) a Potential Change in Control (as defined), but only if and to the extent so determined by the Board of Directors at or after grant (subject to any right of approval expressly reserved by the Board of Directors at the time of such determination), the following acceleration and valuation provisions shall apply:

(i) Any SARs outstanding for at least six months and any stock awards awarded under the Plan not previously exercisable and vested shall become fully exercisable and vested.

(ii) Any restrictions and deferral limitations applicable to any restricted stock, performance units or other stock-based awards, in each case to the extent not already vested under the Plan, shall lapse and such shares, performance units or other stock-based awards shall be deemed fully vested.

(iii) The value of all outstanding stock awards, SARs, restricted stock, performance units and other stock-based awards, in each case to the extent vested, shall, unless otherwise determined by the Committee in its sole discretion at or after grant but prior to any Change in Control, be cashed out on the basis of the Change in Control Price (as defined) as of the date such Change in Control or such Potential Change in Control is determined to have occurred or such other date as the Committee may determine prior to the Change in Control.

(b) As used herein, the term "Change in Control" means the happening of any of the following:

(i) Any person or entity, including a "group" as defined in Section 13(d)(3) of the 1934 Act, other than the Company, a subsidiary of the Company, or any employee benefit plan of the Company or its subsidiaries, becomes the beneficial owner of the Company's securities having 25% or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election for directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business), or

(ii) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the election of directors of the Company or such other corporation or entity after such transaction, are held in the aggregate by holders of the Company's securities entitled to vote generally in the election of directors of the Company immediately prior to such transactions; or

(iii) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period.

(c) As used herein, the term "Potential Change in Control" means the happening of any of the following:

(i) The approval by stockholders of an agreement by the Company, the consummation of which would result in a Change in Control of the Company; or

(ii) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company, a wholly-owned subsidiary thereof or any employee benefit plan of the Company or its subsidiaries (including any trustee of such plan acting as such trustee)) of securities of the Company representing five % or more of the combined voting power of the Company's outstanding securities and the award by the Board of Directors of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this Plan.

(d) As used herein, the term "Change in Control Price" means the highest price per share paid in any transaction reported on the New York Stock Exchange, or paid or offered in any bona fide transaction related to a Potential or actual Change in Control of the Company at any time during the 60 day period immediately preceding the occurrence of the Change in Control (or, where applicable, the occurrence of the Potential Change in Control event), in each case determined by the Committee.

20.    Non-Competition Provision.

(a) Unless the award agreement relating to an option, SAR, a restricted stock, stock bonus or performance unit expressly specifies otherwise, a grantee shall forfeit all unexercised, unearned and/or unpaid awards, including, but not by way of limitation, awards earned but not yet paid, all unpaid dividends and dividend equivalents, and all interest, if any, accrued on the foregoing if, (i) in the opinion of the Committee, the grantee without the written consent of the Company, engages directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee or otherwise, in any business or activity competitive with the business conducted by the Company or any of its subsidiaries; or (ii) the grantee performs any act or engages in any activity which in the opinion of the Chief Executive Officer of the Company is inimical to the best interests of the Company.

(b) This subsection (b) shall be void and of no legal effect in the event of a Change of Control. Notwithstanding anything in any other section or subsection herein to the contrary, the following provisions shall apply to all options, exercises and optionees: if an optionee:

(i)    Terminates for any reason; and

(ii)    within six months following such Termination, engages, directly or indirectly, in any activity determined by the Committee to be competitive with any activity of the Company or any of its subsidiaries,

then, the optionee shall pay to the Company an aggregate amount of cash equal to the spread realized on each option exercise effected during the six-month period immediately preceding the date of Termination. The spread on each option exercise shall be the difference between (x) the exercise price paid by the optionee and (y) the fair market value of the Shares purchased upon exercise, determined as of such date of exercise

21.    Adjustments.

        In the event of any change in the outstanding common stock of the Company, by reason of a stock dividend or distribution, recapitalization, merger, consolidation, reorganization, split-up, combination, exchange of Shares or the like, the Board of Directors, in its discretion, may adjust proportionately the number of Shares which may be issued under the Plan, the number of Shares subject to outstanding awards, and the option exercise price of each outstanding option, and may make such other changes in outstanding options, SARs, performance units and restricted stock awards, as it deems equitable in its absolute discretion to prevent dilution or enlargement of the rights of grantees, provided that any fractional Shares resulting from such adjustments shall be eliminated.

22.    Amendment and Termination.

        The Board of Directors may terminate, amend, modify or suspend the Plan at any time. No termination, modification, amendment or suspension of the Plan shall adversely affect the rights of any grantee, Beneficiary or Award Transferee under an award previously granted unless the grantee or Beneficiary shall consent; but it shall be conclusively presumed that any adjustment pursuant to paragraph 21 hereof does not adversely affect any such right.

23.    Effect on Other Plans.

        Participation in this Plan shall not affect a grantee's eligibility to participate in any other benefit or incentive plan of the Company. Any awards made pursuant to this Plan shall not be used in determining the benefits provided under any other plan of the Company unless specifically provided therein.

24.    Effective Date and Duration of the Plan.

        The Plan shall become effective when adopted by the Board of Directors. Unless it is sooner terminated in accordance with paragraph 22 hereof, the Plan shall remain in effect until all awards under the Plan have been satisfied by the issuance of Shares or payment of cash or have expired or otherwise terminated, but no award shall be granted more than ten years after the date the Plan is adopted by the Board of Directors.

25.    Unfunded Plan.

        The Plan shall be unfunded. Neither the Company nor any affiliate shall be required to segregate any assets that may be represented by stock options, SARs, stock bonuses or performance units, and neither the Company nor any affiliate shall be deemed to be a trustee of any amounts to be paid under any stock option, SAR, stock bonus or performance unit. Any liability of the Company or any affiliate to pay any grantee, Beneficiary or Award Transferee with respect to an option, SAR or performance unit shall be based solely upon any contractual obligations created pursuant to the provisions of the Plan; no such obligations will be deemed to be secured by a pledge or encumbrance on any property of the Company or an affiliate.

26.    Governing Law.

        The Plan shall be construed and its provisions enforced and administered in accordance with the laws of the State of Tennessee except to the extent that such laws may be superseded by any federal law.

        Adopted by the Board of Directors of Saks Incorporated on the 28th day of November, 2000.

                                                                                 By: _                                                 
                                                                                          Brian J. Martin
                                                                                          Executive Vice President and
                                                                                          General Counsel

EX-10

PROMISSORY NOTE

City of Birmingham
State of Alabama

$885,000.00                                                                                                   April 28, 2000

        FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to Saks Incorporated ("Company") on April 28, 2004 or, if earlier, termination of Maker's employment with Company, in one payment, the sum of Eight Hundred Eighty Five Thousand Dollars ($885,000.00) (the "Principal"), plus accrued interest. Simple interest shall accrue on the Principal at a rate of 8% per year. Maker may pre-pay the Principal at any time with accrued interest and without penalty.

        All persons now or later liable, whether primarily or secondarily, for the payment of the indebtedness hereby evidenced, for themselves, their heirs, legal representatives, and assigns, do hereby waive demand, presentment for payment, notice of dishonor, protest, notice of protest and diligence in collection and all other notices or demands whatsoever with respect to this note or the enforcement hereof, and consent that the time of said payments or any part thereof may be extended by the holder hereof, all without in any way modifying, altering, releasing, affecting or limiting their respective liability.

        It is expressly understood that, if it is necessary to enforce payment of this note through an attorney or by suit, Maker or any obligors shall pay reasonable attorney's fees and all costs of collection. Company shall have the right to deduct from Maker's compensation amounts necessary to satisfy Maker's obligations under this note.

        This obligation is made and intended as an Alabama contract and is to be so construed.

        IN WITNESS WHEREOF, this note, which represents a valid debt, has been duly executed by the Maker as of the date and year first above written.

                                                                                     MAKER

                                                                                     ______________________________ 
                                                                                     R. Brad Martin

EX-10

PROMISSORY NOTE

City of Birmingham
State of Alabama

$265,000.00                                                                                           April 14, 2000

FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to Saks Incorporated ("Company") on April 14, 2004 or, if earlier, termination of Maker's employment with Company, in one payment, the sum of Two Hundred and Sixty Five Thousand Dollars ($265,000.00) (the "Principal"), plus accrued interest. Simple interest shall accrue on the Principal at a rate of 8% per year. Maker may pre-pay the Principal at any time with accrued interest (subject to the following paragraph) and without penalty.

All persons now or later liable, whether primarily or secondarily, for the payment of the indebtedness hereby evidenced, for themselves, their heirs, legal representatives, and assigns, do hereby waive demand, presentment for payment, notice of dishonor, protest, notice of protest and diligence in collection and all other notices or demands whatsoever with respect to this note or the enforcement hereof, and consent that the time of said payments or any part thereof may be extended by the holder hereof, all without in any way modifying, altering, releasing, affecting or limiting their respective liability.

It is expressly understood that, if it is necessary to enforce payment of this note through an attorney or by suit, Maker or any obligors shall pay reasonable attorney's fees and all costs of collection. Company shall have the right to deduct from Maker's compensation amounts necessary to satisfy Maker's obligations under this note.

This obligation is made and intended as an Alabama contract and is to be so construed.

IN WITNESS WHEREOF, this note, which represents a valid debt, has been duly executed by the Maker as of the date and year first above written.

                                                                             MAKER

                                                                             ______________________________ 
                                                                             James Coggin

EX-10

PROMISSORY NOTE

City of Birmingham
State of Alabama

$250,000.00                                                                                       April 14, 2000

FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to Saks Incorporated ("Company") on April 14, 2004 or, if earlier, termination of Maker's employment with Company, in one payment, the sum of Two Hundred and Fifty Thousand Dollars ($250,000.00) (the "Principal"), plus accrued interest. Simple interest shall accrue on the Principal at a rate of 8% per year. Maker may pre-pay the Principal at any time with accrued interest and without penalty.

All persons now or later liable, whether primarily or secondarily, for the payment of the indebtedness hereby evidenced, for themselves, their heirs, legal representatives, and assigns, do hereby waive demand, presentment for payment, notice of dishonor, protest, notice of protest and diligence in collection and all other notices or demands whatsoever with respect to this note or the enforcement hereof, and consent that the time of said payments or any part thereof may be extended by the holder hereof, all without in any way modifying, altering, releasing, affecting or limiting their respective liability.

It is expressly understood that, if it is necessary to enforce payment of this note through an attorney or by suit, Maker or any obligors shall pay reasonable attorney's fees and all costs of collection. Company shall have the right to deduct from Maker's compensation amounts necessary to satisfy Maker's obligations under this note.

This obligation is made and intended as an Alabama contract and is to be so construed.

IN WITNESS WHEREOF, this note, which represents a valid debt, has been duly executed by the Maker as of the date and year first above written.

                                                                             MAKER

                                                                             ______________________________
                                                                             Douglas Coltharp

EX-10

PROMISSORY NOTE

City of Birmingham
State of Alabama

$110,000.00                                                                               April 14, 2000

        FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to Saks Incorporated ("Company") on April 14, 2004 or, if earlier, termination of Maker's employment with Company, in one payment, the sum of One Hundred and Ten Thousand Dollars ($110,000.00) (the "Principal"), plus accrued interest. Simple interest shall accrue on the Principal at a rate of 8% per year. Maker may pre-pay the Principal at any time with accrued interest and without penalty.

        All persons now or later liable, whether primarily or secondarily, for the payment of the indebtedness hereby evidenced, for themselves, their heirs, legal representatives, and assigns, do hereby waive demand, presentment for payment, notice of dishonor, protest, notice of protest and diligence in collection and all other notices or demands whatsoever with respect to this note or the enforcement hereof, and consent that the time of said payments or any part thereof may be extended by the holder hereof, all without in any way modifying, altering, releasing, affecting or limiting their respective liability.

        It is expressly understood that, if it is necessary to enforce payment of this note through an attorney or by suit, Maker or any obligors shall pay reasonable attorney's fees and all costs of collection. Company shall have the right to deduct from Maker's compensation amounts necessary to satisfy Maker's obligations under this note.

        This obligation is made and intended as an Alabama contract and is to be so construed.

        IN WITNESS WHEREOF, this note, which represents a valid debt, has been duly executed by the Maker as of the date and year first above written.

                                                                     MAKER

                                                                     ______________________________
                                                                     Brian Martin

EX-10

PROMISSORY NOTE

City of Birmingham
State of Alabama

$200,000.00                                                                             April 14, 2000

        FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to Saks Incorporated ("Company") on April 14, 2004 or, if earlier, termination of Maker's employment with Company, in one payment, the sum of Two Hundred Thousand Dollars ($200,000.00) (the "Principal"), plus accrued interest. Simple interest shall accrue on the Principal at a rate of 8% per year. Maker may pre-pay the Principal at any time with accrued interest and without penalty.

        All persons now or later liable, whether primarily or secondarily, for the payment of the indebtedness hereby evidenced, for themselves, their heirs, legal representatives, and assigns, do hereby waive demand, presentment for payment, notice of dishonor, protest, notice of protest and diligence in collection and all other notices or demands whatsoever with respect to this note or the enforcement hereof, and consent that the time of said payments or any part thereof may be extended by the holder hereof, all without in any way modifying, altering, releasing, affecting or limiting their respective liability.

        It is expressly understood that, if it is necessary to enforce payment of this note through an attorney or by suit, Maker or any obligors shall pay reasonable attorney's fees and all costs of collection. Company shall have the right to deduct from Maker's compensation amounts necessary to satisfy Maker's obligations under this note.

        This obligation is made and intended as an Alabama contract and is to be so construed.

        IN WITNESS WHEREOF, this note, which represents a valid debt, has been duly executed by the Maker as of the date and year first above written.

                                                                     MAKER

                                                                     ______________________________
                                                                     Donald Wright

EX-10

EXHIBIT 10.63
EXECUTIVE SEVERANCE PLAN
SAKS INCORPORATED AND SUBSIDIARIES

Saks Incorporated

2000 Change of Control and Material Transaction Severance Plan

Effective September 13, 2000

1. General

        A. Purpose. The Saks Incorporated Change of Control and Material Transaction Severance Plan (this "Plan") protects a designated group of associates against some of the financial consequences of several adverse events affecting employment so as to attract and retain the associates and motivate them to enhance the value of the underlying businesses of Saks Incorporated (the "Company") and its subsidiaries. This Plan is intended to qualify as an unfunded welfare plan under Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended.

        B. Effective Date of this Plan. The effective date of this Plan is September 13, 2000 (the "Effective Date").

2. Eligibility and Participation

        A. Eligibility. Subject to the next sentence, on the Effective Date each associate of the Company or a subsidiary of the Company listed on Schedule 1 to this Agreement (each an "Employer") who is either (i) in a position of employment listed on Schedule 2 to this Plan on or after the Effective Date or (ii) designated by the Company's Employee Benefits Committee (each person referred to in either (i) or (ii), a "Designated Associate"), shall become a participant in this Plan. If the Designated Associate has rights to severance compensation from the Designated Associate's Employer pursuant to a written agreement, the Designated Associate shall not be a participant in this Plan unless and until the Designated Associate waives all of the Designated Associate's rights to severance compensation pursuant to the written agreement in form and substance satisfactory to the Employee Benefits Committee in its sole discretion. Each Designated Associate who becomes a participant in this Plan in accordance with this subsection A. is a "Participant" except as otherwise provided in this Plan. All store managers and all exempt associates reporting directly or indirectly to store managers are excluded from participating in the Plan and none of them is a Participant. The Company's Employee Benefits Committee and its successors with comparable functions are referred to in this Plan as the "Committee".

        B. Notice of Participation. The Company shall notify Participants in writing of their participation in this Plan, give each Participant a copy of this Plan upon Participant's request, and otherwise comply with the requirements of ERISA.

        C. Termination of Participation. A Participant's participation in this Plan shall automatically terminate, without notice to or consent of Participant, and after the termination of participation the Designated Associate shall not be treated as a Participant, upon the earliest to occur of the following events:

                (i) the Designated Associate's death;

                (ii) the Designated Associate suffers, on or before termination of employment with all Employers, a mental or physical condition that (a) prevents the Designated Associate from reasonably discharging the duties of the Designated Associate's position, and (b) is attested to in writing by a physician selected by the Employer and reasonably acceptable to the Designated Associate;

                (iii) the Employer's termination of the Designated Associate's employment for Cause (defined in Section 7.A);

                (iv) prior to a Change of Control (defined in Section 7.B.), the Employer's termination of the Designated Associate's employment except as the result of a Reduction in Force (defined in Section 7.I.); and

                (v) the Designated Associate terminates the Designated Associate's own employment, except for Good Reason (defined in Section 7.G.) within two years after a Change of Control.

    When the participation of a Designated Associate in this Plan terminates in accordance with this Section 2.C., the Designated Associate shall not be entitled to severance pay or other benefits under this Plan following termination of participation.

        D. Determination of Eligibility. To the fullest extent permitted by law, a Participant's eligibility for severance pay and other benefits under this Plan shall be determined by the Committee in its sole discretion.

3. Severance Benefits

        A. Termination. Subject to a Participant's termination of participation pursuant to Section 2.C. and the conditions set forth below, if:

                (i) Participant's employment with the Employer is terminated by the Employer as a result of a Reduction in Force as to Participant;

                (ii) subject to subsection B. of this section, Participant's employment with the Employer is terminated by the Employer without Cause within two years after a Change of Control; or

                (iii) Participant terminates Participant's own employment with the Employer for Good Reason within two years after a Change of Control;

then Participant shall be entitled to severance pay and other benefits under this Plan in the amounts provided in Sections 3.C. and 3.D. of this Plan.

        B. Limitation.

        A transfer of a Participant's position of employment from one Employer (the "Original Position") to a position of employment with another Employer or to an affiliate of either shall not constitute a termination of employment for purposes of subsection A.(ii) of this Section if the new position of employment (i) includes at least the same annual base salary amount and at least the same annual base rate of bonus potential (determined as a percentage of annual base salary) as the Original Position's annual base salary amount and annual base rate of bonus potential (determined as a percentage of annual base salary), (ii) includes duties, responsibilities, and authority that are comparable to the Original Position's duties, responsibilities, and authority, and (iii) is located not more than fifty miles from the location of the Original Position.

        C. Amount of Severance Pay.

                (i) The amount of severance pay to which a Participant is entitled in accordance with Section 3.A. shall be equal to the amount listed on Schedule 2. "Base Salary" on Schedule 2 means Participant's weekly base salary in effect immediately prior to the termination of employment (but subject to the next sentence). Any reduction in weekly base salary that either (i) results in, occurs in connection with, or otherwise precedes a termination resulting from a Reduction in Force or a termination without Cause or (ii) constitutes Good Reason, shall be ignored for purposes of determining Base Salary.

                    (ii) If a Participant is employed in a position of employment by more than one Employer, Participant shall be entitled to only one severance payment in accordance with this Plan upon termination regardless of the number of employment positions terminated. Participants shall not be entitled to any other duplicative severance payment.

                (iii) If a Participant's employment with the Employer is terminated by the Employer as a result of a Reduction in Force as to Participant and the termination occurs within two years after a Change of Control, Participant shall be entitled to only one severance payment in accordance with this Plan upon termination.

                (iv) Participants are not required to mitigate their damages, and severance pay is not subject to mitigation.

                (v) Except as required by Section 6.J and unless the Company or the Employer shall have acted in bad faith or engaged in intentional misconduct, no Employer shall be liable to a Participant for any damages with respect to this Plan exceeding the amount of severance pay to which Participant is entitled in accordance with this Plan.

                (vi) The Employer may deduct and withhold from severance pay all amounts required to be deducted or withheld by law.

        D. Other Benefits. If the Employer maintains a pension plan in which Participant is a participant, Participant shall be entitled to credited service, if available under and as limited by, the pension plan, as amended from time to time, for a period of time represented by the number of weeks of base salary payable to Participant in accordance with this Plan.

        E. Time of Payment. All severance payments shall be paid, at the Employer's election, either in a lump sum or in substantially equal monthly installments (without interest). Lump sum payments shall be made, and monthly installments shall begin, not later than 15 days following Participant's termination of employment.

4. Claims

        A. Claims Procedure. If any Participant has a claim for benefits under this Plan that are not being paid, Participant may file with the Secretary of the Committee a written claim setting forth the amount and nature of the claim, supporting facts, and Participant's address. The Chairman of the Committee shall designate an individual to review the claim (the "Authorized Representative"). The Authorized Representative shall notify Participant of the Authorized Representative's decision in writing by registered or certified mail within 60 days after the Authorized Representative's receipt of the claim or, under special circumstances, within 120 days after its receipt of the claim. If the claim is denied, the written notice of denial shall list the reasons for denial, refer to pertinent Plan provisions on which the denial is based, describe any additional material or information necessary for Participant to realize the claim, and explain the claim review procedure under this Plan.

        B. Claims Review Procedure. If the Authorized Representative denies a Participant's claim, Participant may file a written request for review of the denial by the Committee. The Committee shall review the claim and notify Participant in writing of its decision within 30 days after receipt of the request. In special circumstances, the Committee may extend for up to 30 additional days the deadline for its decision. The notice of the final decision of the Committee shall include the reasons for its decision and specific references to the provisions of this Plan on which the decision is based. The decision of the Committee shall be final and binding on all parties.

        C. ERISA Rights.

                (i) Participants may obtain copies of all Plan information upon written request to the Plan Administrator. The Plan Administrator and others who operate this Plan must do so prudently and in the interest of Participants. No Employer or other person may fire or otherwise unlawfully discriminate against a Participant in any way to prevent Participant from obtaining a severance benefit or exercising his or her rights under ERISA. If discrimination occurs, Participant may seek assistance from the U.S. Department of Labor or may file suit in a federal court.

