10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: May 2, 2009

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)

TENNESSEE	62-0331040
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

12 East 49th Street New York, New York	10017
(Address of principal executive offices)	(Zip Code)

212-940-5305

(Registrant’s telephone number, including area code)

Indicate by check mark 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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule-405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨ Smaller Reporting Company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 15, 2009, the number of shares of the Registrant’s Common Stock outstanding was 144,375,155.

TABLE OF CONTENTS

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets – May 2, 2009, January 31, 2009 and May 3, 2008	3
	Condensed Consolidated Statements of Income – Three Months Ended May 2, 2009 and May 3, 2008	4
	Condensed Consolidated Statements of Cash Flows – Three Months Ended May 2, 2009 and May 3, 2008	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	40
SIGNATURE		42

2

SAKS INCORPORATED and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands)

(Unaudited)

	May 2, 2009		January 31, 2009		May 3, 2008
			Revised		Revised
ASSETS
Current Assets
Cash and cash equivalents	$	10,252	$	10,273	$	124,523
Merchandise inventories		779,474		728,841		841,068
Other current assets		97,977		105,350		141,677
Deferred income taxes, net		26,721		29,916		41,428
Total current assets		914,424		874,380		1,148,696
Property and Equipment, net		1,042,960		1,058,393		1,082,597
Deferred Income Taxes, net		200,289		194,956		77,640
Other Assets		19,684		19,947		49,643
TOTAL ASSETS	$	2,177,357	$	2,147,676	$	2,358,576
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	140,252	$	90,208	$	204,382
Accrued expenses and other current liabilities		217,429		274,141		255,254
Dividend payable		932		1,406		1,475
Current portion of long-term debt		4,686		4,673		88,980
Total current liabilities		363,299		370,428		550,091
Long-Term Debt		631,940		593,103		434,686
Other Long-Term Liabilities		193,858		193,560		162,543
Total liabilities		1,189,097		1,157,091		1,147,320
Commitments and Contingencies		—		—		—
Shareholders’ Equity		988,260		990,585		1,211,256
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,177,357	$	2,147,676	$	2,358,576

See notes to condensed consolidated financial statements.

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SAKS INCORPORATED and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	May 2, 2009			May 3, 2008
				Revised
NET SALES	$	621,266		$	850,041
Cost of sales (excluding depreciation and amortization)		382,858			527,198
Gross margin		238,408			322,843
Selling, general and administrative expenses		155,434			199,387
Other operating expenses:
Property and equipment rentals		26,471			26,272
Depreciation and amortization		33,340			31,865
Taxes other than income taxes		20,159			22,446
Store pre-opening costs		627			241
Impairments and dispositions		186			18
OPERATING INCOME		2,191			42,614
Interest expense		(10,435	)		(11,626	)
Other income, net		97			947
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(8,147	)		31,935
Provision (benefit) for income taxes		(3,266	)		12,980
INCOME (LOSS) FROM CONTINUING OPERATIONS		(4,881	)		18,955
DISCONTINUED OPERATIONS:
Loss from discontinued operations		(363	)		(2,497	)
Benefit for income taxes		(127	)		(862	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS		(236	)		(1,635	)
NET INCOME (LOSS)	$	(5,117	)	$	17,320
Per-Share amounts - Basic
Income (loss) from continuing operations	$	(0.04	)	$	0.13
Loss from discontinued operations	$	(0.00	)	$	(0.01	)
Net Income (loss) per share	$	(0.04	)	$	0.12
Per-Share Amounts - Diluted
Income (loss) from continuing operations	$	(0.04	)	$	0.13
Loss from discontinued operations	$	(0.00	)	$	(0.01	)
Net Income (loss) per share	$	(0.04	)	$	0.12
Weighted average common shares:
Basic		138,297			139,904
Diluted		138,297			140,830

See notes to condensed consolidated financial statements.

4

SAKS INCORPORATED and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

(Unaudited)

