Back to GetFilings.com

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
        For Fiscal Year Ended: February 2, 2002 or

[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
        For the transition period from _________________ to ________________

Commission File Number: 1-13113

Saks Incorporated
(Exact Name of Registrant as Specified in Its Charter)

(205) 940-4000
(Registrant's Telephone Number

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

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

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and 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 contained, to the best of the Registrant's knowledge, in definitive proxy or information statement incorporated by reference in Part II of this Form 10-K or any amendment to this Form 10-K. (   )

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 15, 2002 was approximately $1,848,608,687.

As of March 15, 2002, the number of shares of the Registrant's Common Stock outstanding was 142,464,048.

DOCUMENTS INCORPORATED BY REFERENCE

The Exhibit Index is on page 21 of this document.

TABLE OF CONTENTS

2

PART I

Saks Incorporated (formerly Proffitt's, Inc.) was founded in 1919. The Company and its subsidiaries (together the "Company") operate two business segments, Saks Department Store Group ("SDSG") and Saks Fifth Avenue Enterprises ("SFAE").

SDSG currently operates 243 department stores in 24 states under the following nameplates: Parisian (41 stores), Proffitt's (26 stores), McRae's (29 stores), Younkers (50 stores), Herberger's (40 stores), Carson Pirie Scott (33 stores), Bergner's (13 stores), and Boston Store (11 stores). SDSG 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. SDSG stores are promoted as "the best place to shop in your hometown."

SFAE includes Saks Fifth Avenue ("SFA") luxury department stores (61 stores in 24 states) and Off 5th Saks Fifth Avenue Outlet ("Off 5th") (52 stores in 23 states). Saks Fifth Avenue stores are intended to offer customers "the most inviting luxury experience." The locations are principally free-standing stores in exclusive shopping destinations or anchor stores in upscale regional malls, and the stores typically offer a wide assortment of distinctive luxury fashion apparel, shoes, accessories, jewelry, cosmetics, and gifts. Customers may also purchase certain SFA products by catalog or online at saks.com. Off 5th is intended to be the premier luxury off-price retailer in the United States, where customers can find SFA merchandise for a "gem of a deal." Off 5th stores are primarily located in upscale mixed-use and off-price centers and offer luxury apparel, shoes, accessories, cosmetics, and decorative home furnishings, targeting the value-conscious customer.

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

In addition to acquisitions, the Company historically has grown through opening new stores and by expanding and renovating selected stores. In 2001, the Company opened three SDSG stores, two SFA stores, and three Off 5th stores. In addition, the Company opened its first licensed store in Riyadh, Saudi Arabia. The Company has announced plans to open five SDSG stores, one SFA store, and one Off 5th store in 2002.

3

The Company also may sell or close stores from time-to-time. In March 2001, the Company sold nine SDSG store locations and related assets to The May Department Stores Company. The Company also closed two SDSG stores and three SFA stores during the year. The Company closed one additional SDSG store in March 2002.

Merchandising, sales promotion, and 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 largely centralized.

In both the SDSG and SFA stores, the Company believes that its 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.

SDSG stores attempt to consistently offer a wide selection of unique and limited distribution merchandise as well as competitively priced national brands. Key brands featured in the Company's SDSG 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 these brands, most Parisian stores carry brands such as 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, which are typically carried only at specialty stores. SDSG differentiates its offerings from its competitors through exclusive merchandise from its core vendors, assortments from unique and emerging suppliers, and proprietary brands.

Saks Fifth Avenue stores carry luxury merchandise from both core vendors and new and emerging designers. SFA has key relationships with the leading American and European fashion houses, including Giorgio Armani, Chanel, Dolce and Gabbana, Salvatore Ferragamo, Gucci, Donna Karan, Calvin Klein, Ralph Lauren, Judith Leiber, Prada, Escada, Carolina Herrera, Oscar de la Renta, St. John, Yves St. Laurent, J.P. Tod, Ermenegildo Zegna, and Max Mara.

The Company has developed a knowledge of each of its trade areas and customer bases for its SDSG, 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 characteristics of its trade areas and customer bases and to the lifestyle needs of its local customers.

4

Certain departments in the Company's stores are leased to independent companies in order to provide high quality service and merchandise where specialization, focus, and expertise are critical. The leased departments vary by store to complement the Company's own merchandising departments. The principal leased department in the SDSG stores is fine jewelry, and the principal leased departments in the SFA stores are furs and certain designer handbags. 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 2, 2002, the Company's percentages of owned sales (exclusive of sales generated by leased departments) by major merchandise category were as follows:

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 maintains 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 that facilitates re-order and replenishment of merchandise. The Company utilizes electronic data interchange ("EDI") technology with its top vendors that 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 incoming cartons of merchandise to the proper processing areas. Many types of merchandise are 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 supplier's bar code and transmit the necessary information to a computer to record merchandise on hand.

5

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

The Company's information systems provide information deemed 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 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 an attempt 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 supplier's warehouse and that which was ordered from the supplier. 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.

For the SDSG stores, advertising campaigns include fashion and image advertising, price promotions, and special events. The Company uses a multi-media marketing approach for the SDSG 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 advertising. To promote its image as the primary source of luxury goods in its trade areas, SFA sponsors fashion shows and in-store special events highlighting the 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 SDSG and SFAE.

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

6

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

The Company believes that proprietary credit card holders shop more frequently with the Company and purchase more merchandise than do customers who pay with cash or third-party credit cards. 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 NBGL's proprietary credit cards by, among other things, providing incentives to sales associates to open new credit accounts, which generally can be opened while a customer is visiting one of the Company's stores. Customers who open accounts are entitled to discounts on initial and, when offered, 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.