                (ii) A Participant is entitled to receive a written explanation of the reasons for the denial of Participant's claim, and to have the Committee review and reconsider the claim. Participant may file suit in a state or federal court to challenge any claim denial.

                (iii) Under ERISA, there are steps a Participant can take to enforce the above rights. For instance, if materials are requested from this Plan and are not received within 30 days, Participant may file suit in a federal court. In that event, the court may require the Plan Administrator to provide the materials and pay Participant up to $100 a day until the materials are received, unless due to reasons beyond the control of the Plan Administrator. The court will decide who should pay court costs and legal fees. The court may order either Participant or the person sued by Participant to pay legal costs and fees. Contact the Plan Administrator for answers to questions. If a Participant has any questions about this Section 4.C. or about rights under ERISA, contact the nearest Area Office of the U.S. Labor-Management Services Administration, Department of Labor.

        D. Agent for Service of Legal Process. Service of legal process upon this Plan shall be made upon the Plan Administrator at the address indicated in Section 5.B. of this Plan.

5. Administration

        A. Plan Sponsor. The Company is Plan Sponsor for this Plan and an Employer participating in this Plan. The Company's address is 750 Lakeshore Parkway, Birmingham, Alabama 35211.

        B. Plan Administrator. The Company shall administer this Plan through the Committee. The address of the Plan Administrator is:

Employee Benefits Committee
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attn: Secretary

        C. Quorum. A majority of the members of the Committee shall constitute a quorum for any meeting held concerning this Plan. The act of a majority of the members of Committee, whether at a meeting or approved in writing without a meeting, shall be the valid act of the Committee.

        D. Duties. The Committee shall have the power and duty to do all things necessary or convenient to effect the intent and purposes of this Plan, whether or not the powers and duties are specifically described in this Plan including without limitation the power to:

                (i) provide rules for the management, operation, and administration of this Plan and, from time to time, amend or supplement the rules;

                (ii) construe this Plan in the Committee's sole discretion to the fullest extent permitted by law, which shall be final and conclusive upon all persons; and

                (iii) correct any defect, supply any omission, or reconcile any inconsistency in this Plan in a manner and to the extent as the Committee shall deem appropriate in its sole discretion to carry this Plan into effect.

        E. Binding Authority. The decisions of the Committee and its duly authorized delegate within the powers conferred by this Plan shall be final and conclusive for all purposes of this Plan, and shall not be subject to any appeal or review other than pursuant to Section 4.

        F. Exculpation. No member of the Committee shall be directly or indirectly responsible or otherwise liable by reason of any action or default as a member of the Committee or of the exercise of or failure to exercise any power or discretion as the member, except for any action, default, exercise or failure to exercise resulting from the member's gross negligence or willful misconduct. No member of the Committee shall be liable in any way for the acts or defaults of any other member of the Committee or any of its advisors, agents, or representatives.

        G. Indemnification. The Company shall indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of the member's membership on the Committee, except for expenses and liabilities arising out of the member's gross negligence or willful misconduct.

        H. Compensation. Members of the Committee who are employees of the Company shall not receive any compensation for their services rendered as members.

        I. Information. The Company may furnish to the Committee in writing all information the Committee requires to exercise its powers and duties in the administration of this Plan. The information may include, without limitation, the names of all Participants, their earnings and their dates of birth, employment, retirement or death. The information shall be conclusive for all purposes of this Plan, and the Committee shall be entitled to rely on the information without investigation.

        J. Self Interest. No member of the Committee may act, vote, or otherwise influence a decision of the Committee specifically relating to the member's benefits, if any, under this Plan.

6. General Provisions

        A. Non-Property Interest. This Plan is unfunded. Any liability of an Employer to any person with respect to benefits payable under this Plan shall give rise only to a claim as an unsecured creditor against the general assets of the Employer. Any Participant who may have or claim any interest in or right to any compensation, payment, or benefit payable under this Plan shall rely solely upon the unsecured promise of Participant's Employer for payment. Nothing in this Plan shall give to or vest in Participant or any other person, now or at any time in the future, any right, title, interest, or claim in or to any specific asset, fund, reserve, account, insurance, annuity policy, or contract, or other property of any kind whatsoever owned by the Employer, or in which the Employer may have any right, title, or interest now or at any time in the future.

        B. Other Rights. Subject to the next sentences of this subsection B., this Plan supersedes (1) the Carson Pirie Scott & Co. 1994 Executive Severance Plan as amended and restated, effective as of April 3, 1998, the Younkers, Inc. Change In Control Severance Plan, and the Saks Holdings, Inc. Executive Severance Policy (each a "Superseded Plan"), which plans and policy are terminated and of no force or effect from and after the effective date of this Plan, and (2) all other plans, policies, and programs providing severance pay benefits for the Designated Associates (together, the "Existing Programs"), under which Existing Programs the Designated Associates shall have no rights to receive severance pay benefits from and after the effective date of this Agreement (the terms of the Existing Programs to the contrary notwithstanding). If a Participant has vested rights under a Superseded Plan or one of more of the Existing Programs on the effective date of this Plan, (i) those vested rights shall continue until they terminate in accordance with the terms of the Superseded Plan or Existing Program and (ii) unless and until such vested rights terminate in accordance with the terms of the applicable Superseded Plan or Existing Program, Participant shall have no rights, and neither the Company nor any Employer shall have any obligation to Participant, of any kind under this Plan, including without limitation pursuant to Section 2 of this Plan. This Plan shall not affect or impair the rights or obligations of an Employer or a Participant (other than with respect to severance pay benefits) under any other contract, arrangement, or pension, profit sharing, or other compensation plan.

        C. Amendment or Termination. (i) This Plan (including Schedules 1 and 2) may be amended, suspended, or terminated by the Committee in its sole discretion, subject to the approval of the Chief Executive Officer of the Company and subject to subsections (ii) and (iii).

                (ii) If this Plan is amended, suspended, or terminated after a Participant's employment is terminated by the Employer as a result of a Reduction in Force, Participant's rights under this Plan to receive the severance pay and other benefits under this Plan shall continue in full force and effect as if the amendment, suspension, or termination had not occurred.

                (iii) If this Plan is amended, suspended, or terminated within two years after a Change of Control, Participant's rights under this Plan to receive the severance pay and other benefits under this Plan if (a) Participant's employment is terminated without Cause within two years after the Change of Control or (b) Participant terminates Participant's own employment for Good Reason within two years after the Change of Control, in each case shall continue in full force and effect as if the amendment, suspension, or termination had not occurred.

                (iv) If the Company ceases to own, directly or through subsidiaries, at least 50.1% of outstanding voting stock or at least 50.1% of the outstanding equity interests of an Employer, then, subject to the next sentences, (a) the Employer shall cease to be an Employer for purposes of this Plan (an "Employer Termination"), and (b) the participation in this Plan of all Participants that are employed by such Employer shall automatically terminate, without notice to or consent of the Participants. If an Employer Termination occurs after a Participant's employment is terminated by the Employer as a result of a Reduction in Force, Participant's rights under this Plan to receive the severance pay and other benefits under this Plan shall continue in full force and effect as if the Employer Termination had not occurred. If an Employer Termination occurs within two years after a Change of Control, Participant's rights under this Plan to receive the severance pay and other benefits under this Plan if (a) Participant's employment is terminated without Cause within two years after the Change of Control or (b) Participant terminates Participant's own employment for Good Reason within two years after the Change of Control, in each case shall continue in full force and effect as if the Employer Termination had not occurred.

        D. Severability. If any term or condition of this Plan shall be invalid or unenforceable to any extent or in any application, then the remainder of this Plan, with the exception of the invalid or unenforceable provision, shall not be affected and shall continue in effect and application to its fullest extent. If, however, the Committee determines in its sole discretion that any term or condition of this Plan which is invalid or unenforceable is material to the interests of the Company, the Committee may, subject to subsection C. of this section, declare this Plan null and void in its entirety.

        E. No Employment Rights. Neither the establishment of this Plan, any provisions of this Plan, nor any action of the Committee shall be held or construed to confer upon any employee the right to a continuation of employment by Participant's Employer. Subject to any applicable employment agreement, each Employer reserves the right to dismiss any employee, or otherwise deal with any employee, to the same extent as though this Plan had not been adopted.

        F. Incapacity. If the Committee determines that a Participant is unable to care for Participant's affairs because of illness or accident, any benefit due Participant may be paid to Participant's spouse or to any other person deemed by the Committee to have incurred expense for Participant (including a duly appointed guardian, committee, or other legal representative), and any payment shall be a complete discharge of the Employer's obligation under this Plan.

        G. Successors and Assigns; Transferability of Rights. This Plan is binding upon the Company and each Employer and the successors (including without limitation by merger or otherwise by operation of law) and permitted assigns of each. Each Employer shall have the unrestricted right to transfer its obligations under this Plan with respect to one or more Participants to any person, including without limitation to any purchaser of all or any part of the Employer's business. No Participant or spouse of a Participant shall have any right to commute, encumber, transfer, or otherwise dispose of or alienate any present or future right or expectancy that Participant or the spouse may have at any time to receive payments of benefits under this Plan, which benefits and the right are expressly declared to be nonassignable and nontransferable, except to the extent required by law. Any attempt to transfer or assign a benefit, or any right granted under this Plan, by a Participant or the spouse of a Participant shall, in the sole discretion of the Committee (after consideration of the facts they deem pertinent), be grounds for terminating any rights of Participant or the spouse to any portion of this Plan benefits not previously paid.

        H. Entire Document. This Plan, as amended from time to time, supersedes any and all prior understandings, agreements, descriptions, and arrangements regarding the subject matter of this Plan, except for written employment or severance agreements executed and delivered by an Employer.

        I. Governing Law. This Plan shall be construed, administered, and enforced according to the laws of the State of Alabama, except to the extent those laws are preempted by the federal laws of the United States of America.

        J. Enforcement. If a Participant brings any litigation to enforce Participant's rights under this Plan, the Company shall reimburse Participant for reasonable attorney's fees and disbursements incurred in the litigation if (i) Participant obtains a final court order awarding Participant damages in an amount equal to 50% or more of the damages Participant demanded in the litigation, or (ii) Participant and the Company or Participant's Employer agree in writing to a settlement in which the Company or the Employer agrees to pay Participant an amount equal to 50% or more of the damages Participant demanded in the litigation.

7. Definitions

        A. "Cause" means any act or any failure to act on the part of Participant which constitutes:

                (i) Participant's conviction, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits the Company or the Participant's Employer or is materially detrimental to the reputation or goodwill of the Company or the Participant's Employer;

                (ii) commission of any material act of fraud or dishonesty by Participant against the Company or Participant's Employer or commission of an immoral or unethical act that materially reflects negatively on the Company or Participant's Employer, but only if Participant shall first be provided by the Company or Participant's Employer with written notice of the alleged immoral or unethical act and then shall have the opportunity to contest the alleged immoral or unethical act before the chief executive officer of the Company;

                (iii) Participant's willful and continual material breach of the material terms and conditions of Participant's employment with Participant's Employer; or

                (iv) Participant's willful violation of any policy of Participant's Employer that in accordance with the Employer's customary practices results in discharge after the first occurrence.

    No act or failure to act by a Participant will be deemed "willful" unless it is done, or omitted to be done, by Participant in bad faith or without reasonable belief that the action or omission was in the best interests of the Company or Participant's Employer.

        B. "Change of Control" means the happening of any one or more of the following:

                (1) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of the Company, or any employee benefit plan of the Company or its subsidiaries, becomes the beneficial owner of the Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election for directors of the Company (other than as a result of an issuance of securities initiated by the Company in the ordinary course of business); or

                (2) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then-outstanding securities of the Company or any successor corporation or entity (excluding any subsidiary or former subsidiary of the Company) entitled to vote generally in the election of directors of the Company or such other corporation or entity after such transaction, are held in the aggregate by holders of the Company's securities entitled to vote generally in the election of directors of the Company immediately prior to such transactions; or

                (3) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's stockholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period.

        C. "Committee" is defined in Section 2.A.

        D. "Company" is defined in Section 1.A.

        E. "Designated Associate" is defined in Section 2.A.

        F. "Employer" is defined in Section 2.A.

        G. "Good Reason" means Participant's (a) annual base salary amount or annual base rate of bonus potential (determined as a percentage of annual base salary) is reduced or (b) location of employment with the Employer is changed by the Employer to a location that is more than fifty miles from the location of Participant's employment with the Employer on the day first preceding a Change of Control.

        H. "Participant" is defined in Section 2.A.

        I. "Reduction in Force" means (1) the termination of Participant's employment with the Participant's Employer due to the elimination of Participant's position or job function (each an "Eliminated Position") that occurs as a result of or in connection with the sale or other transfer for consideration to an acquiror that is not an affiliate of the Company of any material asset or assets (considered alone or together if a series of related transactions) of the Company or any Employer, excluding each transaction referred to above in this sentence that also constitutes a Change of Control, and (2) Participant is not offered another position of employment (to begin immediately following the elimination of the Eliminated Position) by the Employer, the acquiror, or any affiliate of either, that includes each of the following:

                (i) at least the same amount of annual base salary and at least the same annual base rate of bonus potential (determined as a percentage of annual base salary) as the Eliminated Position's amount of annual base salary and annual base rate of bonus potential (determined as a percentage of annual base salary); and

                (ii) if a Change of Control has occurred, is located not more than fifty miles from the Eliminated Position's location.

                                                                         Saks Incorporated,

                                                                         By: /s/ Brian J. Martin  
                                                                                 Executive Vice President

Cafe SFA - Minneapolis, Inc., Carson Pirie Holdings, Inc., Carson Pirie Scott Insurance Services, Inc., Herberger's Department Stores, LLC, Jackson Leasing, LLC, McRae's of Alabama, Inc., McRae's Stores Partnership, McRae's Stores Services, Inc., McRae's, Inc., National Bank of the Great Lakes, New York City Saks, LLC, NorthPark Fixtures, Inc., Parisian, Inc., Saks & Company, Saks Credit Corporation, Saks Direct, Inc., Saks Distribution Centers, Inc., Saks Fifth Avenue Distribution Company, Saks Fifth Avenue Enterprises, Inc., Saks Fifth Avenue Food Corporation, Saks Fifth Avenue of Texas, Inc., Saks Fifth Avenue Texas, L.P., Saks Fifth Avenue, Inc., Saks Holdings, Inc., Saks Shipping Company, Inc., Saks Transitional Credit Corporation, Saks Wholesalers, Inc., saksfifthavenue.com, inc., SFA Finance Company II, SFA Holdings, Inc., SFA Realty, Inc., Tex SFA, Inc., The Restaurant at Saks Fifth Avenue Corporation.

                                                                                  By: /s/ Brian J. Martin  
                                                                                          President

Schedule 1

Subsidiaries of the Company

Cafe SFA - Minneapolis, Inc.

Carson Pirie Holdings, Inc.

Carson Pirie Scott Insurance Services, Inc.

Herberger's Department Stores, LLC

Jackson Leasing, LLC

McRae's of Alabama, Inc.

McRae's Stores Partnership

McRae's Stores Services, Inc.

McRae's, Inc.

National Bank of the Great Lakes

New York City Saks, LLC

NorthPark Fixtures, Inc.

Parisian, Inc.

Saks & Company

Saks Credit Corporation

Saks Direct, Inc.

Saks Distribution Centers, Inc.

Saks Fifth Avenue Distribution Company

Saks Fifth Avenue Enterprises, Inc.

Saks Fifth Avenue Food Corporation

Saks Fifth Avenue of Texas, Inc.

Saks Fifth Avenue Texas, L.P.

Saks Fifth Avenue, Inc.

Saks Holdings, Inc.

Saks Shipping Company, Inc.

Saks Transitional Credit Corporation

Saks Wholesalers, Inc.

saksfifthavenue.com, inc.

SFA Finance Company II

SFA Holdings, Inc.

SFA Realty, Inc.

Tex SFA, Inc.

The Restaurant at Saks Fifth Avenue Corporation

Schedule 2

Position of Employment (Group of Designated Executives)	Severance Payment in Accordance with Section 3.C (Weeks of Base Salary)
Division Presidents and Corporate Executive Vice Presidents and Senior Vice Presidents	104 weeks
Division Executive Vice Presidents and Senior Vice Presidents	78 weeks
Corporate Vice Presidents and Division DMMs	52 weeks
Director-level associates and Buyers	26 weeks
Other exempt associates	(1) 2 weeks plus (2) 1 week per completed year of service measured from employment anniversary date to employment anniversary date up to a maximum of 12 weeks. For example, the total severance payment for associates with 5 completed years of service would be 7 weeks of base salary and the total severance payment for associates with 12 or more completed years of service would be 14 weeks of base salary.

EX-13

 Two Thousand Annual Report

Saks Fifth Avenue Enterprises
Saks Department Store Group  

2        Financial Highlights
3        Letter to Our Shareholders
6        Saks Fifth Avenue Enterprises
20      Saks Department Store Group
33      Five-Year Financial Summary
34      Management's Discussion and Analysis
43      Consolidated Financial Statements
47      Notes to Consolidated Financial Statements
73      Report of Independent Accountants
73      Report of Management
74      Market Information
75      Directors and Certain Officers
76      Store Locations
78      Shareholder Information
79      Corporate Information

Distinctions In Style 
Style is ever-changing.
It's current. And timeless. Individual. And far-reaching.
Saks Incorporated is well-positioned to identify
and take advantage of the distinctions.

2          FINANCIAL HIGHLIGHTS

          Saks Incorporated Financial Highlights

Year Ended

(in thousands, except per share amounts)	February 3,           2001	January 29,         2000	January 30,             1999
Net sales	$   6,581,236	$  6,434,167	$   5,963,813
Income before non-routine items	$      132,699	$     230,132	$      153,525
Diluted earnings per common     share before non-routine items	$            0.93	$           1.58	$            1.05
Income before extraordinary items	$        75,216	$     198,904	$        24,985
Diluted earnings per common share     before extraordinary items	$            0.53	$           1.36	$            0.17
Diluted weighted average common shares	142,718	146,056	146,383
Total assets	$   5,050,611	$  5,098,952	$  5,188,981
Shareholders' equity	$   2,293,829	$  2,208,343	$  2,007,575

                        Note:  Non-routine items include extraordinary items, losses from long-lived assets, integration charges, and year 2000 expenses

3        LETTER TO OUR SHAREHOLDERS

To Our Shareholders

In the midst of a generally difficult retail environment, the operating performance of Saks Incorporated during 2000 fell below last year's levels and below the standards we expect from this organization. While I am disappointed with our 2000 results, I can report to you that we have taken the decisive actions necessary to regain the operating momentum of this business and again assume our historic position as a leader in value creation in the retail industry.

During the first part of 2000, sales at our traditional department store business (Saks Department Store Group or DSG) were substantially below planned levels. A comparable store sales decline of 4.3% during the first half of the year led to an overstocked position in this business. The resulting markdowns necessary to clear the excess inventory, combined with the sales shortfall, led to a substantial decline in the year-over-year contribution of Saks DSG through the first three quarters of the year.

By contrast, the operating performance of our Saks Fifth Avenue businesses during the first three quarters of the year was substantially improved from the prior year's levels. Comparable store sales increased by 6.5% for the first nine months, and the operating contribution of our Saks Fifth Avenue businesses met our plans. However, along with the increase in volatility in the U.S. financial markets in the fall of 2000, our Saks Fifth Avenue business slowed. Fourth quarter comparable store sales declined by 3.4%, and, as a result, the fourth quarter earnings contribution of our Saks Fifth Avenue full-line stores was below prior year's levels. This decline, combined with difficult sales trends at our Saks Off 5th stores and the costs associated with our saks.com launch and related catalog integration, led to lower earnings contribution from this business.

While we reacted aggressively to these sales trends with reductions in inventory purchases, capital spending and general expenses, we could not sufficiently offset these negative factors and, therefore, posted disappointing earnings for the full year.

In July of 2000, faced with a difficult trading environment in the traditional department store segment and with premium valuations being accorded luxury enterprises, the Board of Directors of Saks Incorporated determined it would be in the

4        LETTER TO OUR SHAREHOLDERS

best interests of the shareholders to spin off its Saks Fifth Avenue--related businesses into a separate, publicly-owned company. This business was to be named Saks Fifth Avenue Enterprises (SFAE).

The objective of this action was to focus the operations of two distinct businesses -- each with its own management and value-creation formula. Each would report financial information permitting investors to evaluate and value the businesses accordingly.  Our Board believed that this action would permit the focus necessary to revitalize our traditional department store business, which after a decade of outstanding growth, was facing a challenging operating environment. The Board also believed that having substantially and permanently improved the Saks Fifth Avenue-related businesses since the acquisition of Saks Holdings, this new structure would permit us to accelerate the growth opportunities inherent in the Saks Fifth Avenue--related businesses.

After the July announcement, as a result of the decisive operating actions taken at our DSG business during the summer and early fall of 2000, we enjoyed substantially improved momentum in this business during the fourth quarter of 2000. As I previously outlined, however, the operating contribution of the Saks Fifth Avenue--related businesses declined during the fourth quarter of the year. Concurrent with these performance dynamics, equity investors narrowed the valuations between the traditional department store and luxury retail sectors. These market changes, combined with our ability to deliver the improvements in focus through organizational and personnel changes, led the Board to determine that it was in the best interests of our shareholders to terminate the proposed spin-off of the SFAE-related businesses. Our corporate planning related to this matter has led to substantially improved organizational processes  which I will outline later in this report. I am confident that these enhancements will contribute greatly to our ability to meet the value-creation objectives for Saks Incorporated.

