Exhibit 99.1
SAKS INCORPORATED ANNOUNCES SECOND QUARTER
RESULTS
Contact: | Julia Bentley | |||
(865) 981-6243 | ||||
FOR IMMEDIATE RELEASE | www.saksincorporated.com |
Birmingham, Alabama (August 17, 2004)
HIGHLIGHTS:
| • | Saks Incorporated recorded a ($.20) loss per share for the second quarter ended July 31, 2004 compared to last year’s loss per share of ($.18). The current year loss includes after-tax charges of ($2.1) million, or ($.01) per share, related to the disposal of long-lived assets. The comparable prior year period included a net gain of $2.7 million (net of taxes), or $.02 per share, related to the disposal of long-lived assets. |
| • | The Company recorded a net loss of ($6.9) million, or ($.05) per share, for the six months ended July 31, 2004 compared to a net loss of ($11.3) million, or ($.08) per share, last year. The current year period included charges of ($4.7) million (net of taxes), or ($.03) per share, primarily related to the disposal of certain long-lived assets. The comparable prior year period included a net gain of $4.5 million (net of taxes), or $.03 per share, primarily related the sale of the Company’s proprietary credit card portfolio and the disposal of certain long-lived assets. |
| • | Consolidated operating income for the first half increased by 21% to $41.1 million from $33.9 million last year. |
| • | For the first six months, SFAE’s operating income increased by 235% to $36.4 million from $10.9 million last year. This improvement was driven by strong comparable store sales growth and a reduction in promotional activity, and was accomplished while absorbing certain restructuring costs and investing in key strategic initiatives. |
| • | SDSG experienced a 10% decrease in first half operating income to $33.3 million from $37.0 million in the prior year. The decrease occurred in the second quarter and primarily related to the erosion in the sales trend throughout the quarter. |
| • | Inventories at July 31, 2004 totaled $1.47 billion, an 8.5% increase over the prior year second quarter. Comparable store inventories increased approximately 7% over last year. |
| • | During the quarter, the Company retired approximately $72 million of senior unsecured notes and paid a $2 per share dividend to common shareholders totaling approximately $285 million. After this activity, the Company ended the quarter with approximately $205 million of cash on hand and no borrowings on its $800 million revolving credit facility. Total funded debt at July 31, 2004 was approximately $1.42 billion. |
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SAKS INCORPORATED ANNOUNCES SECOND QUARTER
RESULTS
| Contact: | Julia Bentley | |
(865) 981-6243 | ||
www.saksincorporated.com |
Birmingham, Alabama (August 17, 2004)—Retailer Saks Incorporated (NYSE: SKS) (“Saks” or the “Company”) today announced results for the second quarter and six months ended July 31, 2004.
The Company operates two business segments, Saks Department Store Group (“SDSG”) and Saks Fifth Avenue Enterprises (“SFAE”). SDSG consists of the Company’s department stores under the Parisian, Proffitt’s, McRae’s, Younkers, Herberger’s, Carson Pirie Scott, Bergner’s, and Boston Store nameplates and Club Libby Lu specialty stores. SFAE is comprised of Saks Fifth Avenue luxury department stores and Saks Off 5th outlet stores.
Overview of Results
Saks Incorporated’s results of operations are presented in accordance with generally accepted accounting principles.
Saks Incorporated recorded a net loss of ($28.9) million, or ($.20) per share, for the second quarter ended July 31, 2004, compared to a net loss of ($25.8) million, or ($.18) per share, last year. The current year second quarter included charges of ($2.1) million (net of taxes), or ($.01) per share, primarily related to the disposal of certain long-lived assets related to closed stores. The comparable prior year period included a net gain of $2.7 million (net of taxes), or $.02 per share, primarily related to a gain on the disposal of certain long-lived assets.
For the six months ended July 31, 2004, the Company recorded a net loss of ($6.9) million, or ($.05) per share, compared to a net loss of ($11.3) million, or ($.08) per share, last year. The current year period included charges of ($4.7) million (net of taxes), or ($.03) per share, primarily related to the write-off of certain long-lived assets related to closed stores. The comparable prior year period included a net gain of $4.5 million (net of taxes), or $.03 per share, primarily related to the sale of the Company’s proprietary credit card portfolio and the disposal of certain long-lived assets.
