SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

     For the quarterly period ended May 1, 2004

     For the transition period from              to             

Commission file number 000-26207

BELK, INC.

Registrant’s Telephone Number, including Area Code (704) 357-1000

Indicate by check ü whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 þ No o

Indicate by check ü whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes þ No o

At June 1, 2004, the registrant had issued and outstanding 50,942,382 shares of class A common stock and 1,111,264 shares of class B common stock.

BELK, INC.
Index to Form 10-Q

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This Report Contains Forward-Looking Statements

     Certain statements made in this report, and other written or oral statements made by or on behalf of the Company, may constitute “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and the Company’s future performance, as well as our expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. You can identify these forward-looking statements through our use of words such as “may,” “will,” “intend,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or other similar words. Forward-looking statements include information concerning possible or assumed future results from merchandising, marketing and advertising in our stores and through the internet, our ability to be competitive in the retail industry, our ability to execute profitability and efficiency strategies, our ability to execute our growth strategies, anticipated benefits from the consolidation of our operating divisions and distribution facilities, the expected benefit of our new systems and technology, the expected increase in our sales and revenues generated through our proprietary charge card program and anticipated benefits from the consolidation of our merchandising, marketing and merchandise planning and allocation function. These forward-looking statements are subject to certain risks and uncertainties that may cause our actual results to differ significantly from the results we discuss in such forward-looking statements. We believe that these forward-looking statements are reasonable. However, you should not place undue reliance on such statements.

     For a detailed description of the risks and uncertainties that might cause our results to differ from those we project in our forward-looking statements, we refer you to the section captioned “This Report Contains Forward-Looking Statements” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2004 that we filed with the Securities and Exchange Commission (“SEC”) on April 15, 2004. Our other filings with the SEC may contain additional information concerning the risks and uncertainties listed above, and other factors you may wish to consider. Upon request, we will provide copies of these filings to you free of charge.

     Our forward-looking statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, even if future events or new information may impact the validity of such statements.

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BELK, INC. AND SUBSIDIARIES

See accompanying notes to consolidated financial statements.

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BELK, INC. AND SUBSIDIARIES

See accompanying notes to consolidated financial statements.

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BELK, INC. AND SUBSIDIARIES

See accompanying notes to consolidated financial statements.

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BELK, INC. AND SUBSIDIARIES

See accompanying notes to consolidated financial statements.

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BELK, INC. AND SUBSIDIARIES

(1) Basis of Presentation

     The accompanying unaudited consolidated financial statements of Belk, Inc. and subsidiaries (the “Company”) have been prepared in accordance with the instructions to Form 10-Q promulgated by the Securities and Exchange Commission and should be read in conjunction with the Notes to Consolidated Financial Statements (pages 28-44) in our Annual Report on Form 10-K for the fiscal year ended January 31, 2004. In the opinion of management, this information is fairly presented and all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods have been included; however, certain items are included in these statements based on estimates for the entire year. Also, operating results in periods which exclude the Christmas season may not be indicative of the operating results that may be expected for the full fiscal year.

     Certain prior period amounts have been reclassified to conform with current year presentation.

(2) Comprehensive Income (Loss)

     The following table sets forth the computation of comprehensive income:

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BELK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

(3) Accumulated Other Comprehensive Loss

     The following table sets forth the components of accumulated other comprehensive loss:

(4) Accounts Receivable, Net

     Customer receivables arise primarily under open-end revolving credit accounts used to finance purchases of merchandise from the Company. These accounts have various billing and payment structures, including varying minimum payment levels. Installments of deferred payment accounts receivable maturing after one year are included in current assets in accordance with industry practice.

Accounts receivable, net consists of:

(5) Note Payable

     The Company’s note purchase agreement among the Company, The Belk Center, Inc., Enterprise Funding Corporation and Bank of America, as amended, (the “Note Payable”) expires on April 5, 2005 and, accordingly, the outstanding balance as of May 1, 2004 of $125 million has been included in current liabilities. However, the Note Payable may be renewed by mutual consent of the parties, and it is the Company’s intent to renew the facility and utilize it as long-term financing.