	Three Months Ended
	May 2, 2009			May 3, 2008
				Revised
Operating Activities:
Net Income (Loss)	$	(5,117	)	$	17,320
Loss from discontinued operations		(236	)		(1,635	)
Income (loss) from continuing operations		(4,881	)		18,955
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		33,340			31,865
Impairments and dispositions		186			18
Equity compensation		4,171			3,489
Amortization of discount on convertible senior notes		1,769			1,664
Deferred income taxes		(3,330	)		9,844
Change in operating assets and liabilities, net		(26,349	)		(2,530	)
Net Cash Provided By Operating Activities - Continuing Operations		4,906			63,305
Net Cash Provided By (Used In) Operating Activities - Discontinued Operations		(13,596	)		702
Net Cash Provided By (Used In) Operating Activities		(8,690	)		64,007
Investing Activities:
Purchases of property and equipment		(27,956	)		(24,267	)
Proceeds from the sale of property and equipment		8			14
Net Cash Used In Investing Activities - Continuing Operations		(27,948	)		(24,253	)
Net Cash Used In Investing Activities - Discontinued Operations		—			(701	)
Net Cash Used In Investing Activities		(27,948	)		(24,954	)
Financing Activities:
Proceeds from revolving credit facility		38,325			—
Payments on long-term debt and capital lease obligations		(1,237	)		(1,498	)
Cash dividends paid		(471	)		(1,139	)
Purchases and retirements of common stock		—			(14,765	)
Proceeds from the issuance of common stock		—			1,710
Net Cash Provided By (Used In) Financing Activities - Continuing Operations		36,617			(15,692	)
Net Cash Used In Financing Activities - Discontinued Operations		—			—
Net Cash Provided by (Used In) Financing Activities		36,617			(15,692	)
Increase (decrease) in Cash and Cash Equivalents		(21	)		23,361
Cash and cash equivalents at beginning of period		10,273			101,162
Cash and cash equivalents at end of period	$	10,252		$	124,523

See notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

NOTE 1 – GENERAL

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in compliance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Operating results for the three months ended May 2, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending January 30, 2010 (fiscal year 2009). The financial statements include the accounts of Saks Incorporated and its subsidiaries (collectively, the “Company”). All intercompany amounts and transactions have been eliminated.

The accompanying condensed consolidated balance sheet at January 31, 2009 has been derived from the audited financial statements at that date but does not include all disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s 2008 Annual Report on Form 10-K for the fiscal year ended January 31, 2009.

The Company retrospectively adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) Accounting Principles Board (“APB”) No. 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”) on February 1, 2009, which requires an allocation of convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component) (see Note 4). Certain prior period amounts in the accompanying Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income, and Condensed Consolidated Statements of Cash Flows have been revised to reflect the impact of the Company’s adoption of FSP APB 14-1.

The Company’s operations consist of Saks Fifth Avenue (“SFA”), Saks Fifth Avenue OFF 5^TH, and SFA’s e-commerce operations. Previously, the Company also operated Club Libby Lu (“CLL”), the operations of which were discontinued in January 2009. The operations of CLL are presented as discontinued operations in the Condensed Consolidated Statements of Income and the Condensed Consolidated Statements of Cash Flows for the current and prior year periods.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Net Sales – Net Sales include sales of merchandise (net of returns and exclusive of sales taxes), commissions from leased departments, shipping and handling revenues related to merchandise sold and breakage income from unredeemed gift cards. Commissions from leased departments were $6,191 and $7,603 for the three months ended May 2, 2009 and May 3, 2008, respectively. Leased department sales were $47,616 and $55,563 for the three months ended May 2, 2009 and May 3, 2008, respectively, and were excluded from Net Sales in the accompanying Condensed Consolidated Statements of Income.

Cash and Cash Equivalents – Cash and cash equivalents primarily consist of cash on hand in the stores, deposits with banks, and investments with banks and financial institutions that have original maturities of three months or less. Cash equivalents are stated at cost, which approximates fair value. Cash equivalents totaled $240 and $107,014 at May 2, 2009 and May 3, 2008, respectively, primarily consisting of money market funds, demand and time deposits. Income earned on cash equivalents was $38 and $883 for the three-month periods ending May 2, 2009 and May 3, 2008, respectively, and is reflected in Other Income in the accompanying Condensed Consolidated Statements of Income.

Inventory – Merchandise inventories are stated at the lower of cost or market and include freight, buying and distribution costs. The Company takes markdowns related to slow moving inventory, ensuring the appropriate inventory valuation. The Company receives vendor provided support in different forms. When the vendor provides support for inventory markdowns, the Company records the support as a reduction to cost of sales. Such support is recorded in the period that the corresponding markdowns are taken. When the Company receives inventory-related support that is not designated for markdowns, the Company includes this support as a reduction in the cost of purchases.

Impairments and Dispositions – The Company continuously evaluates its real estate portfolio and closes underproductive stores in the normal course of business as leases expire or as other circumstances dictate. The Company also performs an asset impairment analysis at each fiscal year end. The Company incurred net charges primarily related to asset dispositions in the normal course of business of $186 and $18 for the three month period ended May 2, 2009 and May 3, 2008, respectively. Asset dispositions are included in Impairments and Dispositions in the accompanying Condensed Consolidated Statements of Income.

