Saks announces cost-reduction plan

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Saks announces cost-reduction plan

January 16, 2009

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New York--In response to the deteriorating economic environment, Saks Inc. today announced a series of expense, capital spending and inventory receipt reductions to better position the company for the future.

According to the company, a major component of the cost reductions consist of a reduction in force and changes to compensation and employee benefit plans, including:

--Reductions of approximately 1,100 corporate support and store positions, or approximately 9 percent of the total company workforce (in addition to the previously announced reduction in force related to discontinuation of the Club Libby Lu business).
--The elimination of 2009 merit-based wage increases for the entire workforce.
--Suspension of 401(k) plan company-matching contributions for a minimum of one year.
--Suspension of future benefit accruals for the limited number of associates remaining in the company's pension plan.

The majority of affected associates will be notified shortly, and most position eliminations will be effective by Jan. 30, 2009. Eligible associates will be offered appropriate severance packages.

Changes in the benefit plans will in general be effective for the 2009 plan year.

Saks also has identified additional non-employee-based cost reductions, primarily in the areas of procurement, information technology, distribution and logistics, travel and marketing.

In addition to cost reductions, the company has lowered its planned capital expenditures for fiscal 2009 to approximately $60 million, a decrease of more than 50 percent from the projected 2008 level. The 2009 capital expenditures primarily will be related to the completion of the women's designer floor in the New York City flagship store and certain renovation projects underway in other stores, as well as investments in routine store maintenance and corporate infrastructure projects.

The company also has targeted an approximate 20 percent decrease in inventory receipts for 2009.

"The sustained downturn in the economy and the decline in luxury consumer demand necessitates that we take appropriate and decisive measures to position the company for this new operating environment," Saks Inc. Chairman and Chief Executive Officer Steve Sadove said in a media release. "The cost and capital expenditure reductions are structured to minimize the impact on our customers, and the reduction in inventory receipts is reflective of the decrease in consumer demand. Each of our actions will benefit 2009 and should better position the company for the future, when economic conditions improve. We continue, however, to focus on and make targeted investments in our strategic merchandising, marketing and selling initiatives."

Saks Inc. currently operates 53 Saks Fifth Avenue stores, 51 Saks OFF 5TH stores and Saks.com.

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