Operating income (loss) by segment (in millions) was as follows:
| Quarter Ended | Six Months Ended | |||||||||||||||
| July 31, 2004 | Aug. 2, 2003 | July 31, 2004 | Aug. 2, 2003 | |||||||||||||
SDSG | $ | 5,411 | $ | 12,515 | $ | 33,288 | $ | 37,027 | ||||||||
SFAE | (12,447 | ) | (22,112 | ) | 36,383 | 10,870 | ||||||||||
Items not allocated | (12,614 | ) | (3,022 | ) | (28,571 | ) | (13,984 | ) | ||||||||
Total | $ | (19,650 | ) | $ | (12,619 | ) | $ | 41,100 | $ | 33,913 | ||||||
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Items not allocated to the business segments are comprised of the cost of services performed on behalf of the entire company, those items not considered by corporate management in assessing segment operating performance, and such items as gains or losses on the disposal of long-lived assets and gains related to the sale of the credit card portfolio.
Comments on the Second Quarter and First Half
R. Brad Martin, Chairman and Chief Executive Officer of Saks Incorporated, noted, “After factoring in gains and losses related to long-lived assets and gains from the sale of our proprietary credit card portfolio, our second quarter loss narrowed, and Saks achieved a 21% increase in operating income for the first half of the year. Substantial improvement in the contribution of our SFAE business was partially offset by a decline at SDSG.”
Martin continued, “SFAE delivered a solid second quarter and first half performance. Year-to-date operating income rose 235%, driven by a comparable store sales increase of 16.1% while systematically reducing the level of promotional activity. These results include a continuing investment in key strategic initiatives and the absorption of certain restructuring costs.
“SDSG’s operating performance for the quarter and six months fell short of our expectations. A deterioration in SDSG’s sales trend throughout the quarter led to below plan sales and gross margin performance and a decline in expense leverage.”
Martin noted, “During the second quarter, total SG&A expenses increased by $42 million, resulting in 90 basis points of leverage erosion. The expense ratio at SFAE was essentially flat for the quarter as we continued to incur leadership transition costs and to invest in key strategic initiatives. The SG&A ratio at SDSG increased during the second quarter as investments in strategic marketing, selling, and innovation initiatives during the quarter were not leveraged due to the inability to achieve planned sales.
“For the remainder of the year, we have taken a cautious view regarding SDSG and now anticipate low single digit comparable store sales growth in the second half. We will manage expenses accordingly. At SFAE, we expect a favorable sales environment to continue, and we will continue to invest in the strategic initiatives for this business. Based on these assumptions, we anticipate year-over-year improvement in the consolidated expense ratio for the second half of 2004.”
Inventories at July 31, 2004 totaled $1.47 billion, an 8.5% increase over the prior year second quarter. Comparable store inventories increased approximately 7% over last year.
During the quarter, the Company retired approximately $72 million of senior unsecured notes and paid a $2 per share dividend to common shareholders totaling approximately $285 million. After this activity, the Company ended the quarter with approximately $205 million of cash on hand and no borrowings on its $800 million revolving credit facility. Total debt at July 31, 2004 was approximately $1.42 billion, and debt-to-capitalization was 41.2%.
Store News
In the quarter, the Company opened its replacement Younkers store in the Merle Hay Mall in Des Moines and opened its new Younkers prototype store in the Jordan Creek Town Center in early
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August, which is also in Des Moines. The Company also closed two underproductive stores – Proffitt’s in Greenville, South Carolina and Younkers in downtown Green Bay, Wisconsin.