(6) Implementation of New Accounting Standards

     In December 2003, the Financial Accounting Standards Board (“FASB”) revised Statement of Financial Accounting Standards No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (“Revised Statement 132”). Revised Statement 132 revises employers’ required disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, “Employers’ Accounting for Pensions,” No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” and No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (“Statement 106”). Revised Statement 132 requires disclosures in addition to those in the original FASB Statement No. 132. The interim-period disclosures required by Revised Statement 132 are effective for interim periods beginning after December 15, 2003. The Company adopted the interim disclosure requirements set forth in Revised Statement 132 for the first quarter of fiscal year 2005.

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BELK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

(7) Pension and Postretirement Benefits

     The Company has a defined benefit pension plan covering substantially all of its employees. The benefits are based on years of service and the employee’s compensation. The Company also has a defined benefit health care plan that provides postretirement medical and life insurance benefits to certain retired full-time employees.

The components of net periodic benefit expense are as follows:

     The Company previously disclosed in its financial statements for the year ended January 31, 2004, that it did not expect to contribute to its pension plan in fiscal year 2005. As of May 1, 2004, there have been no contributions to the pension plan, and the Company does not anticipate any contributions for the remainder of the current fiscal year.

(8) Curtailment and Settlement of Defined Benefit Supplemental Executive Retirement Plan

     On April 1, 2004, certain participants elected to waive their benefits in the Company’s non-qualified defined benefit supplemental executive retirement plan in exchange for participation in the Company’s new non-qualified defined contribution 2004 Supplemental Executive Retirement Plan. This election resulted in the curtailment and settlement of their benefits in the defined benefit plan. The Company recognized a net charge of $1.9 million in selling, general and administrative expenses in the first quarter of fiscal year 2005 related to the curtailment and settlement.

(9) Derivative Financial Instruments

     During the first quarter of fiscal year 2005, the Company terminated two interest rate swaps with a total notional value of $50 million. The interest rate swaps had previously been dedesignated as cash flow hedges during the third quarter of fiscal year 2004.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Overview

     Belk, together with its subsidiaries, is the largest privately owned department store business in the United States, with total revenues of approximately $2.26 billion for the fiscal year ended January 31, 2004. The Company and its predecessors have been successfully operating department stores since 1888 by seeking to provide superior service and merchandise that meets customers’ needs for fashion, value and quality.

     The Company’s fiscal year ends on the Saturday closest to each January 31. All references to “fiscal year 2005” refer to the fiscal year ending January 29, 2005 and all references to “fiscal year 2004” refer to the period ended January 31, 2004.

     As of the end of its first quarter of fiscal year 2005, the Company operated 225 retail department stores in 13 states primarily in the southeastern United States. Belk stores seek to provide customers the convenience of one-stop shopping, with an appealing merchandise mix and extensive offerings of brands, styles, assortments and sizes. Belk stores sell top national brands of fashion apparel, shoes and accessories for women, men and children, as well as cosmetics, home furnishings, housewares, gifts and other types of quality merchandise. The Company also sells exclusive private label brands, which offer customers differentiated merchandise selections at better values. Larger Belk stores may include hair salons, spas, restaurants, optical centers and other amenities.

     Belk’s mission is to be the dominant department store in its markets by selling merchandise to customers that meets their needs for fashion, selection, value, quality and service. To achieve this mission, Belk’s business strategy includes five key elements: (1) a target customer focus; (2) focused merchandise assortments; (3) compelling sales promotions; (4) distinctive customer service; and (5) a winning store and market strategy.

     The Company operates retail department stores in the highly competitive retail apparel industry. The Company’s primary competitors are traditional department stores, mass merchandisers, national apparel chains, individual specialty apparel stores and direct merchant firms. In addition to intense competition, the retail industry has experienced downward sales pressure in recent years due primarily to national, regional and local economic conditions.

     Management believes that significant opportunities for growth exist in Belk markets where the Belk name and reputation are well known and in contiguous markets where Belk can distinguish its stores from the competition. Although the Company will continue to take advantage of prudent opportunities to expand into large markets, the Company will focus its expansion in medium-sized markets with store units in the 50,000 to 80,000 square-foot size range. One of the more significant challenges currently facing the Company’s management is to continue to identify new Belk markets and to effectively increase the Company’s net store selling square footage. In fiscal year 2004, the Company increased net store selling square footage by 343,700 square feet, or 2.4%, and plans to expand by an additional 733,800 square feet, or 5.0%, in fiscal year 2005.