Saks Incorporated has now been reorganized along the lines of its two principal business segments--the Saks Department Store Group (DSG) and Saks Fifth Avenue Enterprises (SFAE). These two business segments are supported by a central services group, Saks Support Group (SSG).

George Jones was named President and CEO of DSG effective March 1, 2001. George has enjoyed an outstanding career in retail and brings a wealth of executive experience to this important role. Each of our department store operating divisions, along with the corporate marketing and private-brand functions of DSG, now report to George.

5        LETTER TO OUR SHAREHOLDERS

Christina Johnson has been named President and CEO of SFAE. While continuing to lead the Saks Fifth Avenue full-line business, Tina now has the responsibility for our Saks Off 5th and Saks Direct businesses. This action further integrates the offerings of our multiple channels while more effectively leveraging the infrastructure of the SFAE operations.

Certain of the Company's sales support services are now housed under the umbrella of SSG, led by Jim Coggin, President and Chief Administrative Officer of the Corporation. SSG will provide high-value, efficient services to each of our  business segments, with the associated costs allocated to DSG and SFAE respectively.

In conjunction with these organizational changes, we will begin reporting the operating performance of our two business segments as part of our quarterly and annual reporting process to our investors. This will permit investors to appraise the performance of each of the business segments of Saks Incorporated.

In the next section of this report, I will share with you more detail on the strategies and activities of each of our business segments.

After a decade of dynamic growth, Saks Incorporated had a tough year. We recognized the problems and issues and have dealt with them forcefully. We have reorganized the corporation to drive improved focus and execution and have the leadership in place to see that this occurs. Our financial condition is very sound, and our team is extremely motivated and energized.

We are substantial investors in this Company in addition to being the managers the assets of our investing partners. We know that the year ahead still holds some major challenges with an unsettled economic environment. However, in spite of these challenging circumstances, you will see a return to the high-quality performance standards we all expect from this outstanding business.

Thank you for your support.

/s/ R. Brad Martin

R. Brad Martin
Chairman of the Board and Chief Executive Officer
Saks Incorporated

This letter and the SFAE and DSG information on pages 6 through 31 of this report contain "forward-looking" information within the definition of the Federal securities laws. For a discussion of risk factors, refer to "Forward-Looking Information" contained in Management's Discussion and Analysis appearing on page 42 of this annual report.

Saks Fifth Avenue Enterprises
                 Ultimate Style

 8        SAKS FIFTH AVENUE ENTERPRISES

Saks Fifth Avenue Enterprises
            The Destination for Style Around the World

Saks Fifth Avenue is the most recognized luxury brand worldwide and the foremost authority on luxury and style. Saks Fifth Avenue Enterprises, or SFAE, consists of Saks Fifth Avenue stores, Off 5th Saks Fifth Avenue Outlet stores and Saks Direct.

There are 62 geographically diverse Saks Fifth Avenue luxury department stores, in 23 states, with 6.4 million square feet of premium real estate, including the owned flagship store in New York City. There are 50 Saks Off 5th fashion outlet stores, in 23 states, with 1.3 million square feet of space located in upscale mixed-use and off-price outlet centers. Saks Direct consists of our catalog business as well as saks.com

SFAE is a much stronger business as a result of actions we have taken since our acquisition of Saks Holdings in September 1998. These actions include:

• Improved management focus.  Reorganizing and strengthening our management team.
• New inventory control standards.  Ensuring better returns on working capital.
• Improved efficiency and productivity.  Implementing process improvements in nearly every support function of the business including credit, distribution, logistics, information technology and purchasing.
• Enhanced store design, real estate and capital expenditure processes. Reducing capital investment in new stores as a result of reengineering processes, meaningfully lowering occupancy costs due to improved real estate acquisition and negotiation practices, closing unproductive stores and implementing rigid standards for approval of capital expenditures.

                                                                                     Saks Fifth Avenue Enterprises

Saks Fifth Avenue Enterprises
                    Ultimate Style

Saks Fifth Avenue Enterprises
                    Ultimate Style

Saks Fifth Avenue Enterprises
                    Ultimate Style

Saks Fifth Avenue Enterprises
                    Ultimate Style

Saks Fifth Avenue Enterprises
                    Ultimate Style

15        SAKS FIFTH AVENUE ENTERPRISES

                                                                                                     Saks Fifth Avenue

                                                                                  Ultimate Style    

                                                                                                      Off 5th
                                                                                                      Saks Fifth Avenue
                                                                                                      Outlet

                                                                                                      Saks Direct

	16         SAKS FIFTH AVENUE ENTERPRISES
	Saks Fifth Avenue Full-Line Stores A Luxurious Experience Our goal is to capture an increasing share of spending by the luxury customer. Through extensive research with existing loyal customers we intend to retain as well as new customers we wish to attract, we have developed responsive marketing, merchandising, customer service and store environment strategies. We have updated the merchandising and marketing profile to appeal to both our core customers and younger, affluent customers. We have successfully repositioned the marketing strategy through the fall 2000 introduction of the Live A Little campaign. We continue to strengthen our core designer offerings and add modern, new designers. Merchandise is increasingly lifestyle focused with store assortments based more on customer buying patterns than on store volume. We have refined and re-launched Saks Fifth Avenue's proprietary brand program.	The very successful Fifth Avenue Club and Saks First loyalty program are our hallmarks of service. Our research indicates there are also opportunities to improve "accessibility" within our stores, so we are designing and implementing training programs to ensure that we offer the most approachable, attentive and friendly service in the industry. Additionally, we are testing a new prototype store design that is more modern and inviting. Our new design includes warmer colors, distinctive music and lighting, shopper-friendly department adjacencies, eye-catching visuals, "living room" waiting areas within departments and other unique and innovative amenities.

17       SAKS FIFTH AVENUE ENTERPRISES We have
successfully
repositioned our
marketing strategy
through the
Live A Little
advertising
campaign. In 2000, the Company added new Saks Fifth Avenue full-line stores in Highland Park, Illinois and Hurst, Texas and Saks Fifth Avenue Men's Stores in Portland, Oregon and Chevy Chase, Maryland. For 2001, the Company will open new Saks Fifth Avenue stores in Birmingham, Alabama and Columbus, Ohio and our first international licensed operation in Riyadh, Saudi Arabia. The success of the Riyadh store could lead to other international expansion and licensing opportunities.

	18   SAKS FIFTH AVENUE ENTERPRISES Off 5th Saks Fifth Avenue Outlet  Where Upscale Gets Savvy
	Saks Off 5th is the leading retailer of off- price, upscale merchandise in the United States. This business has attractive economic returns due to high sales productivity, lower operating costs, favorable lease economics and attractive inventory purchase prices. We have strategies in place to grow market share of this business, which include expanding our assortments of key items and the testing and implementation of radio marketing to build public awareness, traffic and volume.	During 2000, we opened new Saks Off 5th stores in Olathe, Kansas and Nashville, Tennessee. Our 2001 store expansion plans include new Saks Off 5th stores in Cincinnati, Ohio; Atlanta, Georgia and Miami, Florida.

19     SAKS FIFTH AVENUE ENTERPRISES Saks Direct Virtual Style. Virtual Saks.
We launched saks.com   in September 2000 to parallel the Saks Fifth Avenue shopping experience. saks.com  is fast becoming an effective merchandising and marketing tool, as well as a new channel to extend the geographic and demographic reach of the Saks Fifth Avenue brand. During its initial months of operation, our order size averaged over $300. Cross-channel opportunities abound, from optimizing business partnerships to driving Saks Fifth Avenue promotions and events on the site.	During the start-up year of 2000, we invested significantly in site development and infrastructure to build the foundation for this value-creating channel of distribution. With our foundation now established, during the first half of 2001 we are further integrating the Saks Fifth Avenue catalog and saks.com  operations with those of the core Saks Fifth Avenue business. The loss in our e-commerce business totaled $.14 per share for 2000, and we expect this number to decline substantially in 2001.

                                         SAKS DEPARTMENT STORE GROUP
                                                                             Real-Life Style

22          SAKS DEPARTMENT STORE GROUP

 Saks Department Store Group
        Defining Style Across the Country

Saks Department Store Group, or DSG, is a leading branded department store operator in the Southeast, Midwest and Great Plains markets, holding the number one or number two market share in approximately 90% of our trade areas.

We operate 243 stores, in 24 states, with 26.8 million square feet of high-quality, well-positioned real estate. Our nameplates--Proffitt's, McRae's, Younkers, Parisian, Herberger's, Carson Pirie Scott, Bergner's and Boston Store--offer upper-moderate to better branded and proprietary branded apparel, cosmetics, shoes, accessories and decorative home furnishings. These regional franchises carry tremendous brand equity with established customer relationships and a broad customer base.

                                                                                 SAKS DEPARTMENT STORE GROUP

SAKS DEPARTMENT STORE GROUP

SAKS DEPARTMENT STORE GROUP
        Real Life Style

SAKS DEPARTMENT STORE GROUP
                                                                                                   Real Life Style

SAKS DEPARTMENT STORE GROUP
                     Real Life Style

                                                                             SAKS DEPARTMENT STORE GROUP
                                                                                                   Real Life Style

SAKS DEPARTMENT STORE GROUP
                         Real Life Style

29        SAKS DEPARTMENT STORE GROUP

                                                                                                  Parisian

                                                                                                  Proffitt's

                                                                              ; Real-Life Style     

                                                                                                  McRae's

                                                                                                  Younker's

                                                                                                  Herberger's

                                                                                                  Carson Pirie Scott

                                                                                                  Boston Store

                                                                                                  Bergner's

	30        SAKS DEPARTMENT STORE GROUP Saks Department Store Group Regaining Momentum
	In the second half of 2000, we began implementing the decisive actions necessary to regain operating momentum at DSG. Implementation and refinement of these initiatives continue today. Specifically, we have made substantial progress toward: *   Improved merchandising.  Refocusing      merchandise content on key items and      products geared toward our traditional      customer base; collaborating with our      vendor partners to better meet our      customers' expectations; developing      profitable relationships with new vendors;      refining assortments by store based on      customer research and analysis of      shopping patterns; enhancing our private      brands; and continuing to emphasize      inventory controls and improved execution.  *  Enhanced marketing.  Focusing efforts in      support of key items; leveraging customer      databases with increased direct mail and      enhanced loyalty programs; and increasing      our customer relationship marketing. *  Improved customer service.  Better      matching staffing needs by department,      ranging from personalized service in areas      requiring more consultation to fast      transaction processing in areas oriented	toward self-selection; and installing new     customer service centers in nearly 100     stores. *  Strengthened management focus.     Consolidating McRae's home offices into     Proffitt's headquarters and Herberger's     home offices into Carson Pirie Scott     headquarters and placing previously     centralized merchandising staff into the     operating divisions, creating a more     efficient cost structure; leveraging key     managers in merchandising, marketing     and store administration; and     streamlining decision making. As a result of these initiatives, DSG generated positive comparable store sales growth and improved year-over-year operating performance in the fourth quarter of 2000. Through the continued execution of these strategies, we are positioned to achieve our objectives at DSG in 2001. We have completed construction on our new state-of-the-art distribution center located in Steele, Alabama. The consolidation of three existing distribution facilities into this center will be completed during spring 2001 and will generate cost savings of approximately $10 million annually, beginning in 2002.

31          SAKS DEPARTMENT STORE GROUP Saks Department Store Group Right Time. Right Place.
In 2000, the Company added a new Parisian store in Charleston, South Carolina and a new Carson Pirie Scott store in Schaumburg, Illinois and closed five under performing units. Consistent with our strategy of rationalizing our store base and asset base in a fashion that creates a higher growth, higher margin, value-creating business, in March 2001 the  Company sold nine DSG stores and related assets to The May Department Stores Company. The stores totaled approximately 1.7 million square feet and included five Proffitt's stores in Nashville, Tennessee; three Parisian stores in Baton Rouge and Lafayette, Louisiana and Orlando, Florida; and one McRae's store in Baton Rouge.	The cash purchase price, including the working capital assets, totaled approximately $307 million. The price obtained for these assets demonstrates the substantial value embedded in the DSG portfolio. The Company will use proceeds from the sale to reduce debt and to repurchase equity. The $31 million after tax loss on disposition of the assets, primarily related to the non-cash impairment of goodwill, was recorded in the fourth quarter of 2000. This loss is expected to be significantly offset by the gain on there purchase of the Company's debt securities with the proceeds, although such gains will be realized in 2001. The Company will open two new traditional department stores in fall 2001--a Parisian store in Atlanta, Georgia and a Younkers store in Muskegon, Michigan.

33          SAKS INCORPORATED & SUBSIDIARIES FIVE-YEAR FINANCIAL SUMMARY

(In thousands, except per share amounts) February 3,
    2001     January 29,
    2000     January 30,
    1999     January 31,
    1998     February 1,
    1997    

Consolidated Income Statement Data:
Net Sales	$   6,581,236	$   6,434,167	$   5,963,813	$   5,515,675	$   4,726,766
Cost of sales	4,211,707	4,028,779	3,794,340	3,481,831	3,006,287

Gross margin	2,369,529	2,405,388	2,169,473	2,033,844	1,720,479
Selling, general and administrative expenses	1,433,357	1,359,386	1,332,275	1,203,909	1,059,750
Other operating expenses	580,853	535,670	498,733	444,276	367,247
Losses from long-lived assets	73,572	12,547	61,785	(134)	1,406
Integration charges	19,886	35,660	111,307	36,524	16,929
Year 2000 expenses	--	5,917	10,437	6,590	--
ESOP expenses	--	--	--	9,513	3,910

Operating Income	261,861	456,208	154,936	333,166	271,237
Interest expense	(149,995)	(138,968)	(110,971)	(113,685)	(114,881)
Other income (expense), net	3,733	140	22,201	2,330	(11,780)

  Income before Provision (Benefit) for
       Income Taxes and Extraordinary Items
115,599 
317,380 
66,166 
221,811 
144,576 

Provision (benefit) for income taxes 40,383  118,476  41,181  (194,426) 50,998 

Income before Extraordinary Items	75,216	198,904	24,985	416,237	93,578
Extraordinary loss on early extinguishment of
debt, net of taxes	--	(9,261)	(25,881)	(11,323)	(12,746)

Net Income $        75,216  $      189,643  $           (896) $       404,914  $        80,832 

Basic earnings per common share:
Before extraordinary items	$           0.53	$            1.38	$           0.17	$             3.03	$           0.72
After extraordinary items	$           0.53	$            1.32	$          (0.01)	$             2.94	$           0.62
Diluted earnings per common share:
Before extraordinary items	$           0.53	$            1.36	$           0.17	$             2.86	$           0.70
After extraordinary items	$           0.53	$            1.30	$          (0.01)	$             2.79	$           0.60
Weighted average common shares
Basic	141,656	144,174	142,856	137,588	125,056
Diluted	142,718	146,056	146,383	149,085	132,583
Consolidated Balance Sheet Data:
Working capital	$   1,085,956	$   1,110,796	$      887,875	$    1,096,359	$      951,752
Total assets	$   5,050,611	$   5,098,952	$   5,188,981	$    4,270,253	$   3,630,276
Long-term debt, less current portion	$   1,801,657	$   1,966,802	$   2,110,395	$    1,093,806	$      863,475
Subordinated debt	$               --	$               --	$         4,252	$       286,964	$      501,767
Shareholders' equity	$   2,293,829	$   2,208,343	$   2,007,575	$    1,944,529	$   1,397,934

34          MANAGEMENT'S DISCUSSION AND ANALYSIS

Saks Incorporated (hereinafter the "Company") is a national retailer currently operating 355 premier, traditional and off-price department stores. The Company operates Saks Fifth Avenue Enterprises ("SFAE"), which consists of 62 Saks Fifth Avenue stores,50 Saks Off 5th stores, and Saks Direct, which includes the Folio and Bullock & Jones catalogs and the operations of saks.com. The Company also operates the Saks Department Store Group ("DSG"), which consists of 26 Proffitt's stores, 29 McRae's stores,50 Younkers stores, 40 Parisian stores, 40 Herberger's stores, 33 Carson Pirie Scott stores, 14 Bergner's stores and 11 Boston Stores.

Between 1994 and 1998, the Company experienced significant growth, principally through a series of acquisitions. The Company's major acquisitions are outlined below:

Name
Headquarters Number of
States Acquired
Locations
Date Acquired Accounting
Treatment

McRae's	Jackson, MS	31	Southeast	March 31, 1994	Purchase
Younkers	Des Moines, IA	50	Midwest	February 3, 1996	Pooling
Parisian	Birmingham, AL	40	Southeast/Midwest	October 11, 1996	Purchase
Herberger's	St. Cloud, MN	37	Midwest	February 1, 1997	Pooling
Carson Pirie Scott,     Boston Store,     and Bergner"s     ("Carson's")	Milwaukee, WI	55	Midwest	January 31, 1998	Pooling
Saks Fifth Avenue and     Off 5th ("SFA")	New York, NY	95	National	September 17, 1998	Pooling

The Company has also expanded its store base through the construction of new units as well as through the acquisition of select store locations, such as the purchase of 15 former Mercantile stores from Dillard's in late 1998.

At February 3, 2001, the Company had entered into an agreement to sell nine of the former Mercantile Stores to The May Department Stores Company for an aggregate purchase price of approximately $307 million. The transaction, including the sale of real and personal property, along with certain related merchandise inventory and customer accounts receivable, was consummated on March 16, 2001.

Merchandising, sales promotion and certain store operating support functions are conducted in multiple locations. Certain back office administrative support functions for the Company, such as accounting, credit administration, store planning and information technology, are centralized.

35          MANAGEMENT'S DISCUSSION AND ANALYSIS

Income statement information for each year presented has been restated to include the financial results of operations of all acquisitions which the Company accounted for under the pooling of interests method of accounting as if the acquired entity and the Company had operated as one since inception. The operations of acquisitions, which were accounted for using the purchase method of accounting, have been included in the income statements subsequent to their respective purchase dates. The following table sets forth, for the periods indicated, certain items from the Company's consolidated statements of income, expressed as percentages of net sales (numbers may not total due to rounding):

February 3,
2001 ("2000") January 29,
2000 ("1999") January 30,
1999 ("1998")

Net sales	100.0%	100.0%	100.0%
Cost of sales	64.0	62.6	63.6

Gross margin	36.0	37.4	36.4
Selling, general and administrative expenses	21.8	21.1	22.3
Other operating expenses	8.8	8.3	8.4
Losses from long-lived assets	1.1	0.2	1.0
Integration charges	0.3	0.6	1.9
Year 2000 expenses	0.0	0.1	0.2

Operating income	4.0	7.1	2.6
Interest expense	(2.3)	(2.2)	(1.9)
Other income (expense), net	0.1	0.0	0.4

Income before provision for income taxes and extraordinary items	1.8	4.9	1.1
Provision for income taxes	0.6	1.8	0.7

Income before extraordinary items	1.1	3.1	0.4
Extraordinary loss on early extinguishment of debt, net of taxes	0.0	(0.1)	(0.4)

Net income 1.1%         2.9%         0.0%         

Net sales and cost of sales, as previously reported in prior years, have been restated to include the revenues and the costs related to the shipping and handling of merchandise sold, with no effect on previously reported operating income, net income, shareholders' equity or cash flows. The Company had previously included revenues and costs for shipping and handling in selling, general and administrative expenses.

36        MANAGEMENT'S DISCUSSION AND ANALYSIS

FISCAL YEAR ENDED FEBRUARY 3, 2001 COMPARED TO FISCAL YEAR ENDED JANUARY 29, 2000

Net Sales
Net sales for 2000 include 53 weeks of sales versus 52 weeks in 1999.

Net sales increased 2.3% in 2000 over 1999 primarily due to sales resulting from the 53rd week, incremental sales generated from new store additions, offset partially by the loss of sales from closed stores, and a comparable stores sales increase of 0.2%.

Net sales for DSG were $3,909.1 million in 2000 compared to $3,928.9 million in 1999, a total sales decrease of 0.5%, principally attributable  to a comparable stores sales decrease for the 52 weeks ended January 27, 2001 of 1.8%. Net sales for SFAE were $2,672.2 million in 2000 compared to $2,505.2 million in 1999, a total sales increase of 6.6%, principally attributable to a comparable stores sales increase  for the 52 weeks ended January 27, 2001 of 5.0% and incremental sales from new stores.

Gross Margin
Gross margin as a percentage of net sales was 36.0% in 2000 compared to 37.4% in 1999. The decrease in gross margin percent from 1999 to 2000 was primarily attributable to markdowns associated with the general weakness in the DSG segment and the extraordinary markdowns taken to clear excess spring and summer apparel inventories in DSG.

Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") as a percentage of net sales were 21.8% in 2000 compared to 21.1% in 1999. The increase in 2000 from 1999 was primarily due to 1) expenses of $21.3 million associated with launching saks.com without a corresponding increase in sales, 2) the inability to reduce operating expenses commensurate with the comparable  store sales decline in DSG during the first three quarters of the year and with the comparable store sales decline in SFAE during the fourth quarter of the year, offset partially by 3) an increase in finance charge income on proprietary credit cards as a result of terms changes initiated in late 1999. Included in SG&A expenses in 2000 were expenses totaling $6.7 million ($4.1 million net of taxes) associated with the terminated proposal to spin-off SFAE and revisions to 1999 charges associated with store closings.