Segment Reporting – The Company derives all of its revenue from the sale of luxury merchandise. Accordingly, the Company has identified the operation of its retail stores and e-commerce business as the Company’s one reportable segment.

Income Taxes – The effective income tax rate from continuing operations for the three-month period ended May 2, 2009 was 40.1%, as compared to 40.6%, for the three-month period ended May 3, 2008. There was no material change in the effective rate or its components for the three-month period ending May 2, 2009.

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Components of the Company’s income tax expense (benefit) from continuing operations for the three-month period ending May 2, 2009 and May 3, 2008 were as follows:

	Three Months Ended
	May 2, 2009			May 3, 2008
				Revised
Expected federal income taxes at 35%	$	(2,852	)	$	11,177
State income taxes, net of federal benefit		(445	)		1,035
Effect of settling tax exams and other tax reserve adjustments		(171	)		495
Other items, net		202			273
Provision (benefit) for income taxes from continuing operations	$	(3,266	)	$	12,980

It is reasonably possible that the amount of unrecognized tax benefits will increase or decrease in the next twelve months as a result of settling uncertain tax positions. However, the Company does not anticipate this to result in any material change to the amount of unrecognized tax benefits.

The Company files a consolidated U.S. Federal income tax return as well as state tax returns in multiple state jurisdictions. The Company has completed examinations by the Internal Revenue Service for taxable years through January 29, 2005. With respect to state and local jurisdictions, the Company has completed examinations in many jurisdictions through the same period and currently has examinations in progress for several jurisdictions.

Our consolidated balance sheet as of May 2, 2009 includes a gross deferred tax asset of $165,568 related to U.S. federal and state net operating loss and alternative minimum tax credit carryforwards. The majority of the net operating loss carryforward is a result of the net operating loss incurred during the fiscal year ended January 31, 2009 due principally to difficult current market and macroeconomic conditions. We have concluded, based on the weight of all available positive and negative evidence, that all but $42,190 of these tax benefits are more likely than not to be realized in the future. The Company has incurred a cumulative loss over the three years ended May 2, 2009; however, after evaluating all available evidence including our past operating results, the macroeconomic factors contributing to the most recent fiscal year loss, the length of the carryforward periods available, and our forecast of future taxable income, including the implementation of prudent and feasible tax planning strategies, we concluded that it is more likely than not the net deferred tax asset will be realized. Therefore, no additional valuation allowance was recorded during the quarter ended May 2, 2009. We will continue to assess the need for a valuation allowance in the future. If future results are less than projected or tax planning alternatives are no longer viable, then a valuation allowance may be required to reduce the deferred tax assets which could have a material impact on our results of operations in the period in which it is recorded.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Pronouncements

In May 2008, the FASB issued FSP APB 14-1 which clarifies the accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). The Company adopted the provisions of FSP APB 14-1 on February 1, 2009. See Note 4 for further discussion of the adoption of FSP APB 14-1.

8

In February 2008, the FASB issued FSP Statement of Financial Accounting Standards (“SFAS”) No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP SFAS 157-2”), which delayed the effective date of SFAS No. 157 “Fair Value Measurements” (“SFAS 157”) for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company adopted the provisions of FSP SFAS 157-2 for the Company’s nonfinancial assets and liabilities measured at fair value on a nonrecurring basis on February 1, 2009. See Note 6 for further discussion of the adoption of FSP SFAS 157-2.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”), which addresses the recognition and accounting for identifiable assets acquired, liabilities assumed, and non-controlling interests in business combinations. SFAS 141(R) also establishes expanded disclosure requirements for business combinations. The Company adopted the provisions of SFAS 141(R) on February 1, 2009 and will apply them to any future business combinations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). This standard outlines the accounting and reporting for ownership interest in a subsidiary held by parties other than the parent. SFAS 160 is effective as of the beginning of the 2009 fiscal year. The adoption of SFAS 160 as of February 1, 2009 did not have an impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). This Statement amends and expands the disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), to require an entity to provide an enhanced understanding of its use of derivative instruments, how they are accounted for under SFAS 133 and their effect on the entity’s financial position, financial performance, and cash flows. The provisions of SFAS 161 are effective as of the beginning of the 2009 fiscal year. The adoption of SFAS 161 as of February 1, 2009 did not have an impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of both basic and diluted earnings per share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The adoption of FSP EITF 03-6-1 did not have a material impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

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In June 2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity’s own stock. The adoption of EITF 07-5 as of February 1, 2009 did not have an impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

In June 2008, the FASB ratified EITF Issue No. 08-3, “Accounting by Lessees for Nonrefundable Maintenance Deposits” (“EITF 08-3”). EITF 08-3 clarifies how a lessee shall account for a maintenance deposit under an arrangement accounted for as a lease. The adoption of EITF 08-3 as of February 1, 2009 did not have a material impact on the Company’s consolidated financial statements for the three months ended May 2, 2009.

