Saks 8-K Entry into a Material Definitive Agreement

Exhibit 99.3

Unaudited Pro Forma Consolidated Statement of Income

(In Thousands, except per share amounts)

				Adjustments															Pro Forma Year Ended January 28, 2006 (Unaudited)
	Year Ended January 28, 2006			Remove Historical Parisian Amounts (1)			Remove Historical NDSG Amounts (2)			Remove Historical Proffitt’s Amounts (3)			TSA Revenue (4), (5), (6)			Total Pro Forma Adjustments
NET SALES	$	5,953,352		$	(723,435	)	$	(2,168,237	)	$	(162,555	)				$	(3,054,227	)	$	2,899,125
Cost of sales (excluding depreciation and amortization)		3,742,459			(459,030	)		(1,345,961	)		(103,489	)					(1,908,480	)		1,833,979
Gross margin		2,210,893			(264,405	)		(822,276	)		(59,066	)					(1,145,747	)		1,065,146
Selling, general and administrative expenses		1,548,747			(188,195	)		(534,537	)		(41,080	)	$	(57,437	)		(821,249	)		727,498
Other operating expenses
Property and equipment rentals		190,471			(26,765	)		(57,790	)		(3,127	)					(87,682	)		102,789
Depreciation and amortization		210,115			(23,308	)		(49,314	)		(6,063	)					(78,685	)		131,430
Taxes other than income taxes		160,723			(15,982	)		(55,323	)		(4,016	)					(75,321	)		85,402
Store pre-opening costs		4,112			(1,357	)		(1,528	)								(2,885	)		1,227
Impairments and dispositions		(105,361	)		(58,093	)		(807	)		155,525						96,625			(8,736	)
OPERATING INCOME (LOSS)		202,086			49,295			(122,977	)		(160,305	)		57,437			(176,550	)		25,536
Interest expense		(85,778	)		147			8,455									8,602			(77,176	)
Loss on extinguishment of debt		(29,375	)		—			—									—			(29,375	)
Other income, net		7,705			—			—									—			7,705
INCOME (LOSS) BEFORE INCOME TAXES		94,638			49,442			(114,522	)		(160,305	)		57,437			(167,948	)		(73,310	)
Provision (benefit) for income taxes		72,290			2,251			(46,598	)		(82,361	)		22,772			(103,936	)		(31,646	)
NET INCOME (LOSS)	$	22,348		$	47,191		$	(67,924	)	$	(77,944	)	$	34,665		$	(64,012	)	$	(41,664	)
Earnings (loss) per common share:
Basic earnings (loss) per common share	$	0.16																	$	(0.30	)
Diluted earnings (loss) per common share	$	0.16																	$	(0.30	)
Weighted average common shares:
Basic		138,348																		138,348
Diluted		143,571																		138,348

Unaudited Pro Forma Consolidated Statement of Income

(In Thousands, except per share amounts)

				Adjustments											Pro Forma Six Months Ended July 29, 2006 (Unaudited)
	Six Months Ended July 29, 2006 (Unaudited)			Remove Historical Parisian Amounts (1)			Remove Historical NDSG Amounts (2)			TSA Revenue (4), (5), (6)		Total Pro Forma Adjustments
NET SALES	$	1,800,409		$	(330,957	)	$	(181,725	)			$	(512,682	)	$	1,287,727
Cost of sales (excluding depreciation and amortization)		1,143,591			(210,458	)		(113,256	)				(323,714	)		819,877
Gross margin		656,818			(120,499	)		(68,469	)		—		(188,968	)		467,850
Selling, general and administrative expenses		510,622			(94,092	)		(48,039	)				(142,131	)		368,491
Other operating expenses		198,862			(33,257	)		(11,260	)				(44,517	)		154,345
Store pre-opening costs		504			(215	)							(215	)		289
Impairments and dispositions		(199,454	)		(241	)		205,147					204,906			5,452
OPERATING INCOME (LOSS)		146,284			7,306			(214,317	)		—		(207,011	)		(60,727	)
Interest expense		(25,781	)		138								138			(25,643	)
Gain on extinguishment of debt		7											—			7
Other income, net		15,751											—			15,751
INCOME (LOSS) BEFORE INCOME TAXES		136,261			7,444			(214,317	)		—		(206,873	)		(70,612	)
Provision (benefit) for income taxes		110,218			2,672			(132,362	)				(129,690	)		(19,472	)
NET INCOME (LOSS)	$	26,043		$	4,772		$	(81,955	)	$	—	$	(77,183	)	$	(51,140	)
Income (loss) per common share:
Basic earnings (loss) per common share	$	0.19													$	(0.38	)
Diluted earnings (loss) per common share	$	0.19													$	(0.38	)
Weighted average common shares:
Basic		134,741														134,741
Diluted		136,593														134,741

Saks Incorporated

Notes to Unaudited Pro Forma Consolidated Statements of Income

(1) To reflect the removal of the historical operating contribution of the Parisian stores sold, in addition to the distribution, administrative, merchandising and store operations associated with the Parisian’s divisional operating and distribution facilities. A Parisian goodwill impairment charge of $48,542 was recorded during the fourth quarter of 2005. For FY 2005, the effective income rate differs from the statutory federal income tax rate due to the effect of non-deductible goodwill.

