Department Stores

Saks Holdings, Inc.

The Company

Saks <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SKS)") else Response.Write("(NYSE: SKS)") end if %> was founded in 1924. Today, the company comprises 40 full-line stores, 8 resort stores and 3 main street stores led by the company's landmark flagship on New York's Fifth Avenue. In addition, Saks also operates 34 "Off 5th" discount stores and "Folio," a separate direct mail business. Saks completed its initial public offering on May 22, 1996. The company's share price has trended down since the end of 1996.

On June 5, the company announced that it would probably have to recognize a tax loss carry forward of $761 million in its fourth quarter. If recognized it is estimated that the one time accounting event would increase earnings in the fourth quarter by $275 million, in addition to recording an asset (deferred tax benefit) that will act to increase assets, hence increasing shareholder's equity in turn. This change will affect Saks' solvency ratios (debt-to-equity among others), and may prompt a re-evaluation of the company's prospects as it will still not have to pay taxes for a number of years to come despite its transition into positive earnings territory.

Latest Financials

For the first quarter of fiscal 1997, Saks reported its net income before extraordinary charges was $12.6 million, or $0.20 per share, an increase of 120% over pro forma net income of $5.7 million, or $0.09 per share for the same period in fiscal 1996. Saks recorded an extraordinary charge of $3.4 million or $0.06 per share related to its repurchase of high-cost debt. Saks also reported operating income of $26.4 million, an increase of $4.6 million or 21% from fiscal 1996 operating income, before management fees, of $21.8 million. Total sales for the first quarter were $520.4 million, a 12% increase compared to $464 million for the same period last year, and comparable sales rose 2.6%.

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