SAKS INCORPORATED REPORTS THIRD QUARTER PROFIT IMPROVEMENT
--Company Affirms Earnings
Outlook for Fourth Quarter--
Contact: Julia
Bentley
(865) 981-6243
www.saksincorporated.com
FOR IMMEDIATE RELEASE
Birmingham, Alabama (November 19, 2002)
THIRD QUARTER HIGHLIGHTS:
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SAKS INCORPORATED REPORTS THIRD QUARTER PROFIT IMPROVEMENT
--Company Affirms Earnings Outlook for Fourth Quarter--
Contact: Julia
Bentley
(865) 981-6243
www.saksincorporated.com
FOR IMMEDIATE RELEASE
Birmingham, Alabama (November 19, 2002)--Retailer Saks Incorporated (NYSE: SKS) (the "Company") today announced operating results for the third quarter and nine months ended November 2, 2002.
The Company operates two business segments, Saks Department Store Group (SDSG) and Saks Fifth Avenue Enterprises (SFAE). SDSG consists of department stores under the following nameplates: Parisian, Proffitt's, McRae's, Younkers, Herberger's, Carson Pirie Scott, Bergner's, and Boston Store. SFAE is comprised of the Saks Fifth Avenue stores and Saks Off 5th.
Earnings Overview
The Company recorded income (prior to certain items outlined below) of $4.5 million, or $.03 per share, for the third quarter ended November 2, 2002, an improvement over last year's loss for the comparable period of ($23.5) million, or ($.17) per share. For the nine months ended November 2, 2002, the Company recorded income (before certain items) of $6.0 million, or $.04 per share, compared to last year's loss of ($48.4) million, or ($.34) per share.
Year-over-year operating income for the quarter substantially improved at SFAE and was relatively flat at SDSG. Year-over-year operating income improved at both business segments for the first nine months. Operating income by segment was as follows:
| Quarter Ended | Nine Months Ended | |||
| Nov. 2, 2002 | Nov. 3, 2001 | Nov. 2, 2002 |
Nov. 3, 2001 |
|
| SDSG | $ 20.6 | $ 21.6 | $79.1 | $77.0 |
| SFAE | 26.8 | (18.9) | 48.3 | (33.4) |
| Other | (9.1) | (8.1) | (25.1) | (22.7) |
| Total | $ 38.3 | ($5.4) | $102.3 | $20.9 |
During the third quarter of 2002, the Company incurred certain items totaling $2.6 million (net of taxes), or $.02 per share, primarily related to the Younkers consolidation and the pending Household transaction. For the nine months ended November 2, 2002, the Company recorded
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certain items aggregating $49.9 million (net of taxes), or $.34 per share ($45.6 million, or $.31 per share, of the certain items related to the first quarter adoption of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets"). In the prior year, certain items (net of taxes) netted to a $1.8 million gain, or $.02 per share, for the third quarter, and a $5.3 million net charge, or $.04 per share, for the nine months.
After recognition of the items outlined above, the Company's net income for the third quarter ended November 2, 2002 of $1.9 million, or $.01 per share, compared to last year's net loss of ($21.8) million, or ($.15) per share. After recognition of the items outlined above, the Company recorded a net loss of ($43.9) million, or ($.30) per share, for the nine months ended November 2, 2002, compared to a net loss of ($53.6) million, or ($.38) per share, last year.
Income Statement Commentary
R. Brad Martin, Chairman and Chief Executive Officer of Saks Incorporated, commented, "We are pleased with our overall improvement in operating performance during the quarter, especially in light of the challenging economic environment. The year-over-year increase principally was driven by a significant improvement in the gross margin rate and diligent expense control.
"For the third quarter, the gross margin rate improved by 260 basis points over last year due to carefully controlled inventories and reduced levels of clearance merchandise and promotional activity. Additionally, we lowered SG&A expenses by approximately $11 million, or 50 basis points, through diligent expense management, while continuing to invest in our key strategic initiatives."
Balance Sheet Commentary
Consistent with the Company's focus of enhancing returns on invested capital, inventory turnover once again improved during the quarter. Quarter-end inventories totaled $1.71 billion, a 3% reduction from the prior year. Total company comparable store inventories were down approximately 3% from last year, on top of a 6% comparable store inventory decline in the third quarter of 2001.