(2) Effective March 6, 2006, the Company sold NDSG to Bon-Ton. A non-recurring pre-tax gain of $205,147 from the sale was recognized in the historical consolidated statements of income during the first quarter of 2006. The unaudited pro forma consolidated statement of income eliminates both the results of operations of NDSG from January 30, 2005 through March 6, 2006 and the non-recurring gain recognized on the sale since such gain is non-recurring and directly attributable to the transaction for which the pro forma financial statements are prepared. For the six-month period ended July 29, 2006, the effective income rate differs from the statutory federal income tax rate due to the effect of non-deductible goodwill.

(3) Effective July 2, 2005, the Company sold Proffitt’s to Belk. A non-recurring pre-tax gain of $155,525 from the sale was recognized in the historical consolidated statements of income during the second quarter of 2005. The unaudited pro forma consolidated statement of income eliminates both the results of operations of Proffitt’s from January 30, 2005 through July 2, 2005 and the non-recurring gain recognized on the sale since such gain is non-recurring and directly attributable to the transaction for which the pro forma financial statements are prepared. For FY 2005, the effective income rate differs from the statutory federal income tax rate due to the effect of non-deductible goodwill.

(4) To reflect the revenue associated with the Parisian TSA, included as part of the Parisian Agreement, whereby Belk will compensate the Company for providing certain back-office services, for varying periods as outlined in the agreement. The initial terms of the Parisian TSA do not exceed twelve months, and thus, there is no Parisian TSA revenue shown as a pro forma adjustment for the six month period ended July 29, 2006. Parisian TSA revenue for FY 2005 totaled $6,806.

(5) To reflect the revenue associated with the NDSG TSA, included as part of the NDSG Agreement, whereby Bon-Ton will compensate the Company for providing certain back-office services, for varying periods as outlined in the agreement. The initial terms of the NDSG TSA do not exceed twelve months, and thus, there is no NDSG TSA revenue shown as a pro forma adjustment for the six month period ended July 29, 2006. NDSG TSA revenue for FY 2005 totaled $40,557.

(6) To reflect the revenue associated with the Proffitt’s TSA, included as part of the Proffitt’s Agreement, whereby Belk will compensate the Company for providing certain back-office services, for varying periods as outlined in the Agreement. The initial terms of the Proffitt’s TSA do not exceed twelve months, and thus, there is no Proffitt’s TSA revenue shown as a pro forma adjustment for the six-month period ended July 29, 2006. Proffitt’s TSA revenue for FY 2005 totaled $10,074.

Unaudited Pro Forma Consolidated Balance Sheet

(In Thousands)

	July 29, 2006 (Unaudited)		Pro Forma Adjustments			Pro Forma July 29, 2006 (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	500,914	$	(262,684	)(1)	$	238,230
Merchandise inventories		641,784					641,784
Other current assets		179,184					179,184
Deferred income taxes, net		33,317					33,317
Current assets-held for sale		177,343		(177,343	)(2)		—
TOTAL CURRENT ASSETS		1,532,542		(440,027	)		1,092,515
PROPERTY AND EQUIPMENT, NET		1,109,412					1,109,412
PROPERTY AND EQUIPMENT, NET - HELD FOR SALE		226,320		(226,320	)(2)		—
GOODWILL AND INTANGIBLES, NET		338					338
GOODWILL AND INTANGIBLES, NET - HELD FOR SALE		4,030		(4,030	)(2)		—
DEFERRED INCOME TAXES, NET		157,648					157,648
OTHER ASSETS		35,644					35,644
OTHER ASSETS - HELD FOR SALE		1,032		(1,032	)(2)		—
TOTAL ASSETS	$	3,066,966	$	(671,409	)	$	2,395,557
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	190,782				$	190,782
Accrued expenses and other current liabilities		368,462	$	(403	) (2)		368,059
Current portion of long-term debt		7,106					7,106
Current liabilities - held for sale		78,292		(78,292	)(2)		—
TOTAL CURRENT LIABILITIES		644,642		(78,695	)		565,947
LONG-TERM DEBT		683,180					683,180
LONG-TERM DEBT - HELD FOR SALE		1,638		(1,638	)(2)		—
OTHER LONG-TERM LIABILITIES		144,570		(18,904	)(2)		125,666
OTHER LONG-TERM LIABILITIES - HELD FOR SALE		26,729		(26,729	)(2)		—
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY		1,566,207		(545,443	)(3)		1,020,764
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,066,966	$	(671,409	)	$	2,395,557

Saks Incorporated

Notes to Unaudited Pro Forma Consolidated Balance Sheet

(1) To reflect net cash proceeds from the Parisian transaction as follows:

Cash received for sale of Parisian	$	285,000
Cash received for adjustment to working capital		15,352
Cash received for preimium on receivables and other items		2,367
Cash paid for transaction expenses		(5,000	)
Cash paid for taxes		(10,403	)
Net cash received		287,316
Special cash dividend		(550,000	)
Net cash	$	(262,684	)

(2) To reflect the removal of the assets and liabilities associated with the Parisian stores sold, in addition to the assets and liabilities associated with the administrative, merchandising and store operations associated with Parisian’s divisional operating facility.

(3) To reflect an increase for the after-tax net gain on the transaction and the special cash dividend of $550,000.