Other Operating Expenses
Other operating expenses as a percentage of net sales were 8.8% in 2000 compared to 8.3% in 1999. The increase was primarily due to 1) increased depreciation and rental expenses associated with the remodel and expansion of comparable stores without a corresponding increase in comparable store sales, 2) depreciation and rental expenses associated with new stores without a corresponding increase in new store sales and 3) increased depreciation resulting from infrastructure capital spending (principally information technology systems).

Certain Items

INTEGRATION CHARGES
The Company incurred certain costs to integrate and combine the operations of acquired companies. The 2000 charges were primarily comprised of severance benefits and systems conversions related to the consolidation of the McRae's and Herberger's operating divisions and three distribution centers. The 1999 charges were primarily comprised of systems conversion costs and severance benefits related to redundant systems and administrative operations associated with the SFA and Carson's acquisitions.

LOSSES FROM LONG-LIVED ASSETS
Losses from long-lived assets in 2000 of $73.6 million were primarily comprised of the non-cash impairment of goodwill associated with the pending sale of nine former Mercantile stores and, to a lesser extent, impairments on abandoned software and under-performing store assets. Losses from long-lived assets in 1999 of $12.5 million were principally comprised of the write-off of the carrying amounts of relocated or closed stores.

37          MANAGEMENT'S DISCUSSION AND ANALYSIS

YEAR 2000 EXPENSESPrior to January 1, 2000, the Company incurred costs related to required system upgrades, replacements and modifications to prepare for the year 2000. The Company experienced no significant system delays or interruptions on or after January 1, 2000.

Operating Income
Operating income decreased from $456.2 million in 1999 to $261.9 million in 2000 primarily due to 1) an increase in markdown activity resulting from the general weakness in DSG, 2) the excessive markdowns required to clear excess spring and summer apparel inventories in DSG, 3) the expenses associated with launching saks.com, 4) increased occupancy costs without a corresponding increase in sales, 5) the impairment of goodwill associated with the pending sale of the nine former Mercantile stores, partially offset by 6) lower integration charges and the absence of Year 2000 expenses.

Interest Expense
Interest expense as a percentage of net sales increased to 2.3% in 2000 from 2.2% in 1999. The increase was due principally to higher average borrowing rates on floating rate debt and higher average debt levels.

Income Taxes
In 2000, the effective income tax rate differed from the federal statutory tax rate due to state income taxes and nondeductible goodwill amortization, offset by the favorable effect of the disposal of a real estate investment ($4.1 million). In 1999, the effective income tax rate differed from the statutory tax rates principally due to state income taxes and nondeductible goodwill amortization. The change in year-over-year effective tax rates was primarily attributable to the favorable effect of the real estate investment disposition.

Extraordinary Items
The extraordinary item in 1999 related to the prepayment of $236 million in REMIC certificates, which resulted in an extraordinary loss from early extinguishment of debt. The loss was comprised of the write-off of unamortized deferred debt issuance costs.

Net Income 
Net income in 2000 decreased to $75.2 million from $189.6 million in 1999 primarily due to the decline in operating income.

FISCAL YEAR ENDED JANUARY 29, 2000 COMPARED TO FISCAL YEAR ENDED JANUARY 30, 1999

Net Sales
Net sales increased 7.9% in 1999 over 1998 primarily due to a comparable stores sales increase of 2.6% and incremental sales generated from new store additions, offset partially by the loss of sales from closed stores.

Net sales for DSG were $3,928.9 million in 1999 compared to $3,647.4 million in 1998, a total sales increase of 7.7%, principally attributable to a comparable stores sales increase of 1.5% and incremental sales from new stores. Net sales for SFAE were $2,505.2 million in 1999 compared to $2,316.4 million in 1998, a total sales increase of 8.2%, principally attributable to a comparable stores sales increase of 4.7% and incremental sales from new stores.

Gross Margin
Gross margin as a percentage of net sales was 37.4% in 1999 compared to 36.4% in 1998. The increase in gross margin percent from 1998 to 1999 was primarily attributable to the effect of the markdowns taken in 1998 related to aged and excessive quantities of inventory recognized contemporaneous with the SFA acquisition.

38          MANAGEMENT'S DISCUSSION AND ANALYSIS

Selling, General and Administrative Expenses
SG&A as a percentage of net sales was 21.1% in 1999 compared to 22.3% in 1998. The decrease in 1999 from 1998 was primarily due to merger related charges incurred in 1998 in connection with the SFA acquisition. Those charges consisted of increased reserves for legal claims and self insurance liabilities, expenses related to real estate realignments and store closings, and a loss recognized from conforming SFA's policies for delinquent proprietary credit card accounts to those of the Company.

Other Operating Expenses
Other operating expenses as a percentage of net sales were 8.3% in 1999 compared to 8.4% in 1998. The decrease in other operating expenses percentage was primarily attributable to the excess of the growth in sales percentage over the percentage growth in expense. This favorable benefit was principally due to leveraging the comparable store sales increase over a relatively fixed expense base.

Certain Items

INTEGRATION CHARGESIn connection with its acquisitions, the Company incurred certain costs to effect the transactions and costs to integrate and combine certain operations. The 1999 charges were primarily comprised of systems conversion costs and severance benefits related to redundant systems and administrative operations. The 1998 charges were related principally to the SFA acquisition and consisted of investment banking, legal and accounting fees, transfer taxes and other direct merger costs and integration charges such as severance, the consolidation of administrative operations and the write-off of redundant information technology systems and certain development projects.

LOSSES FROM LONG-LIVED ASSETS
Losses from long-lived assets in 1999 of $12.5 million were principally comprised of the write-off of the carrying amounts of relocated or closed stores. The 1999 charges were less than the 1998 charges of $61.8 million primarily as a result of the charges taken in 1998 contemporaneous with the Company's review of the SFA real estate portfolio immediately prior to and subsequent to the acquisition.

YEAR 2000 EXPENSES
The Company incurred costs in 1999 and 1998 related to required system upgrades, replacements and modifications to prepare for the year 2000.

Operating Income
Operating income increased from $154.9 million in 1998 to $456.2 million in 1999 primarily due to 1) an increase in comparable store sales and new store sales, 2) the absence of markdowns taken in 1998 related to aged and excessive quantities of inventory recognized contemporaneous with the SFA acquisition, 3) the absence of charges taken in 1998 related to increased liabilities, real estate alignments, store closings and changes in delinquent proprietary credit card policies, 4) a decrease in integration costs and 5) the absence of merger charges taken in 1998 resulting from the SFA acquisition.

Other Income (Expense), Net
Other income in 1998 consisted of gains recorded from the favorable settlement of litigation, partially offset by charges related to the termination of certain interest rate hedging agreements.

Interest Expense
Interest expense as a percentage of net sales increased to 2.2% in 1999 from 1.9% in 1998. The increase was due to higher average levels of borrowings due to funding capital expenditures and working capital related to new stores and higher average borrowing rates due to more fixed versus variable rate debt.

39          MANAGEMENT'S DISCUSSION AND ANALYSIS

Income Taxes
In 1999, the effective income tax rate differed from the federal statutory tax rate principally due to state income taxes and nondeductible goodwill amortization. The change in the 1999 tax rate from the 1998 rate was attributable to nondeductible merger costs reflected in the 1998 rate.

Extraordinary Items
The extraordinary item in 1999 related to the prepayment of $236 million in REMIC certificates, which resulted in an extraordinary loss from early extinguishment of debt. The loss was principally comprised of the write-off of unamortized deferred debt issuance costs. The 1998 extraordinary item related to the early extinguishment of several debt instruments that occurred contemporaneous with the SFA merger and were designed to enhance liquidity, strengthen the balance sheet and position the Company for future growth. These transactions included 1) the repurchase of approximately $272.0 million of 5.5% convertible subordinated notes, 2) the repayment and subsequent cancellation of a revolving credit facility and certain property leases and 3) the repurchase of $65.0 million of REMIC certificates.

Net Income
Net income in 1999 increased to a $189.6 million profit from a $0.9 million loss in 1998 due to the improvement in operating income and fewer extinguishment of debt charges, partially offset by incremental interest expense.

Liquidity and Capital Resources

CASH FLOWThe primary needs for liquidity are to acquire or construct new stores, renovate and expand existing stores and to provide working capital for new and existing stores. The Company anticipates that cash generated from operating activities and borrowings under its revolving credit agreement and accounts receivable securitization will be sufficient to meet its financial commitments and to capitalize on opportunities for future growth.

Cash provided by operating activities was $485.5 million in 2000, $209.7 million in 1999, and $522.9 million in 1998. Cash provided by operating activities principally represents income before depreciation and amortization charges, losses from long-lived assets and changes in working capital. The increase in 2000 from 1999 was related to a lower investment in working capital. The decrease in 1999 from 1998 was primarily related to the favorable effect of the sale of Carson's proprietary credit card receivables on 1998 cash flows.

Cash used in investing activities was $248.7 million in 2000, $407.8 million in 1999, and $943.7 million in 1998. Cash used in investing activities principally consists of construction of new stores, renovation and expansion of existing stores and business acquisitions. The decrease in 2000 from 1999 was due to lower capital spending on new store openings, expansions and remodels. The decrease in 1999 from 1998 was due to the 1998 acquisitions of the former Mercantile stores from Dillard's, the Brody's stores and Bullock & Jones.

Cash provided by (used in) financing activities for 2000, 1999 and 1998 totaled $(191.6) million, $184.9 million and $402.6 million, respectively. The change from 1999 to 2000 was due primarily to increased operating cash flow and lower capital spending which allowed for the reduction of debt. The change from 1998 to 1999 was due to the 1998 issuance of $1.1 billion in senior notes and an increase in revolving credit facilities to fund 1) the acquisition of the former Mercantile stores from Dillard's, 2) the repayment of the Carson's receivables facility, 3) the repayment of the Company's senior notes, 4) the repayment of SFA convertible debentures and 5) the repayment of REMIC certificates.

The availability of net operating loss carry forwards and other tax benefits generated in prior years by SFA and Carson's will enable the Company to reduce its cash requirements for income tax payments in the next several years.

40          MANAGEMENT'S DISCUSSION AND ANALYSIS

ACCOUNTS RECEIVABLE SECURITIZATIONAll accounts receivable are generated by proprietary credit cards that are issued by National Bank of the Great Lakes, the Company's wholly owned subsidiary (the "Bank"), and are sold to wholly owned special purpose subsidiaries of the Company. The special purpose entities transfer the receivables, with limited recourse, to either a credit card related trust or a bank conduit  facility in exchange for cash and subordinated certificates representing undivided interests in the pool of receivables. The trust also issues certificates of beneficial interest, which represent an undivided interest in the pool of receivables, to investors. At February 3, 2001 the funding capacity consisted of approximately $1.3 billion of which $422 million were fixed rate certificates and $921 million were variable rate certificates. In 2001, securitization facilities totaling approximately $765 million of the $1.3 billion will mature. The Company anticipates issuing new certificates or establishing new conduit facilities that will be sufficient to maintain funding of accounts receivable under terms similar to those currently in place.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The guidance in SFAS No. 140 supercedes SFAS No. 125. Under SFAS No. 125, the Company's securitization transactions are accounted for as sales of receivables. SFAS No. 140 requires additional disclosures relating to securitized financial assets and retained interests in securitized financial assets for fiscal years ending after December 15, 2000. These disclosures are included in Note 4 to the consolidated financial statements. In addition, SFAS No. 140 changes the requirements for an entity to be a qualifying special purpose entity and modifies under what conditions a transferor has retained effective control over transferred assets. The updated rules for transfers of financial assets are effective for transfers occurring after March 31, 2001. Early adoption of the new rules is not allowed.

Unless the Company modifies its existing securitization structure, SFAS No. 140 will result in the reinstatement of previously sold accounts receivable and the establishment of a liability for secured borrowings. The Company believes it will be successful in amending its current securitization structure so as to retain accounting for the securitization as a sale of receivables.

CAPITAL STRUCTURE
As of February 3, 2001, the Company's total debt outstanding consisted of $148.7 million outstanding on various capital leases, $8.6 million in mortgage debt and $1.65 billion in senior notes with maturities ranging from 2004 to 2019. Total indebtedness of $1,807.3 million represented a debt to total capitalization percentage of 44.1% and a decrease of $167.3 million from total debt outstanding at January 29, 2000. The reduction in debt was principally in the amounts owed under the revolving credit agreement and was the result of a lower investment in working capital and reduced capital expenditures.

As of January 29, 2000, the Company's total debt consisted of $159.0 million outstanding on its revolving credit agreement, $155.1 million outstanding on its capital leases, $10.5 million of mortgage debt, and $1.65 billion in senior notes. During 1999, the Company issued $200 million in 7.375% senior notes that mature in 2019 and $350 million in 7.0% senior notes that mature in 2004. Proceeds of both issuances were used to refinance borrowings under the Company's revolving credit agreement.

In July 1999, the Company authorized a share repurchase program for up to five million shares. During 1999, the Company repurchased 2.004 million shares under the program for an aggregate amount of $33.3 million. During 2000, the Company repurchased  an additional 2.041 million shares for an aggregate purchase price of $25.0 million, leaving 0.955 million shares available under the program at February 3, 2001. In March 2001, the Company authorized an additional repurchase program of five million shares.

In March 2001, the Company completed the sale of nine former Mercantile stores to The May Department Stores Company  for an aggregate purchase price of approximately $307 million. The Company anticipates using the proceeds to repurchase both equity and debt; based on current conditions, the Company anticipates recording a gain on the extinguishment  of debt.

CASH BALANCES At February 3, 2001 and January 29, 2000, the Company maintained cash and cash equivalent balances of $64.7 million and $19.6 million, respectively. These amounts primarily consist of cash received in payment of credit card balances that remain in transit from our lock box bank accounts, cash receipts related to sales near month end and cash maintained in the stores to facilitate sales transactions.

41          MANAGEMENT'S DISCUSSION AND ANALYSIS

CAPITAL NEEDS
The Company estimates capital expenditures for 2001 will approximate $300 million, primarily for the construction of new stores opening in 2001, initial construction work on stores expected to open in 2002, store expansions and renovations, enhancements to management information systems and regular maintenance capital expenditures.

The Company anticipates that working capital requirements relating to planned new and existing stores and capital expenditures will be funded through cash provided by operations, borrowings under its revolving credit agreement, ongoing sales of receivables under the securitization programs and proceeds from the sale of the nine former Mercantile stores that are not used to fund equity and debt repurchases. The Company maintains favorable banking relations and anticipates that the necessary credit agreements will be extended or new agreements will be entered into in order to provide future borrowing requirements as needed. The Company also believes it has access to a variety of capital markets. At February 3, 2001, the Company had $750 million available to borrow under its revolving credit agreement.

Inflation and Deflation
Inflation and deflation affect the costs incurred by the Company in its purchase of merchandise and in certain components of its SG&A expenses. The Company attempts to offset the effects of inflation through price increases and control of expenses, although the Company's ability to increase prices is limited by competitive factors in its markets. The Company attempts to offset the effects of merchandise deflation through control of expenses.

Seasonality
The Company's business, like that of most retailers, is subject to seasonal influences, with a significant portion of net sales and net income realized during the fall season, which includes the Christmas selling season. In light of these patterns, SG&A expenses are typically higher as a percentage of net sales during the first three quarters of each year, and working capital needs are greater in the last two quarters of each year. The increases in working capital needs during the fall season have typically been financed with internally generated funds, ongoing sales of receivables under the securitization programs and borrowings under the revolving credit agreement. Generally, more than 30% of the Company's net sales and over 50% of net income are generated during the fourth quarter.

Segment Reporting 
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The objective of this statement is to provide users of financial statements information about the different types of business activities in which a company engages and the different economic environments in which it operates. Prior to 2001, the Company operated three segments which are as follows: department stores, furniture and Saks Direct. The combined operations of the furniture and direct business segments represented less than three percent of the Company's total revenues, assets and operating profit. Accordingly, the results of operations of these two segments were not separately presented. Consistent with its reorganization announced in February 2001, the Company identified three reportable segments: SFAE stores, Saks Direct and DSG. It is expected that Saks Direct will continue to represent less than three percent of the Company's total revenues, assets and operating profit. As the reorganization is effected, the Company will begin disclosing more detailed separate financial information for two segments, SFAE, including the Saks Direct segment, and DSG, in the first quarter of fiscal 2001, including comparative historical financial information.

New Accounting Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, will be effective for the Company in the first quarter of fiscal 2001. The FASB issued FIN No. 44, "Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion No. 25," in March 2000. These new standards will not have a material effect on the Company's consolidated financial statements.

42          MANAGEMENT'S DISCUSSION AND ANALYSIS

Forward-Looking Information 
Certain information presented in this report addresses future results or expectations and is considered "forward-looking" information within the definition of the Federal securities laws. Forward-looking statements can be identified through the use of words such as "may," "will," "intend," "plan," "project," "expect," "anticipate," "should," "would," "believe," "estimate," "contemplate," "possible," "attempts," "seeks" and "point." The forward-looking information is premised on many factors.  Actual consolidated results might differ materially from projected forward-looking information if there are any material changes in management's assumptions.

The forward-looking information and statements are based on a series of projections and estimates that involve risks and uncertainties. Potential risks and uncertainties include such factors as: the level of consumer spending for apparel and other merchandise carried by the Company and its ability to respond quickly to consumer trends; adequate and stable sources of merchandise; the competitive pricing environment within the department and specialty store industries as well as other retail channels; favorable customer response to planned changes in customer service formats; the effectiveness of planned advertising, marketing and promotional campaigns; favorable customer response to increased relationship marketing efforts and proprietary credit card loyalty programs; appropriate inventory management; reduction of corporate overhead; effective operations of the Bank's credit card operations; and changes in interest  rates. For additional information regarding these and other risk factors, please refer to Exhibit 99.1 of the Company's Form 10-K filing with the Securities and Exchange Commission, which may be accessed via EDGAR through the Internet at www.sec.gov.

The Company undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are advised, however, to consult any further disclosures the Company makes on related subjects in its reports with the Securities and Exchange Commission and in its press releases.

Quantitative and Qualitative Disclosures About Market Risk 
The Company's exposure to market risk primarily arises from changes in interest rates. The effects of changes in interest rates on earnings generally have been small relative to other factors that also affect earnings, such as sales and operating margins. The Company seeks to manage exposure to adverse interest rate changes through its normal operating and financing activities and, if appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as part of an overall risk management program in order to manage the costs and risks associated with various financial exposures. The Company does not enter into derivative instruments for trading purposes, as clearly defined in its risk management policies.

43          SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

Year Ended

(In thousands, except per share amounts)       February 3,
       2001       January 29, 
      2000       January 30, 
      1999

Net Sales	$  6,581,236	$  6,434,167	$  5,963,813
Cost of sales	4,211,707	4,028,779	3,794,340

Gross margin	2,369,529	2,405,388	2,169,473
Selling, general and administrative expenses	1,433,357	1,359,386	1,332,275
Other operating expenses
Property and equipment rentals	196,813	187,829	181,966
Depreciation and amortization	214,099	178,775	155,361
Taxes other than income taxes	163,745	155,724	150,839
Store pre-opening costs	6,196	13,342	10,567
Losses from long-lived assets	73,572	12,547	61,785
Integration charges	19,886	35,660	111,307
Year 2000 expenses	--	5,917	10,437

Operating Income	261,861	456,208	154,936
Interest expense	(149,995)	(138,968)	(110,971)
Other income (expense), net	3,733	140	22,201

Income before Provision for             Income Taxes and Extraordinary Items	115,599	317,380	66,166
Provision for income taxes	40,383	118,476	41,181

Income before Extraordinary Items	75,216	198,904	24,985
Extraordinary loss on early extinguishment of debt, net of taxes	--	(9,261)	(25,881)

Net Income $       75,216  $   189,643  $         (896)

Earnings per common share:
Basic earnings per common share before extraordinary loss	$           0.53	$         1.38	$         0.17
Extraordinary loss	--	(0.06)	(0.18)

    Basic earnings per common share $           0.53  $         1.32  $        (0.01)

Diluted earnings per common share before extraordinary loss	$           0.53	$         1.36	$         0.17
Extraordinary loss	--	(0.06)	(0.18)

    Diluted earnings per common share $           0.53  $         1.30  $         (0.01)

Weighted average common shares
Basic	141,656	144,174	142,856
Diluted	142,718	146,056	146,383

The accompanying notes are an integral part of these consolidated financial statements.

44           SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(In thousands)       February 3,
      2001            January 29,
      2000     

Assets
Current Assets
Cash and cash equivalents	$       64,660	$       19,560
Retained interest in accounts receivable	193,258	202,134
Merchandise inventories	1,522,203	1,487,783
Other current assets	96,929	122,983
Deferred income taxes	39,188	62,198

Total Current Assets	1,916,238	1,894,658
Property and Equipment, net of depreciation	2,390,850	2,350,543
Goodwill and Intangibles, net of amortization	511,333	578,001
Deferred Income Taxes	178,118	213,204
Other Assets	54,072	62,546

        Total Assets $   5,050,611 $   5,098,952

Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable	$    319,537	$     235,967
Accrued expenses	400,235	436,478
Accrued compensation and related items	59,975	57,259
Sales taxes payable	44,885	46,387
Current portion of long-term debt	5,650	7,771

        Total Current Liabilities 830,282  783,862

Long-Term Debt	1,801,657	1,966,802
Other Long-Term Liabilities	124,843	139,945
Commitments and Contingencies
Shareholders' Equity
Common stock	14,313	14,281
Additional paid-in capital	2,115,091	2,103,001
Accumulated other comprehensive loss	(1,852)	--
Retained earnings	166,277	91,061

       Total Shareholders' Equity 2,293,829  2,208,343

       Total Liabilities and Shareholders' Equity $   5,050,611  $    5,098,952

 The accompanying notes are an integral part of these consolidated financial statements.