Financial leverage continued to decline. At quarter end, debt totaled $1.42 billion, a $220 million reduction from last year. The debt-to-capitalization ratio of 38.9% was down from 42.2% last year. At quarter end, the Company had $94 million in borrowings outstanding under its $700 million revolving credit facility, compared to $285 million outstanding under its credit facility one year ago.
Outlook for the Fourth Quarter of 2002:
Management expects that the Company's income before certain items for the fourth quarter of 2002 will approximate the First Call consensus estimate as of November 19, 2002 of $.61 per share. The Company recorded income before certain items of $.50 per share in the fourth quarter of last year.
Store News
During the third quarter, the Company opened a Parisian replacement store in Birmingham, Alabama; a new Parisian store in Rochester Hills, Michigan; a Carson Pirie Scott replacement
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store in Rochester, Minnesota; and a Saks Fifth Avenue replacement store in Las Vegas, Nevada. In November, the Company opened a new Younkers store in Lansing, Michigan and a new Off 5th store in Denver, Colorado.
At the end of the third quarter, the Company operated 244 SDSG stores with 26.8 million square feet, 61 Saks Fifth Avenue stores with 6.4 million square feet, and 51 Off 5th stores with 1.4 million square feet.
Detail of Sales
Total sales numbers below represent owned department sales and leased department commissions. Total sales (in millions) for the third quarter ended November 2, 2002 compared to last year's third quarter ended November 3, 2001 were:
| This Year | Last Year | Total (Decrease) |
Comparable Increase (Decrease) |
|
| SDSG | $ 841.0 | $ 861.2 | (2.3%) | (3.0%) |
| SFAE | 565.1 | 562.4 | 0.5% | 5.2% |
| Total | $1,406.1 | $1,423.6 | (1.2%) | 0.1% |
Total sales (in millions) for the nine months ended November 2, 2002 compared to last year's nine month period ended November 3, 2001 were:
| This Year | Last Year | Total (Decrease) |
Comparable Increase (Decrease) |
|
| SDSG | $2,414.6 | $2,434.7 | (0.8%) | (0.6%) |
| SFAE | 1,655.0 | 1,723.9 | (4.0%) | 0.2% |
| Total | $4,069.6 | $ 4,158.6 | (2.1%) | (0.3%) |
Leased department commissions included in the total sales numbers above were
as follows (sales in millions):
| Quarter Ended | Nine Months Ended | |||
| Nov. 2, 2002 | Nov. 3, 2001 | Nov. 2, 2002 | Nov. 3, 2001 |
|
| SDSG leased commissions | $ 3.7 | $ 3.7 | $ 12.1 | $ 11.8 |
| SFAE leased commissions | 4.4 | 4.1 | 13.7 | 13.7 |
| Total leased commissions | $ 8.1 | $ 7.8 | $ 25.8 | $ 25.5 |
Conference Call Information:
Management has scheduled a conference call at 10:00 a.m. Eastern Time on Wednesday, November 20, 2002 to discuss third quarter results. To participate, please call (816) 650-0742 (10 minutes prior to the call). A replay of the call will be available for 24 hours following the live call. The dial-in number for the replay is (402) 220-2491. The access code for the replay is 10747906.
Interested parties also have the opportunity to listen to the conference call over the Internet by visiting the Investor Relations section of Saks Incorporated's corporate website at http://www.saksincorporated.com/investor_relations.html.
To listen to the live call, please go to the address listed at least 15 minutes early to register, download, and install any necessary audio software.
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For those who cannot listen to the live broadcast, a replay will be available shortly after the call, and a transcript will be posted on the Company's web site within 24 to 48 hours.
To be placed on the Company's e-mail notification list for press releases, SEC filings, certain analytical information, and/or upcoming events, please go to www.saksincorporated.com, click on "Investor Relations," click on "e-mail Alerts," and fill out the requested information.