The Company has plans for six new or replacement stores in 2004:
Nameplate | Location | Sq. Footage | Opening Date | |||
Younkers (Merle Hay replacement) | Des Moines, IA | 165,000 SF | Opened July 2004 | |||
Younkers (Jordan Creek) | Des Moines, IA | 160,000 SF | Opened August 2004 | |||
Proffitt’s (Riverchase) | Birmingham, AL | 260,000 SF | October 2004 | |||
Saks Fifth Avenue | Raleigh, NC | 80,000 SF | September 2004 | |||
Saks Fifth Avenue | Plano, TX | 120,000 SF | September 2004 | |||
Off 5th | Destin, FL | 30,000 SF | Opened May 2004 | |||
TOTAL | 815,000 SF | |||||
NET (of replacement) | 620,000 SF |
The Company has closed three stores this year totaling approximately 400,000 square feet and thus expects net square footage growth for the year to be approximately 220,000 square feet.
At quarter end, Saks operated 239 SDSG stores with 26.0 million square feet, 62 Saks Fifth Avenue stores with 6.5 million square feet, and 54 Off 5th units with 1.5 million square feet. During the quarter, the Company opened three mall-based Club Libby Lu stores, bringing the quarter-end total to 26.
Sales Detail
Total sales numbers below represent owned department sales and leased department commissions. Total sales (in millions) for the second quarter ended July 31, 2004 compared to last year’s second quarter ended August 2, 2003 were:
| This Year | Last Year | Total Increase | Comparable Increase | |||||||||
SDSG | $ | 770 | $ | 751 | 2.5 | % | 2.0 | % | ||||
SFAE | 580 | 486 | 19.3 | % | 17.0 | % | ||||||
Total | $ | 1,350 | $ | 1,237 | 9.1 | % | 7.9 | % | ||||
Total sales (in millions) for the six months ended July 31, 2004 compared to the six months ended August 2, 2003 were:
| This Year | Last Year | Total Increase | Comparable Increase | |||||||||
SDSG | $ | 1,628 | $ | 1,550 | 5.0 | % | 4.2 | % | ||||
SFAE | 1,262 | 1,069 | 18.1 | % | 16.1 | % | ||||||
Total | $ | 2,890 | $ | 2,619 | 10.3 | % | 9.1 | % | ||||
Leased department commissions included in the total sales numbers above were as follows (sales in millions):
| Quarter Ended | Six Months Ended | |||||||||||
| July 31, 2004 | Aug. 2, 2003 | July 31, 2004 | Aug. 2, 2003 | |||||||||
SDSG leased commissions | $ | 4.0 | $ | 4.0 | $ | 8.1 | $ | 8.2 | ||||
SFAE leased commissions | 5.6 | 5.0 | 12.7 | 10.7 | ||||||||
Total leased commissions | $ | 9.6 | $ | 9.0 | $ | 20.8 | $ | 18.9 | ||||
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Conference Call Information
Management has scheduled a conference call at 10:00 a.m. Eastern Time on Tuesday, August 17, 2004 to discuss second quarter results. To participate, please call (706) 643-1966 (10 minutes prior to the call). A replay of the call will be available for 48 hours following the live call. The dial-in number for the replay is (706) 645-9291 (conference ID number 4815849).
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 athttp://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. 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 towww.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; 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; successful operation of the Company’s proprietary credit card strategic alliance with Household Bank (SB), N.A.; geo-political risks; 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 January 31, 2004 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.