45          SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)
Common
Stock   Additional
Paid-in  
Capital  
Retained
Earnings

Other Total       
Shareholders'
Equity     

Balance at January 31, 1998	$  14,148	$   2,028,067	$  (97,686)	$           --	$  1,944,529
Net loss			(896)		(896)
Change in minimum pension liability				(7,487)	(7,487)
Comprehensive income					(8,383)
Issuance of common stock	255	39,204			39,459
Income tax benefits related to        employee stock plans		16,444			16,444
Decrease in tax valuation allowance		16,000			16,000
Repurchase of common stock	(2)	(472)			(474)

Balance at January 30, 1999	14,401	2,099,243	(98,582)	(7,487)	2,007,575
Net income			189,643		189,643
Change in minimum pension liability				7,487	7,487
Comprehensive income					197,130
Issuance of common stock	80	15,932			16,012
Income tax benefits related to        employee stock plans		4,942			4,942
Decrease in tax valuation allowance		16,000			16,000
Repurchase of common stock	(200)	(33,116)			(33,316)

Balance at January 29, 2000	14,281	2,103,001	91,061	--	2,208,343
Net income			75,216		75,216
Change in minimum pension liability				(1,852)	(1,852)
Comprehensive income					73,364
Issuance of common stock	172	17,296			17,468
Income tax expense related to         employee stock plans		(1,323)			(1,323)
Decrease in tax valuation allowance		15,405			15,405
Net activity under deferred compensation plans	64	5,518			5,582
Repurchase of common stock	(204)	(24,806)			(25,010)

Balance at February 3, 2001 $  14,313  $   2,115,091  $ 166,277  $  (1,852) $  2,293,829 

 The accompanying notes are an integral part of these consolidated financial statements.

46           SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended

(In thousands) February 3,
2001      January 29,
2000      January 30,
1999     

Operating Activities
Net income	$75,216	$   189,643	$   (896)
Adjustments to reconcile net income to net cash   provided by operating activities:
Extraordinary loss on extinguishment of debt	--	7,310	14,599
Depreciation and amortization	214,099	178,775	155,361
Provision for employee deferred compensation	5,582	7,736	2,870
Deferred income taxes	73,671	69,595	14,926
Losses from long-lived assets and integration items	73,572	12,547	79,617
Changes in operating assets and liabilities:
Retained interest in accounts receivable	4,491	(42,538)	293,948
Merchandise inventories	(29,428)	(101,848)	(127,203)
Other current assets	14,234	3,346	(8,112)
Accounts payable and accrued liabilities	48,063	(108,395)	97,302
Other operating assets and liabilities	5,952	(6,423)	527

  Net Cash Provided by Operating Activities 485,452  209,748  522,939 

Investing Activities     Purchases of property and equipment	(274,852)	(430,348)	(421,062)
Proceeds from sale of assets	26,107	22,514	2,500
Acquisitions of operating stores	--	--	(525,117)

  Net Cash Used in Investing Activities (248,745) (407,834) (943,679)

Financing Activities    Payments on long-term debt and capital lease obligations	(8,267)	(16,504)	(506,960)
Net borrowings (repayments) under revolving credit agreement	(159,000)	(449,000)	136,250
Purchases and retirements of common stock	(25,010)	(33,316)	(474)
Proceeds from issuance of stock	670	5,802	37,565
Proceeds from long-term borrowings	--	550,000	1,100,000
Payment of REMIC certificates	--	(235,841)	--
Change in cash placed in escrow for debt redemption	--	363,753	(363,753)

 Net Cash (Used in) Provided by Financing Activities (191,607) 184,894  402,628 

Increase (Decrease) in Cash and Cash Equivalents	45,100	(13,192)	(18,112)
Cash and Cash Equivalents at Beginning of Year	19,560	32,752	50,864

Cash and Cash Equivalents at End of Year $64,660  $    19,560  $32,752

Non-cash investing and financing activities are further described in the accompanying notes.
The accompanying notes are an integral part of these consolidated financial statements.

47      SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          (In thousands, except per share amounts)

Note.1.
Organization

Saks Incorporated (hereinafter together with its subsidiaries the "Company") is a national retailer currently operating premier, traditional and off-price department stores.  The Company operates Saks Fifth Avenue Enterprises ("SFAE"), which consists of Saks Fifth Avenue stores, Saks Off 5th stores, and Saks Direct, which includes the Folio and Bullock & Jones catalogs and the operations of saks.com.  The Company also operates the Saks Department Store Group ("DSG"), which consists of Proffitt's, McRae's, Younkers, Parisian, Herberger's, Carson Pirie Scott ("Carson's"), Bergner's and Boston Stores.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Note. 2.
Summary of Significant Accounting Policies

FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31. Fiscal year 2000 contained 53 weeks and ended on February 3, 2001. Fiscal years 1999 and 1998 contained 52 weeks and ended on January 29, 2000 and January 30, 1999, respectively.

NET SALES 
Net sales include sales of merchandise, net of returns and exclusive of sales taxes, commissions from leased departments and shipping and handling revenues related to merchandise sold. In 1999, in response to the Securities and Exchange Commission's Staff Accounting Bulletin No. 101, the Company changed its method of recording leased department sales to reflect only the commissions related to such sales. As a result of the issuance of EITF 00-10, net sales and cost of sales, as previously reported in prior years, have been restated to include revenues and expenses from shipping and handling of merchandise sold with no effect on previously reported operating income, net income, shareholders' equity or cash flows. The Company had previously included revenues and expenses from shipping and handling in selling, general and administrative expenses.

Revenues from shipping and handling included in net sales were $10,597 in 2000, $10,348 in 1999 and $8,571 in 1998. Commissions from leased departments included in net sales were $41,260, $36,665 and $38,348 in 2000, 1999 and 1998, respectively. Leased department sales were $277,050 in 2000, $244,806 in 1999 and $259,615 in 1998 and were excluded from net sales.

CASH AND CASH EQUIVALENTS 
Cash and cash equivalents primarily consist of cash on hand in the stores and deposits with banks and financial institutions that have maturities, when purchased, of three months or less. Cash equivalents are stated at cost, which approximates fair value.

RETAINED INTEREST IN ACCOUNTS RECEIVABLE 
National Bank of the Great Lakes (the "Bank"), a wholly owned subsidiary, provides credit to and performs ongoing credit evaluations of certain customers of the Company's stores and direct business. Concentration of credit risk is limited because of the large number of customers and their dispersion throughout the United States and other countries.

The Bank sells its credit card receivables to wholly owned special purpose subsidiaries of the Company. Gains or losses on the sale of the receivables depend in part on the cost of receivables sold in proportion to their estimated fair values. The Company estimates fair value based on the present value of expected future cash flows determined using management's best estimates of assumptions including portfolio yield, credit losses, payment rates and the weighted average cost of funding. The carrying value of the Company's retained interest approximates fair value. The Company retains the servicing rights to all receivables sold to the special purpose subsidiaries and trusts.

48          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities--a Replacement of SFAS No. 125." It revises criteria for accounting for securitizations (effective for reporting periods beginning after March 31, 2001) and introduces new disclosures.

The new disclosures are presented in Note 4 of these financial statements. Compliance with the revised accounting criteria is not expected to have a material effect on the Company's financial position or results of operations.

MERCHANDISE INVENTORIES AND COST OF SALES 
At February 3, 2001 and January 29, 2000, merchandise inventories are valued by the retail method and are stated at the lower of cost (last-in, first-out ["LIFO"]), or market and include freight and certain buying and distribution costs. At February 3, 2001 and January 29, 2000, the LIFO value of inventories exceeded market value and, as a result, inventory was stated at the lower market amount.

Consignment merchandise on hand of $99,737 and $87,384 at February 3, 2001 and January 29, 2000, respectively, is not reflected in the consolidated balance sheets.

ADVERTISING 
Direct response advertising relates primarily to the production and distribution of the Company's catalogs and is amortized over the estimated life of the catalog. Direct response advertising amounts included in other current assets in the consolidated balance sheets at February 3, 2001 and January 29, 2000 were $7,951 and $15,403, respectively. All other advertising and sales promotion costs are expensed in the period incurred. Advertising expenses were $222,020, $220,303 and $198,617 in 2000, 1999 and 1998, respectively.

STORE PRE-OPENING COSTSStore pre-opening costs are expensed when incurred.

PROPERTY AND EQUIPMENT 
Property and equipment are stated at cost. For financial reporting purposes, depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Buildings and improvements are depreciated over 20 to 40 years while fixtures and equipment primarily are depreciated over 5 to 15 years. Leasehold improvements are amortized over the shorter of their estimated useful lives or their related lease terms. Gains or losses on the sale of assets are recorded at disposal. Costs incurred in the discovery and post-implementation stages of obtaining internal computer software are expensed as incurred.  Costs incurred for the development of internal computer software are capitalized and amortized using the straight-line method over 3 to 7 years. At each balance sheet date and as changes in circumstances arise, the Company evaluates there cover ability of its property and equipment based upon the utilization of the assets and expected future cash flows.

GOODWILL AND INTANGIBLES 
The Company has allocated the purchase price of purchase transactions first to identifiable tangible assets and liabilities based on estimates of their fair value, with the remainder allocated to intangible assets and goodwill. Amortization of goodwill and intangibles is provided on a straight-line basis over the respective lives of the various intangible assets ranging from 5 to 40 years. The Company recognized amortization expense of $19,659, $17,593 and $11,601 in 2000, 1999 and 1998, respectively. As of February 3, 2001 and January 29, 2000, the accumulated amortization of goodwill and intangible assets was $76,322 and $56,663, respectively.

At each balance sheet date or as changes in circumstances arise, the Company evaluates the recoverability of goodwill and intangible assets based upon utilization of the assets and expectations of related cash flows. In 2000 and 1999, the Company recorded charges of $42,000 and $6,000, respectively, related to dispositions and impairments of goodwill and intangibles which are included in losses from long-lived assets in the consolidated statements of income. The 2000 charges primarily relate to the impairment of goodwill associated with the sale of the nine former Mercantile stores, which was consummated on March 16, 2001, and the 1999 charges relate to a store closing. Based upon its most recent analysis, the Company believes that no other impairment of remaining goodwill and intangibles exists at February 3, 2001. 

49          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             (In thousands, except per share amounts)

DERIVATIVES POLICY 
The Company uses financial derivatives only to manage its costs and risks in conjunction with specific business transactions. 

At February 3, 2001, the Company maintains one interest rate swap agreement used to convert a portion of its fixed rate senior notes to variable rate debt. The financial institution associated with this agreement is considered to be a major, well-known institution. 

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 138, will be effective for the Company in the first quarter of fiscal year 2001. This new standard will not have a material effect on the Company's financial statements.

STOCK-BASED COMPENSATION PLANS 
The Company records compensation expense for all stock-based compensation plans using the intrinsic value method. Compensation expense, if any, is measured as the excess of the market price of the stock over the exercise price of the option on the measurement date. Pro forma disclosures of net income and earnings per share are presented in Note 11, as if the fair value method had been applied.

INCOME TAXES 
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

EARNINGS PER SHARE
Basic earnings per share ("EPS") have been computed based on the weighted average number of common shares outstanding. The Company's 5.50% convertible subordinated debentures were considered in diluted earnings per share, when dilutive. In the fourth quarter of 1998, the Company repurchased these 5.50% convertible subordinated debentures with cash for $272,000.

2000 1999 1998

Income

Shares Per  
Share  Amount

Income

Shares Per  
Share  Amount

Income

Shares Per  
Share  Amount

Basic EPS -- Income before     extraordinary items	$ 75,216	141,656	$ 0.53	$ 198,904	144,174	$ 1.38	$ 24,985	142,856	$ 0.17
Effect of dilutive     stock options		1,062			1,882			3,527

Diluted EPS -- Income before
    extraordinary items
$ 75,216
142,718
$ 0.53
$ 198,904
146,056
$ 1.36
$ 24,985
146,383
$ 0.17

50          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

SEGMENT REPORTING 
In June 1997, the Financial Accounting Standards Board ("FASB') issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The objective of this statement is to provide users of financial statements information about the different types of business activities in which a company engages and the different economic environments in which it operates. Prior to 2001, the Company operated three segments which are as follows: department stores, furniture and Saks Direct. The combined operations of the furniture and direct business segments represented less than three percent of the Company's total revenues, assets and operating profit. Accordingly, the results of operations of these two segments were not separately presented. Consistent with its reorganization announced in February 2001, the Company identified three reportable segments: SFAE stores, Saks Direct and DSG. It is expected that Saks Direct will continue to represent less than three percent of the Company's total revenues, assets and operating profit. As the reorganization is effected, the Company will begin disclosing more detailed separate financial information for two segments, SFAE, including the Saks direct segment, and DSG, in the first quarter of fiscal 2001, including comparative historical financial information. Sales information for SFAE and DSG is provided in Note 15.

COMPREHENSIVE INCOME Components of the Company's comprehensive income for 2000, as presented in the consolidated statements of shareholders equity, include net income of $75,216 and a minimum pension liability adjustment of $(1,852), net of taxes. Components of the Company's comprehensive income for 1999 include net income of $189,643 and the adjustment to relieve the minimum pension liability adjustment of $7,487, net of taxes. Components of the Company's comprehensive income for fiscal year 1998 include the net loss of $896 and a minimum pension liability adjustment of $(7,487), net of taxes.

Note. 3.
Mergers, Acquisitions and Dispositions

The Company has experienced significant growth since 1994, primarily through a series of acquisitions. In September 1998, the Company acquired Saks Holdings ("SFA") by issuing 52.5 million shares. The acquisition was accounted for using the pooling of interest method.

The Company acquired 15 former Mercantile stores, including inventories and proprietary credit card accounts and receivables, from Dillard's in the third and fourth quarters of 1998 for the aggregate purchase price of $482,000. At February 3, 2001, the Company had entered into an agreement to sell nine of the former Mercantile Stores to The May Department Stores Company for an aggregate purchase price of approximately $307,000. A pre-tax loss of approximately $51,000 is expected from the sale, comprised primarily of a goodwill impairment. The transaction, including the sale of real and personal property, along with certain related merchandise inventory and customer accounts receivable, was consummated on March 16, 2001.

Note.4.
Accounts Receivable Securitizations

The Bank is a wholly owned national credit card bank subsidiary and issues all proprietary credit cards to certain of the Company's customers and makes all credit card loans. The securitization of receivables involves the continual transfer of receivables from the Bank to wholly owned special purpose subsidiaries and then with limited recourse to either a credit card related trust or a bank conduit facility in exchange for cash and subordinated certificates representing undivided interests in the pool of receivables. These facilities subsequently issue certificates of beneficial interest, also representing undivided interests in the pool of receivables, to investors.

51          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL
              STATEMENTS (In thousands, except per share amounts)

The Company has the ability to issue certificates of beneficial interest in fixed or variable denominations with fixed or variable implicit discount rates. At February 3, 2001, the Company had available the following funding sources:

Funding Capacity Amount Outstanding
at February 3, 2001
Expiration Date

Fixed at $421,500	$     421,500	June 2001, August 2002
Fixed at $400,675	400,675	June 2001, July 2002, August 2002
Variable up to $465,000	344,000	June 2001
Variable up to $55,000	45,850	Expired March 2001

$   1,212,025

The various agreements contain covenants requiring the maintenance of certain financial ratios and receivables portfolio performance measures. While the Company has no obligations to reimburse the trust or investors for credit losses, the Company is obligated to repurchase receivables related to customer credits such as merchandise returns and other receivables defects.

Gains from the sale of receivables are included in selling, general and administrative expenses. Gains are equal to the excess of the fair value of the receivables sold over the carrying amount of the receivables generated from the sale of merchandise. Implicit in the gains is the finance charge income generated by the outstanding receivables, the portion of finance charge income retained by the certificate investors, credit losses and servicing costs. Finance charge income totaled $269,812 in 2000, $246,870 in 1999 and $225,120 in 1998. Finance charges earned by the certificate investors were $77,119, $65,156 and $66,930 for 2000, 1999 and 1998, respectively. Gains on sales of accounts receivable also included $6,972, $19,500 and $36,400 in 2000, 1999 and 1998, respectively, representing the year-over-year increase in the fair value of the sold receivables. The fair value of sold receivables is influenced by changes in the amount of securitized receivables and the estimated future portfolio yield assumptions.

The Company's assumptions in measuring the retained interests in accounts receivable as of and for the period ended February 3,2001 and the sensitivity of the fair value to immediate 10% and 20% adverse changes in those assumptions are as follows:

Assumption Fair Value Impact of 10% Adverse Change Fair Value Impact of  
20% Adverse Change

Weighted average interest rates applied to credit card balances	21.6%	$  (1.6)	$    (3.3)
Weighted average payment rate	18.0%	$   (7.0)	$  (13.1)
Credit losses expected from February 3, 2001 receivables portfolio	3.3%	$   (4.4)	$    (8.9)
Weighted average cost of funding	6.1%	$   (1.9)	$    (3.8)

These sensitivities are hypothetical and should be used with caution. The effect of an adverse change in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption; changes in one factor may result in changes in another, which might alter the reported sensitivities.

52          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

The table below presents information about the Company's total credit card receivables, delinquencies and net write-offs of these receivables, the third party interests in the credit card related trusts and the fair value of the retained interest in the securitized credit card receivables as of February 3, 2001.                                                                                                                                                                              

February 3,
2001

Total credit card receivables portfolio	$	1,376,704
Outstanding delinquencies	$	37,637
Outstanding delinquencies percentage		2.73%
Net write-offs in total credit card receivables portfolio for the year then ended	$	81,446
Third party interest in credit card related trusts	$	1,212,025
Fair value of retained interests in securitized credit card receivables	$	193,258

The table below summarizes cash flow movements between the credit card trusts and the Company for 2000.

Proceeds from new securitizations	$	137,053
Trust principal payments on previous securitizations	$	(93,000)
Proceeds from collections reinvested in previous securitizations	$	3,185,769
Interest received on retained interests	$	2,251
Interest paid to third party interests in credit card related trusts	$	78,293

Note.5.
Property and Equipment

A summary of property and equipment is as follows:

February 3,
2001     January 29,
2000    

Land and land improvements	$      290,298	$      286,678
Buildings	1,020,455	928,964
Leasehold improvements	587,368	564,697
Fixtures and equipment	1,375,069	1,164,788
Construction in progress	38,083	169,395

	3,311,273	3,114,522
Accumulated depreciation	(922,403)	(763,979)

	2,388,870	2,350,543
Property held for sale, net of accumulated depreciation	1,980	--

$   2,390,850  $   2,350,543 

53          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

For 2000 and 1999, the Company recognized charges of $22,000 and $4,800, respectively, that are included in losses from long-lived assets in the accompanying consolidated statements of income and relate primarily to the impairment of abandoned or under performing assets. In 1998, primarily as a result of the merger with SFA, the Company reviewed the carrying value of several store locations not meeting the Company's minimum investment return criteria, closed and relocated stores, unused corporate office space and terminated planned store projects. This process resulted in an impairment charge comprised of: store closings/relocations, $28,900; termination of new store projects, $12,600; non-cash flow generating store locations, $12,700; other miscellaneous assets, $1,800; and accrued closure costs of $6,000. Based upon its most recent analyses at February 3, 2001,the Company believes that no additional impairment of property and equipment exists.

Note.6. 
Income Taxes  

The compenents of income tax expense are as follows:

2000   1999   1998  

Current:
Federal	$  (34,871)	$    42,278	$     8,574
State	1,583	678	1,134

	(33,288)	42,956	9,708
Deferred:
Federal	73,833	61,035	14,724
State	(162)	8,560	202

73,671  69,595 14,926

    Total expense $   40,383  $  112,551 $   24,634

The tax effect for extraordinary losses on early extinguishment of debt was a benefit of $5,925 and $16,547 for 1999 and 1998, respectively.

54          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Components of the net deferred tax asset or liability recognized in the consolidated balance sheets are as follows:

February 3,
2001     January 29,
2000    

Current:
Deferred tax assets:
Accrued expenses	$     50,627	$    56,199
AMT credit	3,329	2,695
NOL carry forwards	32,999	32,999
Valuation allowance	--	(6,155)

	86,955	85,738
Deferred tax liabilities:
Retained interest in accounts receivable	(18,959)	(11,015)
Inventory	(27,443)	(11,938)
Other	(1,365)	(587)

(47,767)  (23,540)

        Net current deferred tax asset $     39,188  $     62,198 

Non-current:
Deferred tax assets:
Capital leases	$     20,696	$     20,588
Other long-term liabilities	33,609	43,687
NOL carry forwards	248,486	281,643
Valuation allowance	--	(9,251)

	302,791	336,667
Deferred tax liabilities:
Property and equipment	(91,259)	(91,754)
Other assets	(33,414)	(31,709)

(124,673) (123,463)

        Net non-current deferred tax asset $  178,118  $   213,204 

At February 3, 2001, the Company had approximately $697,000 in federal and state tax net operating loss carry forwards related to losses incurred by SFA and Carson's. The carry forwards will expire between 2004 and 2018. The future utilization of these carry forwards is restricted under federal income tax change-in-ownership rules.

The valuation allowance attributable to Carson's losses and tax basis differences was reduced by $15,405 for 2000 and $16,000 for each of 1999 and 1998, based on management's reassessment of the realizability of the related deferred tax asset in future years. The tax benefit resulting from the reduction in the valuation allowance is credited directly to shareholders' equity.

The Company believes it is more likely than not that the benefit of the net deferred tax assets will be realized.