NBGL has approximately 5.0 million credit accounts that have been active within the prior twelve months and approximately 43% of the Company's 2001 sales were transacted on NBGL's proprietary credit cards.

NBGL'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 NBGL's credit card operations.

The Company owns many 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 terms of these registrations are generally ten years, and they are renewable for additional ten-year periods indefinitely so long as the marks are 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 that would have a material adverse effect on the Company's consolidated financial position, results of operations, or liquidity.

7

The Company's Saks Fifth Avenue store located on Fifth Avenue in New York City accounted for approximately 7% of total Company owned sales in 2001 and plays a significant role in creating awareness for the Saks Fifth Avenue brand name.

The Company believes that exceptional customer service contributes to increased store visits and purchases by its customers.

SDSG stores are intended to be customer-friendly and easy to shop. SDSG stores generally offer two types of service. One-on-one, personalized service is typically offered in nine areas of the stores -- cosmetics, shoes, women's better sportswear, women's special size sportswear, men's tailored clothing, men's better sportswear, intimate apparel, china, and furniture. These departments frequently offer clienteling programs and dedicated checkout facilities and are staffed by associates with extensive product training. Fast, friendly, and efficient service is generally offered in the remaining areas of the stores. These areas frequently feature innovative, centralized customer service centers and are staffed with friendly, knowledgeable sales associates delivering efficient transactions.

At Saks Fifth Avenue, the Company's goal is to deliver an inviting, customer-focused luxury shopping experience. Compensation for sales associates is, in part, based upon customer satisfaction measures. Sales associates undergo service, selling, and product knowledge training. Sales associates are encouraged to maintain customer records, send personalized thank-you notes, and routinely communicate with customers to advise them of new merchandise offerings and special promotions.

At both SDSG and SFAE, superior customer service is encouraged through the development and monitoring of sales/productivity goals and through specific award and recognition programs.

The Company's business, like that of many retailers, is subject to seasonal influences, with a significant portion of its sales and net income realized during the fourth fiscal 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.

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 a high level of customer service and a broad selection of quality fashion merchandise at appropriate prices in prime store locations, provides a competitive advantage.

8

As of March 15, 2002, the Company employed approximately 53,000 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 170 of the Company's associates are covered by collective bargaining agreements. The Company considers its relations with its associates to be good.

The Company currently operates six distribution facilities as follows:

The Company's principal administrative offices are as follows:

The following table sets forth information about the Company's stores as of March 15, 2002. The majority of the Company's stores are leased. Store leases generally require the Company to pay a fixed minimum rent and a variable amount based on a percentage of annual sales at that location. 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 20 years. Off 5th leases typically have shorter terms.

9

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.

None.

10

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

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.

Stephen I. Sadove joined the Company in January 2002 as Vice Chairman. Mr. Sadove served as Senior Vice President of Bristol-Myers Squibb and President of Bristol-Myers Squibb Worldwide Beauty Care from 1996 until January 2002. From 1991 until 1996, Mr. Sadove held various other executive positions with Bristol Myers Squibb. From 1975 until 1991, Mr. Sadove held various positions of increasing responsibility with General Foods USA.

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.

11

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.

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.

12

The information set forth under the caption "Market Information," appearing on page 66 of the Saks Incorporated Annual Report to Shareholders for the Fiscal Year Ended February 2, 2002 (the "Annual Report"), is incorporated herein by reference.

The information set forth under the caption "Five-Year Financial Summary" appearing on page 20 of the Annual Report is incorporated herein by reference.

The information set forth under the caption "Management's Discussion and Analysis" appearing on pages 21 through 32 of the Annual Report is incorporated herein by reference.

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, borrowings, and derivative financial instrument activities, which are described in Notes 3, 6, and 2 to the Consolidated Financial Statements appearing on pages 40, 45, and 39 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 2, 2002, 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.

The consolidated Financial Statements and the Report of Independent Accountants appearing on pages 33 through 65 of the Annual Report are incorporated herein by reference.

13

None.

14

The information set forth under the caption "Election of Directors" contained on pages 5 through 7 of the Saks Incorporated Proxy Statement dated April 30, 2002 (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 20 of the Proxy Statement, with respect to Director and Executive Officer compliance with Section 16(a), is incorporated herein by reference.

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

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.

The information set forth under the captions "Further Information Concerning Directors" and "Certain Transactions" contained on pages 7 and 8 and 13 respectively, of the Proxy Statement with respect to certain relationships and related transactions is incorporated herein by reference.

15

(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.

(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.

16

(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 33 through 65 of the Saks Incorporated Annual Report to Shareholders for the Fiscal Year Ended February 2, 2002, are incorporated by reference in Item 8:

• Consolidated Balance Sheets as of February 2, 2002 and February 3, 2001
• Consolidated Statements of Income for Fiscal Years Ended February 2, 2002, February 3, 2001, and January 29, 2000
• Consolidated Statements of Changes in Shareholders' Equity for Fiscal Years Ended February 2, 2002, February 3, 2001, and January 29, 2000
• Consolidated Statements of Cash Flows for Fiscal Years Ended February 2, 2002, February 3, 2001, and January 29, 2000
• Notes to Consolidated Financial Statements

(2) Schedules to Financial Statements

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.

17

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.

18

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.

20

* Filed as a current year Exhibit.