Forward-looking Information
The information contained in this press release that addresses future results or expectations is considered "forward-looking" information within the definition of the Federal securities laws. Forward-looking information in this document can be identified through the use of words such as "may," "will," "intend," "plan," "project," "expect," "anticipate," "should," "would," "believe," "estimate," "contemplate," "possible," and "point." The forward-looking information is premised on many factors, some of which are outlined below. 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 and involve risks and uncertainties. These 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; speedy resolution of the labor dispute between the International Longshore and Warehouse Union and the Pacific Maritime Association; the competitive pricing environment within the department and specialty store industries as well as other retail channels; the effectiveness of planned advertising, marketing, and promotional campaigns; favorable customer response to increased relationship marketing efforts of proprietary credit card loyalty programs; appropriate inventory management; effective expense control; effective operation of the credit card operations of National Bank of the Great Lakes, the Company's national credit card bank; and changes in interest rates. For additional information regarding these and other risk factors, please refer to Exhibit 99.1 to the Company's Form 10-K for the fiscal year ended February 2, 2002 filed with the Securities and Exchange Commission ("SEC"), which may be accessed via EDGAR through the Internet at www.sec.gov.
Management undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events, or otherwise. Persons are advised, however, to consult any further disclosures management makes on related subjects in its reports filed with the SEC and in its press releases.
####
|
SAKS INCORPORATED (Dollars In Thousands) |
||||||||||
|
(UNAUDITED) |
||||||||||
|
November 2, 2002 |
November 3, |
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|
ASSETS |
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|
Current assets |
||||||||||
|
Cash and cash equivalents |
$ 34,281 |
$ 40,250 |
||||||||
|
Retained interest in accounts receivable |
243,261 |
211,042 |
||||||||
|
Merchandise inventories |
1,706,980 |
1,764,546 |
||||||||
|
Other current assets |
85,319 |
102,153 |
||||||||
|
Deferred income taxes, net |
43,873 |
42,489 |
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|
Total current assets |
2,113,714 |
2,160,480 |
||||||||
|
Property and equipment, net |
2,203,090 |
2,278,281 |
||||||||
|
Goodwill and intangibles, net |
316,807 |
366,795 |
||||||||
|
Deferred income taxes, net |
186,639 |
203,650 |
||||||||
|
Other assets |
46,860 |
41,105 |
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|
TOTAL ASSETS |
$ 4,867,110 |
$ 5,050,311 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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|
Current liabilities |
||||||||||
|
Trade accounts payable |
$ 506,051 |
$ 495,786 |
||||||||
|
Accrued expenses and other current liabilities |
534,164 |
527,934 |
||||||||
|
Current portion of long-term debt |
4,762 |
5,240 |
||||||||
|
Total current liabilities |
1,044,977 |
1,028,960 |
||||||||
|
Long-term debt |
1,422,538 |
1,642,707 |
||||||||
|
Other long-term liabilities |
166,621 |
133,573 |
||||||||
|
Total shareholders' equity |
2,232,974 |
2,245,071 |
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|
|
|
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|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ 4,867,110 |
$ 5,050,311 |
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|