55          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Income tax expense varies from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for this difference are as follows:

2000   1999   1998  

Expected income taxes at 35%	$  40,460	$  105,768	$    8,308
State income taxes, net of federal benefit	2,848	6,100	857
Nondeductible merger related costs	(1,694)	(1,837)	14,887
Amortization of nondeductible goodwill	3,755	3,656	3,100
Favorable settlement of tax examination	--	--	(3,000)
Other items, net (includes nontaxable gain in 2000)	(4,986)	(1,136)	482

Provision for income taxes $   40,383  $   112,551  $   24,634 

The Company made income tax payments, net of refunds received, of $4,691 and $19,852 during 2000 and 1998, respectively and received net tax refunds of $14,007 in 1999.

Note. 7.
Long-Term Debt

A summary of long-term debt is as follows:

February 3,
2001     January 29,
2000    

Notes 8.25%, maturing 2008	$    500,000	$     500,000
Notes 7.50%, maturing 2010	250,000	250,000
Notes 7.25%, maturing 2004	350,000	350,000
Notes 7.00%, maturing 2004	350,000	350,000
Notes 7.375%, maturing 2019	200,000	200,000
Revolving credit agreement	--	159,000
Real estate notes, mortgage notes and industrial revenue bonds	8,632	10,523
Capital lease obligations	148,675	155,050

	1,807,307	1,974,573
Current portion	(5,650)	(7,771)

$  1,801,657  $  1,966,802 

REVOLVING CREDIT AGREEMENT
The Company has a revolving credit agreement with a syndicate of banks providing for borrowings of up to $750,000 subject to certain terms and conditions, including but not limited to, compliance with various financial and non-financial covenants. Financial covenants include the requirement to maintain a minimum net worth, a minimum fixed charge ratio and a maximum leverage ratio. No amounts were outstanding on the Company's revolving credit agreement, and the Company remains in compliance with the financial covenants at February 3, 2001. The agreement expires in September 2003 and $750,000 was available to borrow at February 3, 2001. Interest is based on a variable rate, and the weighted  average interest rate for 2000 was 6.80%.

SENIOR NOTES
In 1999, the Company sold $350,000 of uncollateralized 7.0% notes which mature in 2004 and $200,000 of uncollateralized 7.375% notes, which mature in 2019. The net proceeds from the notes were used to reduce outstanding amounts on the Company's revolving credit facilities, which had been used to fund the purchase of the 15 former Mercantile stores and the repurchase of SFA convertible debentures.

56         SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             (In thousands, except per share amounts)

MERGER REFINANCING ACTIVITIES
In connection with the 1998 SFA acquisition, the Company completed a tender offer for the $125,000, 8.125% notes resulting in an after-tax extraordinary loss on early extinguishment of debt of $11,625 and sold $1,100,000 of uncollateralized notes with interest rates ranging from 7.25% to 8.25% and maturities ranging from 2004 to 2010.

The Company repurchased approximately $95,000 of its outstanding REMIC certificates and recorded after-tax extraordinary loss of $8,174 in 1998 associated with the repurchase premium and accelerated write-off of deferred financing costs related to these repurchases. In the first quarter 1999, the Company prepaid the remaining $235,841 in outstanding REMIC certificates and reflected an after-tax extraordinary loss of $9,261 associated with the prepayment premium and accelerated write-off of deferred financing costs related to this prepayment.

During 1998, the Company repurchased $271,748 of SFA's 5.50% convertible subordinated notes and redeemed the remaining $4,252 of notes in 1999. The Company recorded an after-tax extraordinary loss of $6,082 in 1998 relating to the accelerated write-off of deferred financing costs associated with the prepayments.

MATURITIESAt February 3, 2001, maturities of senior and subordinated debt for the next five years and thereafter, giving consideration to lenders' call privileges and the Company's option to term-out the revolving credit facility, are as follows:

Year Maturities 

2001	$          5,650
2002	5,230
2003	5,310
2004	711,683
2005	4,941
Thereafter	1,074,493

$   1,807,307

The Company made interest payments, net of capitalized interest, of $156,730, $143,708 and $93,999 during 2000, 1999 and1998, respectively.

In March 2001, the Company completed the sale of nine former Mercantile stores for approximately $307,000. The Company anticipates using a portion of the proceeds to repurchase debt and, based on current conditions, anticipates recording a gain on the extinguishment of debt.

Note. 8.
Commitments and Contingencies

The Company leases certain land and buildings under various non-cancelable capital and operating leases. The leases generally provide for contingent rentals based upon sales in excess of stated amounts and require the Company to pay real estate taxes, insurance and occupancy costs. Generally, the leases have primary terms ranging from 20 to 30 years and include renewal options ranging from 5 to 20 years.

57          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

At February 3, 2001, future minimum rental commitments under capital leases and non-cancelable operating leases consisted of the following:

Year Operating Leases Capital Leases

2001	$      112,161	$     23,936
2002	111,312	23,239
2003	109,825	23,041
2004	105,556	23,161
2005	101,773	19,585
Thereafter	738,723	293,539

$   1,279,350     $   406,501   

      Amounts representing interest (257,826)  

      Capital lease obligations $   148,675   

Total rental expense for operating leases was $196,813, $187,829 and $181,966 during 2000, 1999 and 1998, respectively, including contingent rents of $27,466, $20,983 and $22,806, respectively.

The Company is involved in several legal proceedings arising from its normal business activities, and accruals for such claims have been established where appropriate. Management believes that none of these legal proceedings will have a material adverse effect on the Company's consolidated financial condition, results of operations or liquidity.

Note.9.
Employee Benefit Plans

EMPLOYEE SAVINGS PLANS
The Company sponsors various qualified savings plans that cover substantially all full-time employees. Company contributions charged to expense under these plans, or similar predecessor plans, for 2000, 1999 and 1998 were $9,512, $9,536 and $8,667, respectively.

DEFINED BENEFIT PLANS
The Company sponsors two noncontributory defined benefit pension plans for many employees of Carson's and SFA. Benefits are principally based upon years of service and compensation prior to retirement. The Company generally funds pension costs currently, subject to regulatory funding limitations. In 1998, the SFA defined benefit plan was amended and converted to a cash balance plan.

2000   1999   1998  

Net periodic pension expense:
Service cost	$    12,476	$  11,584	$ 10,401
Interest cost	20,895	19,318	18,989
Expected return on plan assets	(22,906)	(21,393)	(20,707)
Net amortization and deferral of prior service costs	(541)	293	90

    Net pension expense $      9,924  $    9,802  $   8,773 

58          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

February 3,
2001 January 29,
2000

Change in benefit obligation:
Benefit obligation at beginning of year	$   271,298	$   296,577
Service cost	12,476	11,584
Interest cost	20,895	19,318
Plan amendment	79	219
Actuarial loss (gain)	9,255	(28,877)
Benefits paid	(22,963)	(27,523)

    Benefit obligation at end of year $   291,040  $   271,298 

Change in plan assets:
Fair value of plan assets at beginning of year	$   255,283	$   239,737
Actual return on plan assets	18,368	36,172
Employer contributions	16,651	6,897
Benefits paid	(22,963)	(27,523)

    Fair value of plan assets at end of year $   267,339  $   255,283 

Pension plans' funding status:
Accumulated benefit obligation	$  (268,762)	$  (252,209)
Effect of projected salary increases	(22,278)	(19,089)

Projected benefit obligation	(291,040)	(271,298)
Fair value of plan assets	267,339	255,283

Funded status	(23,701)	(16,015)
Unrecognized actuarial (gain) loss	(12,950)	(27,519)
Unrecognized prior service cost	1,944	2,059
Contributions subsequent to measurement date	174	2,073

Accrued pension cost classified in other liabilities $  (34,533) $    (39,402)

Amounts recognized in the consolidated balance sheet:
Accrued benefit liability	$  (39,419)	$    (39,683)
Intangible asset	1,849	281
Additional minimum pension liability (reflected in equity net of tax)	3,037	--

Net amount recognized $  (34,533) $   (39,402)

Assumptions:
Discount rate	8.00%	8.00%
Expected long-term rate of return on assets	9.50%	9.50%
Average assumed rate of compensation increase	4.50%	3.66%
Measurement date	11/1/00	11/1/99

59          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

RETIREE HEALTH CARE PLANSThe Company provides health care benefits for certain groups of employees who retired before 1997. The plans were contributory with the Company providing a frozen annual credit of varying amounts per year of service. The net annual expense and liabilities for the unfunded plans reflected in the Company's consolidated balance sheets are as follows:

February 3,
2001     January 29,
2000    

Change in benefit obligation:
Benefit obligation at beginning of year	$     8,879	$  9,403
Interest cost	673	625
Actuarial gain	(2,166)	(566)
Benefits paid	(373)	(583)

  Benefit obligation at end of year $   7 ,013  $  8,879 

Plan funding status:
Accumulated post-retirement benefit obligation	$     (7,013)	$  (8,879)
Fair value of plan assets	--	--

Funded status	(7,013)	(8,879)
Unrecognized actuarial gain	(6,762)	(4,887)
Contributions subsequent to measurement date	195	62

  Accrued pension cost classified in other liabilities $   (13,580) $ (13,704)

Sensitivity analysis:
Effect of a 1.0% increase in health care cost trend assumption on       total service cost and interest cost components	$         40	$        37
Effect on benefit obligation	$       339	$      536
Effect of a 1.0% decrease in health care cost trend assumption on       total service cost and interest cost components	$        (36)	$       (33)
Effect on benefit obligation	$      (308)	$     (484)
Assumptions:
Discount rate	8.00%	8.00%
Pre-Medicare medical inflation	6.00%	7.00%
Post-Medicare medical inflation	6.00%	7.00%
Ultimate medical inflation	5.25%	5.25%
Measurement date	11/1/00	11/1/99

60          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Note.10.
Shareholders' Equity

PREFERRED STOCK
The Company has 10,000 shares of Series A Cumulative Convertible Exchangeable Preferred Stock authorized and no shares issued and outstanding at February 3, 2001 or January 29, 2000.

COMMON STOCK
The Company has 500,000 shares of $.10 par value common shares authorized of which 141,897 and 143,043 shares were issued and outstanding at February 3, 2001 and January 29, 2000, respectively.

In July 1999, the Company authorized a share repurchase program for up to five million shares. During 1999, the Company repurchased 2,004 shares under the program for an aggregate amount of $33,316. During 2000, the Company repurchased an additional 2,041 shares for an aggregate purchase price of $25,010, leaving 955 shares available for repurchase at February 3,2001. In March of 2001, the Company authorized an additional share repurchase program of five million shares.

Each outstanding share of common stock has one preferred stock purchase right attached. The rights generally become exercisable ten days after an outside party acquires, or makes an offer for, 20% or more of the common stock. Each right entitles its holder to buy 1/200 share of Series C Junior Preferred Stock at an exercise price of $278 per 1/100 of a share, subject to adjustment in certain cases. The rights expire in March 2008. Once exercisable, if the Company is involved in a merger or other business combination or an outside party acquires 20% or more of the common stock, each right will be modified to entitle its holder (other than the acquirer) to purchase common stock of the acquiring company or, in certain circumstances, common stock having a market value of twice the exercise price of the right.

During 2000, the Company began presenting the unearned restricted stock grants issued under its deferred equity compensation program as a component of shareholders' equity. The Company had previously presented the unearned restricted stock grants as a component of other long-term liabilities. Included in the 2000 issuance of common stock in the consolidated statements of shareholders' equity is $11,685 related to this reclassification. Current year net activity under the deferred compensation plans reflected in the consolidated statements of shareholders' equity.

Note.11.
Employee Stock Plans  

STOCK OPTIONS AND GRANTS  
The Company utilizes the intrinsic value method of accounting for stock option grants. As the option exercise price is generally equal to fair value of the common shares at the date of the option grant, no compensation cost is recognized. Had compensation cost for the Company's stock-based compensation plans been determined under the fair value method, using the Black-Scholes option-pricing model, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below.

2000 1999 1998

As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma

Net income (loss)	$   75,216	$    55,805	$  189,643	$   177,343	$     (896)	$    (13,439)
Basic earnings (loss) per common share	$       0.53	$        0.39	$       1.32	$        1.23	$    (0.01)	$       (0.09)
Diluted earnings (loss) per common share	$       0.53	$        0.39	$       1.30	$        1.21	$    (0.01)	$       (0.09)

The four assumptions for determining compensation costs under the fair value method include 1) a risk-free interest rate based on zero-coupon government issues on each grant date with the maturity equal to the expected term of the option (6.17%, 5.84%and 5.22% for 2000, 1999 and 1998, respectively), 2) an expected term of seven years, 3) an expected volatility of 45.7%, 46.2%and 32.7% for 2000, 1999 and 1998, respectively and 4) no expected dividend yield.

61          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (In thousands, except per share amounts)

The Company maintains stock option plans for the granting of options, stock appreciation rights and restricted shares to officers, employees and directors. At February 3, 2001 and January 29, 2000, the Company had available for grant 7,044 and 9,554 shares of common stock, respectively. Options granted generally vest over a four-year period after issue and have an exercise term of seven to ten years from the grant date. Restricted shares generally vest three to ten years after grant date with accelerated vesting at the discretion of the Company's Board of Directors if the Company meets certain performance objectives.

A summary of the stock option plans for 2000, 1999 and 1998 is presented below:

2000 1999 1998

Shares Weighted    
Average    
Exercise Price

Shares Weighted     
Average     
Exercise Price

Shares Weighted    
Average    
Exercise Price

Outstanding at beginning of year	11,892	$   21.92	10,518	$   21.63	9,567	$   18.17
Granted	14,964	10.35	2,549	24.13	4,111	25.78
Exercised	(76)	7.54	(353)	16.30	(2,568)	14.06
Forfeited	(1,686)	19.69	(822)	27.54	(592)	27.41

Outstanding at end of year	25,094	$   15.20	11,892	$   21.92	10,518	$   21.63
Options exercisable at year end	7,780	$   20.42	5,191	$   18.94	4,885	$   16.89

Weighted average fair value of
    options granted during the year
$     5.88
$   13.60
     $     9.83

The following table summarizes information about stock options outstanding at February 3, 2001:

Options Outstanding Options Exercisable

Range of Exercise Prices
Number   
Outstanding at
February 3, 
2001      Weighted 
Average 
Remaining
Contractual
Life (Years)
Weighted
Average
Exercise
Price
Number   
Exercisable at
February 3, 
2001    
Weighted
Average
Exercise
Price  

$3.75 to $5.63	67	1	$    4.78	67	$    4.78
$5.64 to $8.45	270	3	5.87	270	5.87
$8.46 to $12.69	15,673	9	10.40	1,596	11.48
$12.70 to $18.69	1,389	7	15.83	916	16.15
$18.70 to $28.05	4,546	7	21.40	2,966	21.02
$28.06 to $42.09	3,085	7	30.53	1,913	30.86
$42.10 to $48.78	64	6	47.45	52	47.14

25,094   $ 15.20 7,780   $ 20.42

The Company also granted restricted stock awards of 790, 84 and 383 shares to certain employees in 2000, 1999 and 1998, respectively. The fair value of these awards on the dates of grants was $8,877, $1,891 and $7,284 for 2000, 1999 and 1998, respectively. During 2000, 1999 and 1998, compensation cost of $5,582, $7,736 and $2,870, respectively, has been recognized in connection with these awards.

STOCK PURCHASE PLAN
The stock purchase plan (the "Plan") provides that an aggregate of 700 shares of the Company's common stock is available for purchase. Under the Plan, an eligible employee may elect to participate by authorizing limited payroll deductions to be applied toward the purchase of common stock at a 15.0% discount to market value. Under the Plan, 221 shares ($1.9 million), 228 shares ($2.7 million) and 73 shares ($1.8 million) of the Company's common stock were purchased by employees in 2000,1999 and 1998, respectively. At February 3, 2001, the Plan has available for future offerings 61 shares.  

62          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Note.12.
Fair Values of Financial Instruments

The Company had one interest rate swap agreement outstanding at February 3, 2001 which has a notional amount of $175,000 related to the July 1999 issuance of the 7.0% senior notes. The agreement swapped the fixed 7.0% coupon to a variable rate based on three month LIBOR and matures in 2004. The weighted average rate for 2000 was 7.16%. The fair value of this interest rate swap agreement was $4,415 as of February 3, 2001.

The fair values of the Company's cash and cash equivalents, retained interest in accounts receivable and accounts payable approximate their carrying amounts reported in the consolidated balance sheets, due to the immediate or short-term maturity of these instruments. For variable rate notes that reprice frequently, such as the revolving credit facilities, fair value approximates carrying value. The fair value of fixed rate real estate and mortgage notes is estimated using discounted cash flow analyses with interest rates currently offered for loans with similar terms and credit risk, and as of February 3, 2001 and January 29, 2000 the fair value of these notes approximated the carrying value.

The fair values of the Company's financial instruments other than the instruments considered short-term in nature at February 3, 2001 and January 29, 2000 were as follows:

Carrying Amount Estimated Fair Value

February 3, 2001
7.375% senior notes	$    200,000	$   130,000
8.25% senior notes	$    500,000	$   415,000
7.25% senior notes	$    350,000	$   301,000
7.50% senior notes	$    250,000	$   200,000
7.00% senior notes	$    350,000	$   301,000
January 29, 2000
7.375% senior notes	$    200,000	$   176,000
8.25% senior notes	$    500,000	$   486,000
7.25% senior notes	$    350,000	$   333,000
7.50% senior notes	$    250,000	$   227,000
7.00% senior notes	$    350,000	$   331,000

The fair values of the long-term debt and interest rate swap agreement were estimated based on quotes obtained from financial institutions for those or similar instruments or on the basis of quoted market prices.

Note.13.
Integration Charges

Integration charges incurred in 2000, 1999 and 1998 (before income taxes) were as follows:

2000    1999    1998 

Severance and related benefits	$  14,818	$   11,517	$    23,568
Conversion and consolidation of systems and administrative operations	9,987	27,412	19,891
Merger transaction costs, principally investment banking, legal     and other direct merger costs	--	981	44,848
Abandonment and write-down of information technology     software, hardware and other assets	--	--	23,000

Revisions to prior year estimates (4,919) (4,250) --  

$   19,886  $   35,660  $   111,307

63         SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

A reconciliation of the aforementioned charges to the amounts of integration costs remaining unpaid at the applicable balance sheet date is as follows:

February 3,
2001    January 29,
2000   

Amounts unpaid at beginning of year	$  13,576	$  31,951
Integration charges	19,886	35,660
Amounts paid	(21,250)	(51,180)
Amounts representing non-cash charges	(7,059)	(2,855)

Amounts unpaid at end of year $    5,153  $  13,576 

The components of the aforementioned amounts unpaid are as follows:

February 3,
2001   January 29,
2000   

Severance	$4,340	$   6,874
Direct merger costs	--	5,558
Contractual obligations with extended payment terms (such as rents     for abandoned leases and payments on abandoned contracts)	--	248
Other	813	896

Totals $5,153 $13,576

Note.14.
Quarterly Financial Information (Unaudited)

Summarized quarterly financial information, including restated sales and gross margin, is as follows:

First   
Quarter Second 
Quarter  Third  
Quarter Fourth   
Quarter  

Fiscal year ended February 3, 2001
Total sales, as restated	$   1,500,818	$   1,389,169	$   1,567,796	$   2,123,453
Gross margin, as restated	552,550	496,090	564,101	756,788
Net income	33,855	(5,787)	(8,149)	55,297
Basic earnings per common share	$           0.24	$         (0.04)	$         (0.06)	$           0.39
Diluted earnings per common share	$           0.24	$         (0.04)	$         (0.06)	$           0.39

Total shipping and handling revenues for each of the four quarters in 2000 were $2,920, $2,342, $2,088 and $3,247, respectively. Total shipping and handling costs for each of the four quarters were $1,463, $1,346, $1,378 and $3,030, respectively.

64          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

First
Quarter Second
Quarter Third
Quarter Fourth   
Quarter  

Fiscal year ended January 29, 2000
Total sales, as restated	$   1,463,333	$    1,380,997	$    1,549,820	$    2,040,017
Gross margin, as restated	551,111	514,802	587,998	751,477
Income before extraordinary items	33,735	18,819	25,900	120,450
Net income	24,474	18,819	25,900	120,450
Basic earnings per common share:
Before extraordinary items	$           0.23	$            0.13	$           0.18	$           0.84
After extraordinary items	$           0.17	$            0.13	$           0.18	$           0.84
Diluted earnings per common share:
Before extraordinary items	$          0.23	$            0.13	$           0.18	$           0.84
After extraordinary items	$          0.17	$            0.13	$           0.18	$           0.84

Total shipping and handling revenues for each of the four quarters in 1999 were $2,506, $2,511, $2,344 and $2,987, respectively. Total shipping and handling costs for each of the four quarters were $1,523, $1,635, $1,156 and $1,943, respectively.