     The Company focuses on four key indicators to assess performance and growth. These key indicators are: (1) comparable store sales, (2) gross profit rate, (3) expense rate, and (4) net square footage growth.

Results of Operations

     The following table sets forth, for the periods indicated, the percentage relationship to revenues of certain items in the Company’s condensed consolidated statements of income, as well as a period comparison of changes in comparable store net revenue.

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Comparison of the Three Months Ended May 1, 2004 and May 3, 2003

     Revenues. The Company’s revenues for the three months ended May 1, 2004 increased 9.4%, or $47.4 million, to $550.1 million from $502.7 million over the same period in fiscal year 2004. The increase is attributable to a 5.6% increase in revenues from comparable stores in addition to $19.2 million of additional sales from new stores.

     As disclosed in the Company’s Form 10-K, which was filed on April 15, 2004, comparable store sales no longer exclude replacement and expansion stores. Non-comparable stores will include only closing stores and new stores that have not reached the one-year anniversary of their opening prior to the beginning of the fiscal year in which they were constructed. The Company believes this revised measure is a more accurate indicator of existing store performance and is a common basis used by other retailers in the reporting of their results. The Company has restated the previous year’s comparable store net revenue decrease to conform with this new definition.

     Cost of goods sold. As a percentage of revenues, cost of goods sold decreased to 66.0% for the three months ended May 1, 2004, compared to 67.3% for the same period in fiscal year 2004. The decrease is primarily attributable to improved margin on inventory purchases and a 0.18% reduction in both occupancy and buying expenses as a percentage of revenues due to improved operating efficiencies.

     Selling, general and administrative expenses. As a percent of revenues, selling, general and administrative (“SG&A”) expenses decreased to 25.5% for the three months ended May 1, 2004 compared to 26.5% for the same period in fiscal year 2004. The decrease resulted primarily from a decrease in depreciation expense as a percentage of revenues of approximately 0.47%, a decrease in payroll as a percentage of revenues of 0.49% and a decrease in bad debt expense as a percentage of revenues of 0.31%. These decreases were partially offset by a $1.9 million charge recognized in the first quarter of fiscal year 2005 for the curtailment and settlement of the Company’s defined benefit supplemental executive retirement plan.

     Store closing costs. The Company incurred $0.4 million in asset impairment and store closing costs in the first quarter of fiscal year 2005 related to the post-closing real estate holding costs for three stores located in Lenoir, North Carolina; and Beaufort and Myrtle Beach, South Carolina.

     Net income. As a percentage of revenues, net income increased to 4.3% for the three months ended May 1, 2004, compared to 2.8% for the same period in fiscal year 2004. The increase was primarily due to the changes discussed above.

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Seasonality and Quarterly Fluctuations

     The retail business is highly seasonal with approximately one-third of annual revenues being generated in the fourth quarter, which includes the Christmas selling season. As a result, a disproportionate amount of the Company’s operating and net income is realized during the fourth quarter and significant variations can occur when comparing the Company’s financial condition between quarters.

Liquidity and Capital Resources

     The Company’s primary sources of liquidity are cash on hand, cash flow from operations, and borrowings under debt facilities. The Company’s debt facilities consist of a $250 million variable rate note, a $125 million ten-year variable rate bond facility, a $200 million revolving line of credit and a $126.8 million standby letter of credit.

     The $250 million variable rate note is governed by a note payable agreement that expires on April 5, 2005 and, accordingly, the outstanding balance as of May 1, 2004 of $125.0 million has been included in current liabilities. However, the note payable agreement is renewable by mutual consent of the parties, and the Company intends to renew the facility and utilize it as long-term financing.

     Net cash provided by operating activities decreased $50.9 million to $7.7 million for the three months ended May 1, 2004 from $58.6 million for the three months ended May 3, 2003. The decrease in cash provided by operating activities for the first quarter of fiscal year 2005 was principally due to higher levels of inventory purchases, attributable to the addition of new stores and higher comparable store sales during the first quarter of fiscal year 2005, and increased income tax payments, due to higher net income in fiscal 2004.