SAKS INCORPORATED |
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CONSOLIDATED STATEMENTS OF INCOME |
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|
(Dollars In Thousands, Except for Per Share Data) |
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|
(UNAUDITED) |
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|
Three Months Ended |
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|
November 2, 2002 |
November 3, 2001 |
||||||
|
Net sales |
$ 1,406,142 |
100.0% |
$ 1,423,551 |
100.0% |
|||
|
Cost of sales |
875,758 |
62.3% |
925,314 |
65.0% |
|||
|
Gross margin |
530,384 |
37.7% |
498,237 |
35.0% |
|||
|
Selling, general and administrative expenses |
342,929 |
24.4% |
353,910 |
24.9% |
|||
|
Other operating expenses: |
|||||||
|
Property and equipment rentals |
55,534 |
3.9% |
54,932 |
3.9% |
|||
|
Depreciation & other amortization |
55,423 |
3.9% |
54,636 |
3.8% |
|||
|
Taxes other than income taxes |
36,159 |
2.6% |
38,844 |
2.7% |
|||
|
Store pre-opening costs |
2,848 |
0.2% |
3,568 |
0.3% |
|||
|
Integration charges |
2,305 |
0.2% |
91 |
0.0% |
|||
|
Losses (gains) from long-lived assets |
999 |
0.1% |
(1,902) |
-0.1% |
|||
|
Operating income (loss) |
34,187 |
2.4% |
(5,842) |
-0.4% |
|||
|
Other income (expense): |
|||||||
|
Interest expense |
(30,826) |
-2.2% |
(32,303) |
-2.3% |
|||
|
Other income (expense), net |
(285) |
0.0% |
463 |
0.0% |
|||
|
Income (loss) before provision (benefit) for income |
|||||||
|
taxes and extraordinary items |
3,076 |
0.2% |
(37,682) |
-2.6% |
|||
|
Provision (benefit) for income taxes |
1,154 |
0.1% |
(13,907) |
-1.0% |
|||
|
Income (loss) before extraordinary items |
1,922 |
0.1% |
(23,775) |
-1.7% |
|||
|
Extraordinary gain on early extinguishment |
|||||||
|
of debt, net of taxes |
- |
0.0% |
2,022 |
0.1% |
|||
|
Net income (loss) |
$ 1,922 |
0.1% |
$ (21,753) |
-1.5% |
|||
|
Basic earnings (loss) per common share: |
|||||||
|
Before extraordinary items |
$ 0.01 |
$ (0.17) |
|||||
|
After extraordinary items |
$ 0.01 |
$ (0.15) |
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|
Diluted earnings (loss) per common share: |
|||||||
|
Before extraordinary items |
$ 0.01 |
$ (0.17) |
|||||
|
After extraordinary items |
$ 0.01 |
$ (0.15) |
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|
Weighted average common shares: |
|||||||
|
Basic |
142,791 |
141,969 |
|||||
|
Diluted |
145,449 |
141,969 |
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|
SAKS INCORPORATED |
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|
CONSOLIDATED STATEMENTS OF INCOME |
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|
(Dollars In Thousands, Except for Per Share Data) |
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|
(UNAUDITED) |
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|
Nine Months Ended |
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|
November 2, 2002 |
November 3, 2001 |
|||||||||
|
Net sales |
$ 4,069,601 |
100.0% |
$ 4,158,609 |
100.0% |
||||||
|
Cost of sale |
2,552,616 |
62.7% |
2,691,393 |
64.7% |
||||||
|
Gross margin |
1,516,985 |
37.3% |
1,467,216 |
35.3% |
||||||
|
Selling, general and administrative expenses |
988,872 |
24.3% |
1,027,077 |
24.7% |
||||||
|
Other operating expenses: |
||||||||||
|
Property and equipment rentals |
150,341 |
3.7% |
148,380 |
3.6% |
||||||
|
Depreciation & other amortization |
160,415 |
3.9% |
162,157 |
3.9% |
||||||
|
Taxes other than income taxes |
114,605 |
2.8% |
118,662 |
2.9% |
||||||
|
Store pre-opening costs |
3,744 |
0.1% |
5,170 |
0.1% |
||||||
|
Integration charges |
2,305 |
0.1% |
1,539 |
0.0% |
||||||
|
Losses from long-lived assets |
1,925 |
0.0% |
18,604 |
0.4% |
||||||
|
Operating income (loss) |