Note.15 .
Consolidating Financial Information

Net sales for DSG and SFAE were as follows:

2000 1999 1998

DSG	$    3,909,082	$ 3,928,926	$   3,647,439
SFAE	2,672,154	2,505,241	2,316,374

Total $    6,581,236 $ 6,434,167 $   5,963,813

The following tables present condensed consolidating financial information for 2000, 1999 and 1998 for: 1) Saks Incorporated, 2) on a combined basis, the guarantors of Saks Incorporated's Senior Notes (representing all subsidiaries of Saks Incorporated except for special purpose subsidiaries, the Bank and immaterial subsidiaries) and 3) on a combined basis, the Company's special purpose subsidiaries, the Bank and immaterial subsidiaries, which collectively represent the only subsidiaries of the Company that are not guarantors of the Senior Notes. The condensed consolidating financial statements presented as of and for the years ended February 3, 2001, January 29, 2000 and January 30, 1999 reflect the legal entity compositions at the respective dates. Separate financial statements of the guarantor subsidiaries are not presented because the guarantors are jointly, severally and unconditionally liable under the guarantees, and the Company believes the condensed consolidating financial statements are more meaningful in understanding the financial position of the guarantor subsidiaries. Borrowings and the related interest expense under the Company's revolving credit facility are allocated to Saks Incorporated and the guarantor subsidiaries under an intercompany revolving credit arrangement. There are also management and royalty fee arrangements among Saks Incorporated and the subsidiaries. At February 3, 2001, Saks Incorporated was the sole obligor for a majority of the Company's long-term debt, owned one store location and maintained a small group of corporate employees.

65          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Condensed Consolidating Statements of Income for the Year Ended February 3, 2001

Saks   
Incorporated Guarantor   Subsidiaries Non-Guarantor Subsidiaries  
Eliminations
Consolidated

Net Sales	$   15,073	$   6,560,410	$     5,753	$  6,581,236
Cost of sales	9,845	4,190,606	11,256	4,211,707

Gross Margin	5,228	2,369,804	(5,503)		2,369,529
Selling, general and administrative expenses	11,841	1,524,483	96,698	$  (199,665)	1,433,357
Other operating expenses	3,632	568,736	2,289		574,657
Store pre-opening costs		6,196			6,196
Integration costs		19,886			19,886
Losses from long-lived assets		64,134	9,438		73,572

Operating Income (Loss)	(10,245)	186,369	(113,928)	199,665	261,861
Other income (expense)
Finance charge income, net			199,665	(199,665)
Intercompany exchange fees		(37,964)	37,964
Intercompany servicer fees		42,500	(42,500)
Equity in earnings of subsidiaries	174,959	17,797		(192,756)
Interest expense	(138,130)	(9,226)	(2,639)		(149,995)

    Other income (expense), net 3,733  3,733 

Income before Provision (Benefit)     for Income Taxes	26,584	203,209	78,562	(192,756)	115,599
Provision (benefit) for income taxes	(48,632)	62,958	26,057		40,383

Net Income $  75,216  $     140,251  $  52,505  $  (192,756) $       75,216 

66          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Condensed Consolidating Balance Sheets as of February 3, 2001

Saks    
Incorporated Guarantor   Subsidiaries Non-Guarantor Subsidiaries  
Eliminations
Consolidated

Assets Current Assets
Cash and cash equivalents	$      40,000	$      (3,152)	$   27,812		$     64,660
Retained interest in accounts receivable			193,258		193,258
Merchandise inventories	3,356	1,512,982	5,865		1,522,203
Intercompany borrowings		30,272	48,100	$    (78,372)
Other current assets		95,875	1,054		96,929
Deferred income taxes		52,782	(13,594)		39,188

    Total Current Assets 43,356 1,688,759  262,495  (78,372) 1,916,238

Property and Equipment, net	8,702	2,375,716	6,432		2,390,850
Goodwill and Intangibles, net		511,333			511,333
Deferred Income Taxes		178,118			178,118
Other Assets	17,782	32,763	3,527		54,072
Investment in and Advances to Subsidiaries	3,899,921	114,783		(4,014,704)

    Total Assets $3,969,761 $4,901,472  $272,454  $ (4,093,076) $5,050,611

Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable	$       1,007	$   316,425	$    2,105		$    319,537
Accrued expenses and other current liabilities	22,296	479,021	3,778		505,095
Intercompany borrowings	2,029	46,071	30,272	$     (78,372)
Current portion of long-term debt		5,650			5,650

Total Current Liabilities	25,332	847,167	36,155	(78,372)	830,282
Long-Term Debt	1,650,000	151,657			1,801,657
Other Long-Term Liabilities	600	124,243			124,843
Investment by and Advances from Parent		3,778,405	236,299	(4,014,704)
Shareholders' Equity	2,293,829				2,293,829

   Total Liabilities and
       Shareholders' Equity
$ 3,969,761
$ 4,901,472
$ 272,454 
$ (4,093,076)
$  5,050,611

 67          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Condensed Consolidating Statements of Cash Flows for the Year Ended February 3, 2001

Saks    Incorporated Guarantor   Subsidiaries Non-Guarantor Subsidiaries  
Eliminations
Consolidated

Operating Activities
Net income	$    75,216	$  140,251	$      52,505	$   (192,756)	$   75,216
Adjustments to reconcile net income (loss)     to net cash (used in) provided by operating activities:
Equity in earnings of subsidiaries	(174,959)	(17,797)		192,756
Depreciation and amortization	1,003	211,866	1,230		214,099
Provision for employee deferred compensation	5,582				5,582
Deferred income taxes		65,117	8,554		73,671
Losses from long-lived assets		64,134	9,438		73,572
Changes in operating assets and liabilities,  net	(31,381)	69,674	5,019		43,312

Net Cash (Used in) Provided by                  Operating Activities	(124,539)	533,245	76,746	485,452
Investing Activities
Purchases of property and equipment		(258,476)	(16,376)	(274,852)
Proceeds from sale of assets		26,107		26,107

Net Cash Used in Investing Activities		(232,369)	(16,376)	(248,745)
Financing Activities
Intercompany borrowings	347,879	(292,712)	(55,167)
Payments on long-term debt		(8,267)		(8,267)
Net repayments under revolving credit agreement	(159,000)			(159,000)
Proceeds from issuance of stock	670			670
Purchases and retirements of common stock	(25,010)			(25,010)

Net Cash Provided by (Used in)               Financing Activities	164,539	(300,979)	(55,167)	(191,607)
Increase (Decrease) in Cash and
Cash Equivalents	40,000	(103)	5,203	45,100
Cash and Cash Equivalents     at Beginning of Year	--	(3,049)	22,609	19,560

Cash and Cash Equivalents at End of Year $    40,000  $    (3,152) $      27,812  $    64,660 

68        SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (In thousands, except per share amounts)  

Condensed Consolidating Statements of Income for the Year Ended January 29, 2000

Saks    
Incorporated Guarantor  
Subsidiaries Non-Guarantor
Subsidiaries  
Eliminations
Consolidated

Net Sales	$  6,434,167	$  6,434,167
Cost of sales	4,028,779	4,028,779

Gross Margin		2,405,388			2,405,388
Selling, general and administrative expenses	$     9,752	1,458,589	$   92,259	$  (201,214)	1,359,386
Other operating expenses	1,605	561,851	(41,128)		522,328
Store pre-opening costs		13,342			13,342
Integration costs		35,660			35,660
Losses from long-lived assets		12,547			12,547
Year 2000 expenses		5,917			5,917

Operating Income (Loss)	(11,357)	317,482	(51,131)	201,214	456,208
Other income (expense)
Finance charge income, net			201,214	(201,214)
Intercompany exchange fees		(36,712)	36,712
Intercompany servicer fees		41,076	(41,076)
Equity in earnings of subsidiaries	278,964	25,581		(304,545)
Interest expense	(130,422)	(8,546)			(138,968)
Other income (expense), net		140			140

Income before Provision (Benefit) for     Income Taxes and Extraordinary Items	137,185	339,021	145,719	(304,545)	317,380
Provision (benefit) for income taxes	(52,458)	117,310	53,624		118,476

Income before Extraordinary Items	189,643	221,711	92,095	(304,545)	198,904
Extraordinary items, net of taxes			(9,261)		(9,261)

Net Income $  189,643  $     221,711  $    82,834  $  (304,545) $    189,643 

69          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Condensed Consolidating Balance Sheets as of January 29, 2000

Saks    
Incorporated Guarantor  
Subsidiaries Non-Guarantor
Subsidiaries  
Eliminations
Consolidated

Assets Current Assets
Cash and cash equivalents		$      (3,049)	$    22,609		$     19,560
Retained interest in accounts receivable			202,134		202,134
Merchandise inventories		1,487,783			1,487,783
Intercompany borrowings	$     27,659	23,883	7,636	$    (59,178)
Other current assets		122,941	42		122,983
Deferred income taxes		67,238	(5,040)		62,198

Total Current Assets	27,659	1,698,796	227,381	(59,178)	1,894,658
Property and Equipment, net		2,350,543			2,350,543
Goodwill and Intangibles, net		578,001			578,001
Deferred Income Taxes		213,204			213,204
Other Assets		56,657	5,889		62,546
Investment in and Advances to Subsidiaries	4,023,830	93,042		(4,116,872)

    Total Assets $4,051,489 $4,990,243  $  233,270  $ (4,176,050) $ 5,098,952

Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable		$    235,967			$    235,967
Accrued expenses and other current liabilities	$     22,769	512,130	$      5,225		540,124
Intercompany borrowings		7,636	51,542	$      (59,178)
Current portion of long-term debt		7,771			7,771

Total Current Liabilities	22,769	763,504	56,767	(59,178)	783,862
Long-Term Debt	1,809,000	157,802			1,966,802
Other Long-Term Liabilities	11,377	128,568			139,945
Investment by and Advances from Parent		3,940,369	176,503	(4,116,872)
Shareholders' Equity	2,208,343				2,208,343

    Total Liabilities and
        Shareholders' Equity
$ 4,051,489
$ 4,990,243 
$ 233,270  
$ (4,176,050)
$ 5,098,952

70          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Condensed Consolidating Statements of Cash Flows for the Year Ended January 29, 2000

Saks    
Incorporated Guarantor  
Subsidiaries Non-Guarantor
Subsidiaries  
Eliminations
Consolidated

Operating Activities
Net income	$   189,643	$   221,711	$    82,834	$   (304,545)	$  189,643
Adjustments to reconcile net income to net cash     provided by (used in) operating activities:
Equity in earnings of subsidiaries	(278,964)	(25,581)		304,545
Extraordinary loss on extinguishment of debt			7,310		7,310
Depreciation and amortization		164,835	13,940		178,775
Provision for employee deferred compensation	7,736				7,736
Deferred income taxes		72,707	(3,112)		69,595
Losses from long-lived assets		12,547			12,547
Changes in operating assets and liabilities, net	(15,873)	(177,730)	(62,255)		(255,858)

Net Cash (Used in) Provided by         Operating Activities	(97,458)	268,489	38,717	209,748
Investing Activities
Purchases of property and equipment		(369,496)	(60,852)	(430,348)
Proceeds from the sale of assets		22,514		22,514

Net Cash Used in Investing Activities		(346,982)	(60,852)	(407,834)
Financing Activities
Intercompany borrowings	3,606	(245,054)	241,448
Proceeds from long-term borrowings	550,000			550,000
Payments on long-term debt		(16,504)		(16,504)
Net repayments under revolving credit agreement	(449,000)			(449,000)
Change in cash placed in escrow           for debt redemption		363,753		363,753
Payment of REMIC certificates			(235,841)	(235,841)
Proceeds from issuance of stock	5,802			5,802
Purchases and retirements of common stock	(33,316)			(33,316)

Net Cash Provided by Financing Activities	77,092	102,195	5,607	184,894
(Decrease) Increase in Cash and     Cash Equivalents	(20,366)	23,702	(16,528)	(13,192)
Cash and Cash Equivalents     at Beginning of Year	20,366	(26,751)	39,137	32,752

Cash and Cash Equivalents at End of Year $         --    $     (3,049) $    22,609  $  19,560 

71          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Condensed Consolidating Statements of Income for the Year Ended January 30, 1999

Saks   
Incorporated Guarantor 
Subsidiaries Non-Guarantor
Subsidiaries  
Eliminations
Consolidated

Net Sales	$   800,592	$   5,163,221	$ 5,963,813
Cost of sales	494,355	3,299,985	3,794,340

Gross Margin	306,237	1,863,236			2,169,473
Selling, general and administrative expenses	155,531	1,282,357	$   88,977	$  (194,590)	1,332,275
Other operating expenses	59,597	469,700	(41,131)		488,166
Store pre-opening costs	1,448	9,119			10,567
Integration costs	31,952	79,355			111,307
Losses from long-lived assets	331	41,005	20,449		61,785
Year 2000 expenses	884	9,553			10,437

Operating Income (Loss)	56,494	(27,853)	(68,295)	194,590	154,936
Other income (expense)
Finance charge income, net			194,590	(194,590)
Intercompany exchange fees	(7,000)	(19,909)	26,909
Intercompany servicer fees		30,412	(30,412)
Equity in earnings of subsidiaries	14,321	19,775		(34,096)
Interest expense	(18,466)	(64,983)	(27,522)		(110,971)
Other income (expense), net	(11,536)	33,737			22,201

Income (Loss) before Provision (Benefit) for     Income Taxes and Extraordinary Items	33,813	(28,821)	95,270	(34,096)	66,166
Provision (benefit) for income taxes	22,724	(15,389)	33,846		41,181

Income (Loss) before Extraordinary Items	11,089	(13,432)	61,424	(34,096)	24,985
Extraordinary items, net of taxes	(11,985)	(6,994)	(6,902)		(25,881)

Net Income (Loss) $        (896) $     (20,426) $   54,522  $    (34,096) $       (896)

72          SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              (In thousands, except per share amounts)

Condensed Consolidating Statements of Cash Flows for the Year Ended January 30, 1999

Saks    
Incorporated Guarantor  
Subsidiaries Non-Guarantor
Subsidiaries  
Eliminations
Consolidated

Operating Activities
Net Income (loss)	$            (896)	$       (20,426)	$        54,522	$       34,096	$            (896)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Equity in earnings of subsidiaries	(14,321)	(19,775)		34,096
Extraordinary loss on extinguishments of debt		14,599			14,599
Depreciation and amortization	15,263	126,159	13,939		155,361
Provision for employee deferred compensation	2,870				2,870
Deferred income taxes	20,224	(19,897)	14,599		14,926
Losses from long-lived assets and
integration items		59,086	20,531		79,617
Changes in operating assets and liabilities, net	(18,243)	514	274,191		256,462

Net Cash Provided by Operating Activities	4,897	140,260	377,782	522,939
Investing Activities
Purchases of property and equipment	(48,277)	(327,785)	(45,000)	(421,062)
Proceeds from sale of assets	2,500			2,500
Acquisition of operating stores	(248,196)	(276,921)		(525,117)

Net Cash Used in Investing Activities	(293,973)	(604,706)	(45,000)	(943,679)
Financing Activities
Intercompany borrowings	(1,212,694)	1,375,413	(162,719)
Proceeds from long-term borrowings	1,100,000			1,100,000
Payments on long-term debt	(10,320)	(450,661)	(45,979)	(506,960)
Net borrowings under revolving credit agreement	398,000	(136,750)	(125,000)	136,250
Change in cash placed in escrow
for debt redemption		(363,753)		(363,753)
Proceeds from issuance of stock	19,525	18,040		37,565
Purchases and retirements of common stock	(474)			(474)

Net Cash Provided by (Used in)
Financing Activities	294,037	442,289	(333,698)	402,628
Increase (Decrease) in Cash and
Cash Equivalents	4,961	(22,157)	(916)	(18,112)
Cash and Cash Equivalents
at Beginning of Year	15,405	(4,594)	40,053	50,864

Cash and Cash Equivalents at End of Year $       20,366  $       (26,751) $        39,137  $        32,752 

73          REPORTS

Report of Independent Accountants To the Board of Directors and Shareholders Saks Incorporated In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, changes in shareholders' equity and cash flows present fairly, in all material respects, the financial position of Saks Incorporated and subsidiaries at February 3, 2001 and January 29, 2000, and the results of their operations and their cash flows for each of the three years in the period ended February 3, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a  test basis,  evidence supporting the amounts and  disclosures in the financial statements, assessing  the accounting principles used and significant  estimates made by management, and evaluating  the overall financial statement presentation. We  believe that our audits provide a reasonable basis  for our opinion. /s/ PricewaterhouseCoopers, LLP Birmingham, Alabama March 13, 2001	Report of Management The accompanying consolidated financial statements, including the notes thereto, and the other financial information presented in the Annual Report have been prepared by management. The financial statements have been prepared in accordance with generally accepted accounting principles and include amounts that are based upon our best estimates and judgments. Management is responsible for the consolidated financial statements, as well as the other financial information in this Annual Report. The Company maintains an effective system of internal accounting control. We believe that this system provides reasonable assurance that transactions are executed in accordance with management authorization and that they are appropriately recorded in order to permit preparation of financial statements in conformity with generally accepted accounting principles and to adequately safeguard, verify and maintain accountability of assets. Reasonable assurance is based on the recognition that the cost of a system of internal control should not exceed the benefits derived. The consolidated financial statements and related notes have been audited by independent certified public accountants. Management has made available to them all of the Company's financial records and related data and believes all representations made to them during their audits were valid and appropriate. Their report provides an independent opinion upon the fairness of the financial statements. The Audit Committee of the Board of Directors is composed of  five independent Directors. The Committee is responsible for recommending the independent certified public accounting firm to be retained for the coming year, subject to shareholder approval. The Audit Committee meets periodically with the independent auditors, as well as with management, to review accounting, auditing, internal accounting control and financial reporting matters. The independent auditors have unrestricted access to the Audit Committee.
	/s/ R. Brad Martin Chairman of the Board and  Chief Executive Officer	/s/ Douglas E. Coltharp Executive Vice President and Chief Financial Officer

 74          MARKET INFORMATION

The Company's common stock trades on the New York Stock Exchange under the Symbol SKS. As of March 15, 2001,  there were approximately 2,600 shareholders of record. The prices in the table below represent the high and low sales prices for the stock as reported by the New York Stock Exchange.

The Company presently follows the policy of retaining earnings to provide funds for the operation and expansion of the business and has no present intention to declare cash dividends in the foreseeable future. Future dividends, if any, will be determined by the Board of Directors of the Company in light of circumstances then existing, including the earnings of the Company, its financial requirements and general business conditions. The Company declared no dividends to common shareholders in either 2000 or 1999.

Fiscal Year Ended

February 3, 2001
Price Range January 29, 2000
Price Range

Quarter High Low High Low

First	$15.06	$10.56	$39.50	$23.13
Second	$12.56	$10.00	$30.69	$22.56
Third	$10.75	$8.75	$24.75	$14.63
Fourth	$14.23	$7.63	$18.88	$13.69

75          DIRECTORS AND CERTAIN OFFICERS

Board of Directors

R. BRAD MARTIN
Chairman of the Board and
Chief Executive Officer of
Saks Incorporated RONALD DE WAALVice Chairman of the Board;
Chairman of We International, B.V. BERNARD E. BERNSTEIN
Partner in the law firm of
Bernstein, Stair & McAdams LLP STANTON J. BLUESTONE
Retired Chairman and
Chief Executive Officer of
Carson Pirie Scott & Co. JOHN W. BURDEN
Retail Consultant;
Retired Chairman and Chief Executive
Officer of Federated Department Stores
and Allied Stores Corporation JAMES A. COGGIN
President and Chief Administrative
Officer of Saks Incorporated JULIUS W. ERVING
President of The Erving Group;
Executive Vice President of RDV Sports/
Orlando Magic MICHAEL S. GROSS
Vice President of Apollo Capital
Management, L.P. DONALD E. HESS
Chairman Emeritus of Parisian;
Chief Executive Officer of
Southwood Partners G. DAVID HURD
Emeritus Chairman and retired
Chief Executive Officer of
Principal Financial Group GEORGE L. JONES
President and Chief Executive
Officer of Saks Department
Store Group PHILIP B. MILLER
Chairman of Saks Fifth Avenue C. WARREN NEEL
Commissioner of Finance
and Administration for the
State of Tennessee STEPHEN I. SADOVE
President of Bristol-Myers Squibb
Beauty Care MARGUERITE W. SALLEE
Chairman and Chief Executive Officer
of Frontline Group, Inc. CHRISTOPHER J. STADLER
Managing Partner of Investcorp, S.A. GERALD TSAI, JR.
Private Investor Director Emeritus EDMOND D. CICALA
President of Edmond Enterprises, Inc.; 
Retired Chairman of the
Goldsmith's Division of Federated 
Department Stores

Certain Corporate Officers

R. BRAD MARTIN
Chairman of the Board and
Chief Executive Officer JAMES A. COGGIN
President and Chief
Administrative Officer DOUGLAS E. COLTHARP
Executive Vice President and
Chief Financial Officer CHRISTINA JOHNSON
President and Chief Executive Officer of
Saks Fifth Avenue Enterprises GEORGE L. JONES
President and Chief Executive Officer of Saks Department Store Group BRIAN J. MARTIN
Executive Vice President of  Law 
and General Counsel

Store Officers

TONI E. BROWNING
President and Chief Executive
Officer of Proffitt's/McRae's ANTHONY J. BUCCINA
President of Carson Pirie Scott & Co. FRANK E. KULP, III
President and Chief Executive
Officer of Younkers MICHAEL R. MACDONALD 
President of the Northern Department 
Stores Group and Chairman and Chief 
Executive Officer of Carson Pirie Scott & Co. W. TRAVIS SAUCER 
President and Chief Executive
Officer of Parisian RONALD B. COVIN
President of Off 5th Saks
Fifth Avenue Outlet