     Expenditures for property and equipment increased $10.2 million, or 50.1%, to $30.7 million for the three months ended May 1, 2004 from $20.4 million for the same time period in fiscal year 2004. The increase was principally due to the addition of four new stores and three replacement stores in the first quarter of fiscal year 2005, as compared to the addition of one new store during the same time period in fiscal year 2004.

     During the three months ended May 1, 2004, the Company opened seven new stores in Waco, Kerrville, and Sherman, Texas; Beaufort and Myrtle Beach, South Carolina; Mandeville, Louisiana; and Lenoir, North Carolina. The Texas and Louisiana stores are in new markets of the Company and the other new stores are replacements of stores in existing markets. The Company also completed the expansion of one store in Corinth, Mississippi during the first quarter of fiscal year 2005.

     Net cash used by financing activities increased $8.8 million to $26.5 million for the three months ended May 1, 2004 from $17.7 million for the three months ended May 3, 2003. This increase resulted from a higher dividend per share amount attributable to a special one-time dividend paid on fiscal 2004 net income.

     Management of the Company believes that cash flows from operations and the existing credit facilities will be sufficient to cover working capital needs, capital expenditures and debt service requirements for at least the next twelve months.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     During the first quarter of fiscal year 2005, the Company terminated two interest rate swaps with a total notional value of $50 million. The interest rate swaps had previously been dedesignated as cash flow hedges during the third quarter of fiscal year 2004.

     There have been no other material changes to the Company’s quantitative and qualitative market risk disclosures during the three months ended May 1, 2004.

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Item 4. Controls and Procedures

     Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

     As of the end of the period covered by this report, the Company has evaluated under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

     During the period covered by this report, there were no changes or corrective actions in the Company’s internal controls that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     In the ordinary course of business, the Company is subject to various legal proceedings and claims. The Company believes that the ultimate outcome of these matters will not have a material effect on its financial statements.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

     Not applicable

Item 3. Defaults Upon Senior Securities

     Not applicable

Item 4. Submission of Matters to a Vote of Security Holders

     The Company’s annual meeting of stockholders was held on May 26, 2004. The only matter submitted to a vote of the stockholders was the election of directors. At the meeting, in person or by proxy, there were stockholders holding an aggregate of 50,703,070 shares of common stock. There were no broker-non votes with respect to any proposal. The voting results were as follows:

     Election of Directors

Accordingly, John R. Belk, John A. Kuhne and Elizabeth Valk Long were elected as directors for terms expiring in 2007. Thomas M. Belk, Jr., Sarah Belk Gambrell and J. Kirk Glenn, Jr. continue to serve as directors for terms expiring in 2005, and H.W. McKay Belk, B. Frank Matthews, II and Thomas C. Nelson continue to serve as directors for terms expiring in 2006.

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Item 5. Other Information

     Not applicable

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1		Form of Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to pages B-24 to B-33 of the Company’s Registration Statement on Form S-4, filed on March 5, 1998 (File No. 333-42935)).
3.2		Form of Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2004).
4.1		Articles Fourth, Fifth and Seventh of the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to pages B-24 to B-33 of the Company’s Registration Statement on Form S-4, filed on March 5, 1998 (File No. 333-42935)).
4.2		Articles I and IV of the Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2004).
10.1		Amendment Number 7 to Note Purchase Agreement, dated as of April 6, 2004, among Belk, Inc., The Belk Center, Inc., Enterprise Funding Corporation, and Bank of America, N.A., amending that certain Note Purchase Agreement dated as of May 3, 1999.
10.2		Consulting Services Agreement dated as of May 26, 2004 by and between Belk, Inc. and John M. Belk.
31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

     A current report on form 8-K furnished on March 10, 2004, contained disclosure under Item 7, “Financial Statements, Pro Forma Financial Information and Exhibits”, and Item 9, “Regulation FD Disclosure.”

     A current report on form 8-K filed on March 11, 2004, contained disclosure under Item 9, “Regulation FD Disclosure.”

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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