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SAKS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except for Per Share Data)
(UNAUDITED) Three Months Ended | ||||||||||||||
| July 31, 2004 | August 2, 2003 | |||||||||||||
Net sales | $ | 1,350,357 | 100.0 | % | $ | 1,237,104 | 100.0 | % | ||||||
Cost of sales | 853,438 | 63.2 | % | 786,062 | 63.5 | % | ||||||||
Gross margin | 496,919 | 36.8 | % | 451,042 | 36.5 | % | ||||||||
Selling, general and administrative expenses | 369,410 | 27.4 | % | 327,319 | 26.5 | % | ||||||||
Other operating expenses: | ||||||||||||||
Property and equipment rentals | 50,356 | 3.7 | % | 49,570 | 4.0 | % | ||||||||
Depreciation & other amortization | 53,912 | 4.0 | % | 52,418 | 4.2 | % | ||||||||
Taxes other than income taxes | 38,552 | 2.9 | % | 37,483 | 3.0 | % | ||||||||
Store pre-opening costs | 1,027 | 0.1 | % | 1,033 | 0.1 | % | ||||||||
Integration charges | — | 0.0 | % | 70 | 0.0 | % | ||||||||
(Gains) losses from long-lived assets | 3,312 | 0.2 | % | (4,232 | ) | -0.3 | % | |||||||
Operating income (loss) | (19,650 | ) | -1.5 | % | (12,619 | ) | -1.0 | % | ||||||
Other income (expense): | ||||||||||||||
Interest expense | (26,162 | ) | -1.9 | % | (27,901 | ) | -2.3 | % | ||||||
Other income (expense), net | 237 | 0.0 | % | (76 | ) | 0.0 | % | |||||||
Income (loss) before provision (benefit) for income taxes | (45,575 | ) | -3.4 | % | (40,596 | ) | -3.3 | % | ||||||
Provision (benefit) for income taxes | (16,635 | ) | -1.2 | % | (14,819 | ) | -1.2 | % | ||||||
Net income (loss) | $ | (28,940 | ) | -2.1 | % | $ | (25,777 | ) | -2.1 | % | ||||
Basic earnings (loss) per common share: | $ | (0.20 | ) | $ | (0.18 | ) | ||||||||
Diluted earnings (loss) per common share: | $ | (0.20 | ) | $ | (0.18 | ) | ||||||||
Weighted average common shares: | ||||||||||||||
Basic | 141,591 | 140,498 | ||||||||||||
Diluted | 141,591 | 140,498 | ||||||||||||
SAKS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars In Thousands, Except for Per Share Data)
(UNAUDITED) Six Months Ended | ||||||||||||||
| July 31, 2004 | August 2, 2003 | |||||||||||||
Net sales | $ | 2,890,550 | 100.0 | % | $ | 2,618,964 | 100.0 | % | ||||||
Cost of sales | 1,792,036 | 62.0 | % | 1,645,231 | 62.8 | % | ||||||||
Gross margin | 1,098,514 | 38.0 | % | 973,733 | 37.2 | % | ||||||||
Selling, general and administrative expenses | 756,538 | 26.2 | % | 662,387 | 25.3 | % | ||||||||
Other operating expenses: | ||||||||||||||
Property and equipment rentals | 102,410 | 3.5 | % | 96,197 | 3.7 | % | ||||||||
Depreciation & other amortization | 107,490 | 3.7 | % | 104,682 | 4.0 | % | ||||||||
Taxes other than income taxes | 82,366 | 2.8 | % | 75,712 | 2.9 | % | ||||||||
Store pre-opening costs | 1,239 | 0.0 | % | 2,261 | 0.1 | % | ||||||||
Integration charges | — | 0.0 | % | 535 | 0.0 | % | ||||||||
(Gains) losses from long-lived assets | 7,371 | 0.3 | % | (1,954 | ) | -0.1 | % | |||||||
Operating income | 41,100 | 1.4 | % | 33,913 | 1.3 | % | ||||||||
Other income (expense): | ||||||||||||||
Interest expense | (52,128 | ) | -1.8 | % | (56,765 | ) | -2.2 | % | ||||||
Other income (expense), net | 138 | 0.0 | % | 4,992 | 0.2 | % | ||||||||
Income (loss) before provision (benefit) for income taxes | (10,890 | ) | -0.4 | % | (17,860 | ) | -0.7 | % | ||||||
Provision (benefit) for income taxes | (3,976 | ) | -0.1 | % | (6,520 | ) | -0.2 | % | ||||||
Net income (loss) | $ | (6,914 | ) | -0.2 | % | $ | (11,340 | ) | -0.4 | % | ||||