 76          STORE LOCATIONS

SAKS FIFTH AVENUE
STORES ARIZONA
Phoenix CALIFORNIABeverly Hills
Carmel
Costa Mesa
La Jolla
Mission Viejo
Palm Desert
Palm Springs
Palos Verdes
Pasadena
San Diego
San Francisco
Santa Barbara COLORADODenver CONNECTICUT
Greenwich
Stamford FLORIDABal Harbor
Boca Raton
Ft. Lauderdale
Ft. Myers
Naples
Orlando
Palm Beach
Palm Beach Gardens
Sarasota
South Miami
Tampa GEORGIA
Atlanta ILLINOIS
Chicago
Highland Park
Oakbrook
Old Orchard LOUISIANA
New Orleans MARYLAND
Chevy Chase MASSACHUSETTS
Boston MICHIGANDearborn
Troy MINNESOTA
Minneapolis MISSOURI
Frontenac
Kansas City NEVADA
Las Vegas NEW JERSEY
Hackensack
Short Hills NEW YORK
Garden City
Huntington
New York City
Southampton
White Plains OHIO
Beachwood
Cincinnati OKLAHOMA
Tulsa OREGONPortland PENNSYLVANIA
Bala Cynwyd
Pittsburgh SOUTH CAROLINA
Charleston
Hilton Head TEXASAustin
Dallas
Houston
Hurst
San Antonio VIRGINIAMcLean OFF 5TH STORES ARIZONA
Tempe
Tucson CALIFORNIA
Anaheim
Cabazon
Camarillo
Folsom
Milpitas
Ontario
Petaluma
San Diego COLORADO
Castle Rock CONNECTICUT
Clinton FLORIDA
Ellenton
Miami
Naples
Orlando
Sunrise GEORGIA
Dawsonville HAWAII
Waipahu ILLINOIS
Gurnee
Schaumburg KANSAS
Olathe MARYLAND
Baltimore MASSACHUSETTS
Worcester
Wrentham MICHIGAN
Auburn
Dearborn MINNESOTA
Minneapolis NEVADA
Las Vegas NEW JERSEY
Elizabeth
Paramus NEW YORK
Central Valley
Niagara Falls
Riverhead
Westbury NORTH CAROLINA
Concord
Morrisville OHIO
Aurora
Cincinnati PENNSYLVANIA
Grove City
Philadelphia SOUTH CAROLINA
Myrtle Beach TENNESSEE
Nashville (2) TEXAS
Grapevine
Katy
San Marcos
Stafford VIRGINIALeesburg
Woodbridge

77          STORE LOCATIONS

Saks Department Store Group

PARISIAN STORES ALABAMABirmingham (5)
Decatur
Dothan
Florence
Huntsville (2)
Mobile
Montgomery (2)
Tuscaloosa FLORIDA
Jacksonville
Orlando (2)
Pensacola
Tallahassee GEORGIA
Atlanta (6)
Columbus
Macon
Savannah INDIANAIndianapolis (2) MICHIGAN
Livonia MISSISSIPPI
Tupelo OHIO
Cincinnati
Dayton SOUTH CAROLINA
Charleston
Columbia (2) TENNESSEE
Chattanooga
Knoxville
Nashville PROFFITT'S STORES GEORGIA
Dalton
Rome KENTUCKY
Ashland
Elizabethtown NORTH CAROLINA
Asheville
Goldsboro
Greenville
Kinston
Rocky Mount SOUTH CAROLINA
Greenville
Spartanburg TENNESSEE
Athens
Chattanooga (2)
Cleveland
Greeneville
Johnson City
Kingsport
Knoxville (2)
Maryville
Morristown
Oak Ridge VIRGINIA
Bristol WEST VIRGINIA
Morgantown
Parkersburg McRAE'S STORES ALABAMA
Birmingham (4)
Dothan
Gadsden
Huntsville (2)
Mobile
Selma
Tuscaloosa FLORIDA
Mary Esther
Pensacola LOUISIANA
Baton Rouge
Monroe MISSISSIPPI
Biloxi
Columbus
Gautier
Greenville
Hattiesburg
Jackson (3)
Laurel
McComb
Meridian
Natchez
Tupelo
Vicksburg YOUNKERS STORES ILLINOIS
Moline IOWA
Ames
Cedar Falls
Cedar Rapids (2)
Coralville
Davenport
Des Moines (4)
Dubuque
Fort Dodge
Iowa City
Marshalltown
Mason City
Sioux City (2)
Waterloo
West Burlington MICHIGAN
Bay City
Grandville
Holland
Marquette
Port Huron
Traverse City MINNESOTA
Austin
Duluth NEBRASKA
Grand Island
Lincoln
Omaha (3) SOUTH DAKOTA
Sioux Falls WISCONSIN
Appleton (2) 
Eau Claire 
Fond du Lac 
Green Bay 
Madison (2) 
Manitowoc  
Marinette 
Marshfield  
Racine 
Sheboygan  
Sturgeon Bay 
Superior  
Wausau 
Wisconsin Rapids HERBERGER'S 
STORES COLORADO
Grand Junction  IOWA
Ottumwa  MINNESOTA
Albert Lea 
Alexandria  
Bemidji 
Bloomington  
Brainerd 
Fergus Falls 
Mankato 
Minneapolis  
Moorhead 
New Ulm 
Roseville 
St. Cloud 
St. Paul  
Stillwater  
Virginia 
Willmar   MONTANA
Billings  
Butte 
Great Falls  
Havre  
Kalispell  
Missoula  NEBRASKA
Hastings 
Kearney  
Norfolk 
North Platte 
Scottsbluff NORTH DAKOTA  
Bismarck 
Dickinson  
Fargo 
Minot   SOUTH DAKOTA
Aberdeen  
Rapid City 
Watertown   WISCONSIN
Beaver Dam 
LaCrosse 
Rice Lake  WYOMING
Rock Springs CARSON PIRIE 
SCOTT STORES ILLINOIS
Aurora (2) 
Bloomingdale  
Bourbonnais 
Calumet City 
Chicago (3)
Chicago Ridge
Dundee
Evergreen Park
Hammond
Joliet  
Lincolnwood
Lombard (2)
Matteson
Mount Prospect
Naperville (2)  
Norridge
North Riverside
Orland Park
Schaumburg (2)
St. Charles
Vernon Hills  
Waukegan
Wilmette (2) INDIANA
Merrillville  
Michigan City MINNESOTA
Rochester BOSTON STORES WISCONSIN
Brookfield (2)
Janesville
Madison (2)
Milwaukee (5)
Racine BERGNER'S  STORES ILLINOIS
Bloomington 
Champaign  
Forsyth
Galesburg  
Machesney Park
Pekin  
Peoria
Peru  
Quincy
Rockford (2)
Springfield
Sterling  
Urbana

78          SHAREHOLDER INFORMATION

Sales Release Dates for 2001 Sales Period               Release Date
February 2001                       3/8/01
March 2001                          4/12/01
April 2001                             5/10/01
May 2001                               6/7/01
June 2001                            7/12/01
July 2001                               8/9/01
August 2001                           9/6/01
September 2001                 10/11/01
October 2001                       11/8/01
November 2001                   12/6/01
December 2001                   1/10/02
January 2002                        2/7/02 Earnings Release Dates for 2001 Quarter                       Release Date
First                                      5/22/01
Second                                8/21/01
Third                                  11/20/01
Fourth                 To be announced Annual Meeting  The Annual Meeting of Shareholders of Saks Incorporated will be held at 8:30 a.m. Eastern Time, Wednesday, June 13, 2001, at the Willard Inter-Continental Hotel, 1401 Pennsylvania Avenue NW, Washington, DC 20004.  Shareholders are cordially invited to attend. Inquiries Regarding Your Stock 
Holdings Registered shareholders (shares held by you in your name) should address communications regarding address changes, lost certificates and other administrative matters to the Company's  Transfer Agent and Registrar:  Union Planters Bank, NA7650 Magna Drive 
Belleville, Illinois 62223 
(618) 239-4451 (telephone) 
(618) 239-4750 ext. 4451 (facsimile) In all correspondence or telephone inquiries, please mention Saks Incorporated, your name as printed on your stock certificate, your Social Security number, your address and your phone number. Beneficial shareholders (shares held by you in the name of your broker or other nominee) should direct communications on all administrative matters to your nominee owner.  Financial and Other Information  
Copies of financial documents and other company information such as Saks Incorporated's Form 10-K and 10-Q reports as filed with the SEC are available free of charge by contacting:  Investor Relations 
Saks Incorporated 
P.O. Box 9388 
Alcoa, Tennessee 37701  
(865) 981-9541  Security analysts portfolio managers,  representatives of financial institutions and other individuals with questions regarding Saks Incorporated are invited to contact:  Julia Bentley 
Senior Vice President of Investor 
Relations and Communications  
P.O. Box 9388 
Alcoa, Tennessee 37701
(865) 981-6243 (telephone) 
(865) 981-6325 (facsimile) 
julia_bentley@saksinc.com (e-mail) Financial results, corporate news and other Company information are available on Saks Incorporated's web site: www.saksincorporated.com. 

79          CORPORATE INFORMATION

Corporate Headquarters:

750 Lakeshore Parkway  
Birmingham, Alabama 35211 
(205) 940-4000 

Saks Fifth Avenue Enterprises 
Headquarters:

12 East 49th Street  
New York, New York 10017  
(212) 940-4048 

Saks Department Store Group 
Headquarters:

Parisian
750 Lakeshore Parkway 
Birmingham, Alabama 35211 
(205) 940-4000  

Proffitt's and McRae's
115 North Calderwood Street 
Alcoa, Tennessee 37701 
(865) 983-7000 

Younkers
701 Walnut Street 
Des Moines, Iowa 50397 
(515) 244-1112  

Carson Pirie Scott, Boston Store, 
Bergner's and Herberger's
331 West Wisconsin Avenue  
Milwaukee, Wisconsin 53203 
(414) 347-4141 

Independent Accountants

PricewaterhouseCoopers LLP  
Birmingham, Alabama 

Copyright 2001 Saks Incorporated

EX-21

Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
Saks Incorporated and Subsidiaries
As of March 30, 2001

	Name of Subsidiary	Organizational Jurisdiction
1.	Cafe SFA - Minneapolis, Inc.	California
2.	Carson Pirie Holdings, Inc.	Delaware
3.	Carson Pirie Scott Insurance Services, Inc.	Illinois
4.	Herberger's Department Stores, LLC	Minnesota
5.	Jackson Leasing, LLC	Mississippi
6.	McRae's of Alabama, Inc.	Alabama
7.	McRae's Stores Partnership	Mississippi
8.	McRae's Stores Services, Inc.	Illinois
9.	McRae's, Inc.	Mississippi
10.	McRIL, LLC	Virginia
11.	National Bank of the Great Lakes	United States of America
12.	New York City Saks, LLC	New York
13.	NorthPark Fixtures, Inc.	Delaware
14.	Parisian, Inc.	Alabama
15.	PMIN General Partnership	Virginia
16.	Saks & Company	New York
17.	Saks Credit Corporation	Delaware
18.	Saks Direct, Inc.	New York
19.	Saks Distribution Centers, Inc.	Illinois
20.	Saks Fifth Avenue Distribution Company	Delaware
21.	Saks Fifth Avenue Enterprises, Inc.	New York
22.	Saks Fifth Avenue Food Corporation	California
23.	Saks Fifth Avenue of Texas, Inc.	Delaware
24.	Saks Fifth Avenue Texas, L.P.	Delaware
25.	Saks Fifth Avenue, Inc.	Massachusetts
26.	Saks Holdings, Inc.	Delaware
27.	Saks Shipping Company, Inc.	Illinois
28.	Saks Transitional Credit Corporation	Delaware
29.	Saks Wholesalers, Inc.	Alabama
30.	saksfifthavenue.com, inc.	Delaware
31.	SCCA, LLC	Virginia
32.	SCCA Store Holdings, Inc.	Delaware
33.	SCIL, LLC	Virginia
34.	SFA Finance Company II	Delaware
35.	SFA Holdings, Inc.	Delaware
36.	SFA Realty, Inc.	Delaware
37.	SFAILA, LLC	Virginia
38.	Tex SFA, Inc.	New York
39.	The Restaurant at Saks Fifth Avenue Corporation	New York

EX-23

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration Statements listed below of Saks Incorporated and Subsidiaries of our report dated March 13, 2001 relating to the financial statements, which appears in the 2000 Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated March 13, 2001 relating to the financial statement schedule, which appears in this Form 10-K.

Registration Statements on Form S-3
Registration Numbers
333-66755
333-71933

Registration Statements on Form S-4
Registration Numbers
333-09043
333-41563
333-60123

Registration Statements on Form S-8
Registration Numbers
33-88390
333-00695
333-25213
333-47535
333-66759
333-83161
333-83159

/s/ PricewaterhouseCoopers LLP

Birmingham, Alabama

April 26, 2001

EX-23

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 33-88390) of Saks Incorporated and Subsidiaries of our report dated April 6, 2001 relating to the financial statements of Saks Incorporated Employee Stock Purchase Plan, which appears as exhibit 99.2 in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

April 26, 2001

EX-99

Exhibit 99.1
Cautionary Statements Relating to Forward-Looking Information

The Company and its representatives may, from time to time, make written or verbal forward-looking statements. Those statements relate to developments, results, conditions, or other events the Company expects or anticipates will occur in the future. Without limiting the foregoing, those statements may relate to future revenues, earnings, store openings, market conditions, and the competitive environment. Forward-looking statements are based on management's then-current views and assumptions and, as a result, are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

All forward-looking statements are qualified by the following statements which contain several of the important factors that could cause actual results to differ materially from those predicted by the forward-looking statements:

Competitive, Sales, and Gross Margin Pressures

Our retail business is highly competitive. Each of our operations competes for customers, employees, locations, products, services, and other important items necessary for the successful operation of their businesses with many other local, regional, direct, and national retailers. Those competitors, some of which have greater financial and other resources than those of the Company, include department stores, specialty apparel stores, designer boutiques, outlet stores, discount stores, general and mass merchandisers, mail-order and electronic commerce retailers, and other forms of retail commerce. Changes in the pricing and other practices of those competitors may affect our expected results by decreasing our sales or gross margin percentage.

Customer Trends

It is difficult to predict what merchandise consumers will want. A substantial part of our business is dependent on our ability to make the correct trend decisions for a wide variety of goods and services. Failure accurately to predict constantly changing consumer tastes, preferences, spending patterns, and other lifestyle decisions could adversely affect short-term results and long-term relationships with our customers.

Credit Operations

Sales of merchandise and services are facilitated by the credit card loan operations of the Company's national credit card bank. These credit card loan operations also generate additional revenue from fees related to extending credit. Our bank's ability to extend credit to our customers depends on many factors including compliance with federal and state banking and consumer protection laws, which may change from time to time. In addition, changes in credit card use, payment patterns, and default rates may result from a variety of economic, legal, social, and other factors that we cannot control or predict with certainty. Changes that adversely affect our ability to extend credit and collect payments could negatively affect our results and financial condition.

General Economic Conditions

General economic factors that are beyond our control influence the Company's forecasts and directly affect performance. These factors include interest rates, rates of economic growth, fiscal and monetary policies of governments, inflation, deflation, levels of consumer confidence, consumer credit availability, consumer debt levels, tax rates and policy, unemployment trends, and other matters that influence consumer confidence and spending. Increasing volatility in financial markets may cause these factors to change with a greater degree of frequency and magnitude. Increases in interest rates may increase our financing costs.

Product Sourcing

The products we sell are sourced from a wide variety of domestic and international vendors. All of our vendors must comply with applicable laws and our required standards of conduct. Our ability to find qualified vendors and access products in a timely and efficient manner is a significant challenge which is typically even more difficult with respect to goods sourced outside of the United States. Trade restrictions, tariffs, currency exchange rates, transport capacity and costs, and other factors significant to this trade are beyond our control and could affect our business.

Advertising and Marketing Programs

The Company spends a meaningful amount on advertising and marketing. Our business depends on high customer traffic in our stores and effective marketing. We have many initiatives in this area, and we often change our advertising and marketing programs. If our advertising and marketing efforts are not effective, this could negatively affect our results.

Inventory Control

The Company's merchants focus on inventory levels and balance these levels with plans and trends. Excess inventories could result in significant markdowns, which could adversely affect our results.

Cost Containment

The Company's performance depends on appropriate management of its expense structure, including its selling, general, and administrative costs. The Company is continuously focused on reducing expenses as a percent of sales. This is a difficult task. The Company's failure to meet its expense budget or to appropriately reduce expenses during a weak sales season could adversely affect our results.

Other Factors

Other factors that could cause actual results to differ materially from those predicted include: weather, changes in the availability or cost of capital, the availability of suitable new store locations on acceptable terms, shifts in the seasonality of shopping patterns, labor strikes or other work interruptions, the effects of excess retail capacity in our markets, material acquisitions or dispositions, the success or failure of significant new business ventures, or adverse results in material litigation.

The foregoing list of important factors is not exclusive, and the Company does not undertake to revise any forward-looking statement to reflect events or circumstances that occur after the date those statements are made.

EX-99

Saks Incorporated Employee Stock Purchase Plan
Financial Statements
December 31, 2000 and January 31, 2000

Saks Incorporated Employee Stock Purchase Plan
Table of Contents
____________________________________________________________________________________

			Pages
Report of Independent Accountants			1
Financial Statements
	Statements of Net Assets Available for Plan Benefits
		December 31, 2000 and January 31, 2000	2
	Statements of Changes in Net Assets Available for Plan Benefits
		for the Eleven Month Period Ended December 31, 2000 and the Years Ended January 31, 2000 and 1999	3
Notes to Financial Statements			4-5

<PAGE>

Report of Independent Accountants

To the Board of Directors of Saks Incorporated

In our opinion, the accompanying statements of net assets available for plan benefits and the related statements of changes in net assets available for plan benefits, present fairly, in all material respects, the net assets available for plan benefits of Saks Incorporated Employee Stock Purchase Plan at December 31, 2000 and January 31, 2000, and the related changes in net assets available for plan benefits for the eleven month period ended December 31, 2000 and the two years ended January 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers, LLP

Birmingham, Alabama
April 6, 2001

<PAGE> 1

Saks Incorporated Employee Stock Purchase Plan
Statements of Net Assets for Plan Benefits
December 31, 2000 and January 31, 2000
____________________________________________________________________________________

		2000	1999
ASSETS
Cash held by Saks Incorporated		$          -	$     9,601
		-	9,601
LIABILITIES
Due to terminated employees		$           -	9,601
		-	9,601
	Net assets available for plan benefits	$           - =========	$           - =========

The accompanying notes are an integral part of these financial statements.

<PAGE> 2

Saks Incorporated Employee Stock Purchase PlanStatements of Changes in Net Assets for Plan Benefits
For the Eleven Month Period Ended December 31, 2000 and the Years
Ended January 31, 2000 and 1999
____________________________________________________________________________________

			Eleven Months Ended December 31,        2000	Year Ended January 31,             1999                  2000
Additions:
	Participant contributions		$  1,880,383		$  2,686,882	$  1,803,908
Deductions:
	Purchase of common stock		1,880,383		2,686,882	1,803,908
		Net change
Net assets available for plan benefits:
	Beginning of year		-		-	-
	End of year		$             - ==========		$             - ==========	$            - ==========

<PAGE> 3

Saks Incorporated Employee Stock Purchase PlanNotes to Financial Statements
For the Eleven Month Period Ended December 31, 2000 and the Years
Ended January 31, 2000 and 1999
____________________________________________________________________________________

1. Summary of Significant Accounting Policies and Description of the Plan

The following description of the Saks Incorporated Employee Stock Purchase Plan (the "Plan") is provided for general information only. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions.

General - The Plan provides employees of Saks Incorporated and Subsidiaries (the "Company") an opportunity to purchase shares of common stock of the Company. The Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended, and is therefore not subject to Federal and state income taxes. In connection with the 1998 merger of Proffitt's, Inc. and Saks Holdings, Inc., the Company changed its corporate name to Saks Incorporated. Accordingly, the Board of Directors elected to change the name of the Plan from the Proffitt's, Inc. Employee Stock Purchase Plan to the Saks Incorporated Employee Stock Purchase Plan.

During 2000, the Company changed the Plan's year end from January 31 to December 31. Therefore, the year ended December 31, 2000 contains 11 months, compared to 12 months in the prior year.

The total number of shares reserved for issuance under the Plan is 700,000. The number of shares of common stock to be issued under the Plan and the period for which the option to purchase shares will remain outstanding (the "Option Period") are based on an annual determination by the Compensation Committee of the Company's Board of Directors. Option periods currently end on December 31 of each year. The price at which the stock may be purchased is 85% of the lesser of the closing price per share as listed on the New York Stock Exchange on the last business day preceding (i) the grant of the option, or (ii) the exercise of the option. The Plan purchased shares for an exercise price of $8.50, $11.79, and $24.97 per share for the eleven month period ended December 31, 2000 and the two years ended January 31, 2000 and 1999, respectively.

Contributions - Eligible employees may elect annually to make after-tax contributions to the Plan through payroll deductions. Contributions are subject to limitations to be set annually by the Compensation Committee of the Company's Board of Directors. Each participant's account is credited with the participant's contributions. Participants are fully vested in their contributions. The contribution limitation was $2,400 for the eleven month period ended December 31, 2000 and the years ended January 31, 2000 and 1999.

Distribution of Stock - As soon as practicable after the purchase of stock by the Plan for its participants, the Company will deliver to each participant certificates representing the shares purchased on their account.

<PAGE> 4

Administrative Expenses - The Company pays for all administrative expenses of the Plan.

Income Taxes - Participants are not taxed upon receipt or exercise of options, but rather upon disposition of shares purchased under the Plan.

Basis of Accounting - The financial statements have been prepared on the accrual basis of accounting.


2. Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan document to alter, suspend, amend or terminate the Plan. In the event of plan termination, the participants' rights to acquire stock would continue until the end of the current Option Period, at which time shares and cash due to terminated employees would be distributed and no further contributions would be accepted.

<PAGE> 5