94,778 |
2.3% |
(14,373) |
-0.3% |
||||||
|
Other income (expense): |
||||||||||
|
Interest expense |
(93,019) |
-2.3% |
(99,354) |
-2.4% |
||||||
|
Other income (expense), net |
296 |
0.0% |
746 |
0.0% |
||||||
|
Income (loss) before provision (benefit) for income |
||||||||||
|
taxes, extraordinary items and cumulative |
||||||||||
|
effect of a change in accounting principle |
2,055 |
0.1% |
(112,981) |
-2.7% |
||||||
|
Provision (benefit) for income taxes |
775 |
0.0% |
(42,898) |
-1.0% |
||||||
|
Income (loss) before extraordinary items and cumulative |
||||||||||
|
effect of a change in accounting principle |
1,280 |
0.0% |
(70,083) |
-1.7% |
||||||
|
Extraordinary gain on early extinguishment |
||||||||||
|
of debt, net of taxes |
443 |
0.0% |
16,439 |
0.4% |
||||||
|
Cumulative effect of a change in accounting principle, |
||||||||||
|
net of taxes |
(45,593) |
-1.1% |
- |
0.0% |
||||||
|
Net income (loss) |
$ (43,870) |
-1.1% |
$ (53,644) |
-1.3% |
||||||
|
Basic earnings (loss) per common share: |
||||||||||
|
Before extraordinary items and cumulative |
||||||||||
|
effect of accounting change |
$ 0.01 |
$ (0.49) |
||||||||
|
After extraordinary items and cumulative |
||||||||||
|
effect of accounting change |
$ (0.31) |
$ (0.38) |
||||||||
|
Diluted earnings (loss) per common share: |
||||||||||
|
Before extraordinary items and cumulative |
||||||||||
|
effect of accounting change |
$ 0.01 |
$ (0.49) |
||||||||
|
After extraordinary items |
||||||||||
|
effect of accounting change |
$ (0.30) |
$ (0.38) |
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|
Weighted average common shares: |
||||||||||
|
Basic |
142,720 |
141,955 |
||||||||
|
Diluted |
146,893 |
141,955 |
||||||||
|
SAKS INCORPORATED |
||||
|
SEGMENT INFORMATION |
||||
|
(Dollars In Thousands) |
||||
|
(UNAUDITED) |
||||
|
Three Months Ended |
||||
|
November 2, 2002 |
November 3, 2001 |
|||
|
Net Sales: |
||||
|
Saks Department Stores Group |
$ 841,020 |
$ 861,149 |
||
|
Saks Fifth Avenue Enterprises |
565,122 |
562,402 |
||
|
$ 1,406,142 |
$ 1,423,551 |
|||
|
Operating Income, before certain items: |
||||
|
Saks Department Stores Group |
$ 20,571 |
$ 21,566 |
||
|
Saks Fifth Avenue Enterprises |
26,854 |
(18,942) |
||
|
Other |
(9,087) |
(8,052) |
||
|
$ 38,338 |
$ (5,428) |
|||
|
Depreciation and Amortization: |
||||
|
Saks Department Stores Group |
$ 29,399 |
$ 29,420 |
||
|
Saks Fifth Avenue Enterprises |
25,155 |
24,526 |
||
|
Other |
869 |
690 |
||
|
$ 55,423 |
$ 54,636 |
|||
|
Total Assets: |
||||
|
Saks Department Stores Group |
$ 2,492,441 |
$ 2,483,194 |
||
|
Saks Fifth Avenue Enterprises |
1,900,495 |
2,075,750 |
||
|
Other |
474,174 |
491,367 |
||
|
$ 4,867,110 |
$ 5,050,311 |
|||
|
SAKS INCORPORATED |
||||
|
SEGMENT INFORMATION |
||||
|
(Dollars In Thousands) |
||||
|
(UNAUDITED) |
||||
|
Nine Months Ended |
||||
|
November 2, 2002 |
November 3, 2001 |
|||
|
Net Sales: |
||||
|
Saks Department Stores Group |
$ 2,414,590 |
$ 2,434,720 |
||
|
Saks Fifth Avenue Enterprises |
1,655,011 |
1,723,889 |
||
|
$ 4,069,601 |
$ 4,158,609 |
|||
|
Operating Income, before certain items: |
||||
|
Saks Department Stores Group |
$ 79,036 |
$ 76,988 |
||
|
Saks Fifth Avenue Enterprises |
48,331 |
(33,397) |
||
|
Other |
(25,067) |
(22,658) |
||
|
$ 102,300 |
$ 20,933 |
|||
|
Depreciation and Amortization: |
||||
|
Saks Department Stores Group |
$ 84,814 |
$ 87,348 |
||
|
Saks Fifth Avenue Enterprises |
73,533 |
73,332 |
||
|
Other |
2,068 |
1,477 |
||
|
$ 160,415 |
$ 162,157 |
|||
|
Total Assets: |
||||
|
Saks Department Stores Group |
$ 2,492,441 |
$ 2,483,194 |
||
|
Saks Fifth Avenue Enterprises |
1,900,495 |
2,075,750 |
||
|
Other |
474,174 |
491,367 |
||
|
$ 4,867,110 |
$ 5,050,311 |
|||