Basic earnings (loss) per common share: | $ | (0.05 | ) | $ | (0.08 | ) | ||||||||
Diluted earnings (loss) per common share: | $ | (0.05 | ) | $ | (0.08 | ) | ||||||||
Weighted average common shares: | ||||||||||||||
Basic | 141,309 | 141,866 | ||||||||||||
Diluted | 141,309 | 141,866 | ||||||||||||
SAKS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
| (UNAUDITED) | ||||||
July 31, 2004 | August 2, 2003 | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 205,323 | $ | 389,748 | ||
Merchandise inventories | 1,469,278 | 1,354,570 | ||||
Other current assets | 190,385 | 155,042 | ||||
Deferred income taxes, net | 83,129 | 77,176 | ||||
Total current assets | 1,948,115 | 1,976,536 | ||||
Property and equipment, net | 2,046,985 | 2,114,151 | ||||
Goodwill and intangibles, net | 324,709 | 323,987 | ||||
Deferred income taxes, net | 127,046 | 142,586 | ||||
Other assets | 90,926 | 55,613 | ||||
TOTAL ASSETS | $ | 4,537,781 | $ | 4,612,873 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Trade accounts payable | $ | 387,030 | $ | 356,311 | ||
Accrued expenses and other current liabilities | 442,959 | 438,945 | ||||
Current portion of long-term debt | 74,948 | 81,478 | ||||
Total current liabilities | 904,937 | 876,734 | ||||
Long-term debt | 1,349,762 | 1,241,455 | ||||
Other long-term liabilities | 248,829 | 293,576 | ||||
Total shareholders’ equity | 2,034,253 | 2,201,108 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 4,537,781 | $ | 4,612,873 | ||
SAKS INCORPORATED
SEGMENT INFORMATION
(Dollars In Thousands)
(UNAUDITED) Three Months Ended | ||||||||
| July 31, 2004 | August 2, 2003 | |||||||
Net Sales: | ||||||||
Saks Department Stores Group | $ | 770,350 | $ | 750,784 | ||||
Saks Fifth Avenue Enterprises | 580,007 | 486,320 | ||||||
| $ | 1,350,357 | $ | 1,237,104 | |||||
Operating Income: | ||||||||
Saks Department Stores Group | $ | 5,411 | $ | 12,515 | ||||
Saks Fifth Avenue Enterprises | (12,447 | ) | (22,112 | ) | ||||
Items not allocated | (12,614 | ) | (3,022 | ) | ||||
| $ | (19,650 | ) | $ | (12,619 | ) | |||
Depreciation and Amortization: | ||||||||
Saks Department Stores Group | $ | 29,121 | $ | 27,920 | ||||
Saks Fifth Avenue Enterprises | 24,244 | 23,290 | ||||||
Other | 547 | 1,208 | ||||||
| $ | 53,912 | $ | 52,418 | |||||
Total Assets: | ||||||||
Saks Department Stores Group | $ | 2,159,221 | $ | 2,103,728 | ||||
Saks Fifth Avenue Enterprises | 1,703,614 | 1,667,589 | ||||||
Other | 674,946 | 841,556 | ||||||
| $ | 4,537,781 | $ | 4,612,873 | |||||
SAKS INCORPORATED
SEGMENT INFORMATION
(Dollars In Thousands)
(UNAUDITED) Six Months Ended | ||||||||
| July 31, 2004 | August 2, 2003 | |||||||
Net Sales: | ||||||||
Saks Department Stores Group | $ | 1,628,191 | $ | 1,549,937 | ||||
Saks Fifth Avenue Enterprises | 1,262,359 | 1,069,027 | ||||||
| $ | 2,890,550 | $ | 2,618,964 | |||||
Operating Income: | ||||||||
Saks Department Stores Group | $ | 33,288 | $ | 37,027 | ||||
Saks Fifth Avenue Enterprises | 36,383 | 10,870 | ||||||
Items not allocated | (28,571 | ) | (13,984 | ) | ||||
| $ | 41,100 | $ | 33,913 | |||||
Depreciation and Amortization: | ||||||||
Saks Department Stores Group | $ | 58,133 | $ | 55,229 | ||||
Saks Fifth Avenue Enterprises | 48,263 | 46,460 | ||||||
Other | 1,094 | 2,993 | ||||||
| $ | 107,490 | $ | 104,682 | |||||
Total Assets: | ||||||||
Saks Department Stores Group | $ | 2,159,221 | $ | 2,103,728 | ||||
Saks Fifth Avenue Enterprises | 1,703,614 | 1,667,589 | ||||||
Other | 674,946 | 841,556 | ||||||
| $ | 4,537,781 | $ | 4,612,873 | |||||