Recently Issued Pronouncements

In December 2008, the FASB issued FSP SFAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP SFAS 132(R)-1”), which provides additional guidance on employers’ disclosures about the plan assets of defined benefit pension or other postretirement plans. The disclosures required by FSP SFAS 132(R)-1 include a description of how investment allocation decisions are made, major categories of plan assets, valuation techniques used to measure the fair value of plan assets, the impact of measurement using significant unobservable inputs and concentrations of risk within plan assets. FSP SFAS 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Company will adopt the new disclosure requirements in the 2009 annual reporting period.

In April 2009, the FASB issued FSP SFAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP SFAS 157-4”), which provides additional guidance on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and includes guidance on identifying circumstances that indicate when a transaction is not orderly. FSP SFAS 157-4 is effective for interim and annual periods ending after June 15, 2009. The Company does not believe the adoption of FSP SFAS 157-4 will have a material impact on the Company’s condensed consolidated financial statements in future periods.

In April 2009, the FASB issued FSP SFAS 115-2 and SFAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS 115-2 and SFAS 124-2”), which: 1) clarifies the interaction of the factors that should be considered when determining whether a debt security is other than temporarily impaired, 2) provides guidance on the amount of an other-than-temporary impairment recognized in earnings and other comprehensive income and 3) expands the disclosures required for other-than-temporary impairments for debt and equity securities. FSP SFAS 115-2 and SFAS 124-2 is effective for interim and annual periods ending after June 15, 2009. The Company does not believe the adoption of FSP SFAS 115-2 and SFAS 124-2 will have a material impact on the Company’s condensed consolidated financial statements in future periods.

In April 2009, the FASB issued FSP SFAS 107-1 and APB No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1 and APB 28-1”), which requires disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP SFAS 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009. The Company will adopt the new disclosure requirements for the interim period beginning May 3, 2009.

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NOTE 3 – EARNINGS PER COMMON SHARE

Calculations of earnings per common share (“EPS”) for the three-month period ending May 2, 2009 and May 3, 2008, respectively, are as follows:

	For the Three Months Ended May 2, 2009							For the Three Months Ended May 3, 2008
								Revised
	Net Loss			Weighted Average Shares	Per Share Amount			Net Income		Weighted Average Shares	Per Share Amount
Basic EPS	$	(5,117	)	138,297	$	(0.04	)	$	17,320	139,904	$	0.12
Effect of dilutive stock options and restricted stock		—		—		—			—	926		—
Diluted EPS	$	(5,117	)	138,297	$	(0.04	)	$	17,320	140,830	$	0.12

As of May 2, 2009, the Company had 2,779 options and 6,056 unvested restricted stock and performance share awards outstanding that were excluded from the computation of diluted EPS because the potential common shares would have been anti-dilutive as the Company generated a net loss for the three months ended May 2, 2009. These options and unvested restricted stock and performance share awards represent the number of shares outstanding at the end of the period and application of the treasury stock method would reduce this amount if they had a dilutive effect and were included in the computation of diluted EPS. There were also 19,219 of potentially exercisable shares under the convertible notes that were not included in the computation of diluted EPS for the three months ended May 2, 2009 because inclusion of the potential common shares would have been anti-dilutive as the Company generated a net loss for the period.

As of May 3, 2008, the Company had 1,132 options and 885 performance share awards of potentially dilutive common stock outstanding that were not included in the computation of diluted EPS because the exercise prices of the options were greater than the average market price of the common shares for the period or the performance criteria were not met. There were also 19,219 of potentially exercisable shares under the convertible notes that were not included in the computation of diluted EPS due to the assumption of net share settlement as of May 3, 2008.

The FASB is contemplating an amendment to SFAS No. 128, “Earnings Per Share” (“SFAS 128”) that would require the Company to ignore the cash presumption of net share settlement and to assume share settlement for purposes of calculating diluted earnings per share. Although the Company is now required to ignore the contingent conversion provision on its convertible notes under EITF No. 04-08 “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share” (“EITF 04-08”), it can still presume that it will satisfy the net share settlement of the par value upon conversion of the notes in cash, and thus exclude the effect of the conversion of the notes in its calculation of diluted earnings per share. If and when the FASB amends SFAS 128, the effect of the changes would require the Company to use the if-converted method in

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calculating diluted earnings per share except when the effect would be anti-dilutive. The effect of adopting the amendment to SFAS 128 would increase the number of shares in the Company’s diluted calculation by 19,219 shares if the addition of the shares had a dilutive effect.

NOTE 4 – DEBT AND SHARE ACTIVITY

A summary of long-term debt and capital lease obligations is as follows:

	May 2, 2009			January 31, 2009			May 3, 2008
				Revised			Revised
Notes 8.25%, matured fiscal year 2008	$	—		$	—		$	84,132
Notes 7.50%, maturing fiscal year 2010		45,872			45,872			45,872
Notes 9.875%, maturing fiscal year 2011		141,557			141,557			141,557
Notes 7.00%, maturing fiscal year 2013		2,922			2,922			2,922
Notes 7.375%, maturing fiscal year 2019		1,911			1,911			1,911
Convertible Notes 2.00%, maturing fiscal year 2024		230,000			230,000			230,000
Less: Unamortized discount (1)		(40,528	)		(42,297	)		(47,444	)
Carrying amount of Convertible Notes		189,472			187,703			182,556
Revolving credit facility		195,000			156,675			—
Terminated interest rate swap agreements, net		46			53			21
Capital lease obligations		59,846			61,083			64,695
		636,626			597,776			523,666
Current portion		(4,686	)		(4,673	)		(88,980	)
	$	631,940		$	593,103		$	434,686

(1) Recorded upon adoption of FSP APB 14-1.

REVOLVING CREDIT AGREEMENT

The Company has a $500,000 revolving credit facility, subject to a borrowing base equal to a specified percentage of eligible inventory and certain credit card receivables. The obligations under the facility are guaranteed by certain of the Company’s existing and future domestic subsidiaries, and the obligations are secured by the Company’s and the guarantors’ merchandise inventories and certain third party accounts receivable. Borrowings under the facility bear interest at a per annum rate of either LIBOR plus a percentage ranging from 1.00% to 1.50% or at the higher of the prime rate and federal funds rate. Letters of credit are charged a per annum fee equal to the then applicable LIBOR borrowing spread (for standby letters of credit) or fifty percent of the LIBOR borrowing spread (for documentary or commercial letters of credit). The Company also pays an unused line fee of 0.25% per annum on the average daily unused revolver.

During periods in which availability under the agreement is $60,000 or more, the Company is not subject to financial covenants. If and when availability under the agreement decreases to less than $60,000, the Company will be subject to a minimum fixed charge coverage ratio of 1 to 1. There is no debt rating trigger. As of May 2, 2009, the Company was not subject to the minimum fixed charge coverage ratio.

12

The revolving credit agreement restricts additional debt to specific categories including the following (each category being subject to limitations as described in the revolving credit agreement): debt arising from permitted sale and leaseback transactions; debt to finance purchases of machinery, equipment, real estate and other fixed assets; debt in connection with permitted acquisitions; and unsecured debt. The revolving credit agreement also places certain restrictions on, among other things, asset sales, the ability to make acquisitions and investments, and to pay dividends. The credit agreement contains default provisions that are typical for this type of financing, including a provision that would trigger a default under the credit agreement if a default were to occur in another debt instrument resulting in the acceleration of principal of more than $20,000 under that other instrument.

SENIOR NOTES

At May 2, 2009, the Company had $192,262 of unsecured senior notes outstanding, excluding the convertible notes, comprised of four separate series having maturities ranging from 2010 to 2019 and interest rates ranging from 7.000% to 9.875%. The senior notes are guaranteed by all of the subsidiaries that guarantee the Company’s credit facility and have substantially identical terms except for the maturity dates and interest rates payable to investors. Subject to certain exceptions, the notes restrict the Company from incurring secured debt or entering into sale/leaseback transactions that are, in the aggregate greater than 15% (17.5% in the case of the notes due in 2013) of consolidated net tangible assets of the Company. The notes permit certain sale/leaseback transactions but place certain restrictions around the use of proceeds generated from a sale/leaseback transaction. The terms of each senior note require all principal to be repaid at maturity. There are no financial covenants associated with these notes, and there are no debt-rating triggers.

CONVERTIBLE NOTES

The Company issued $230,000 of 2.0% convertible senior notes in March 2004. The notes bear interest at a rate of 2.0% per annum and mature in 2024. In certain circumstances, the provisions of the convertible senior notes allow the holder to convert the notes to shares of the Company’s common stock at a conversion rate of $11.97 per share of common stock (19,219 shares of common stock to be issued upon conversion). The Company can settle a conversion of the notes with shares and/or cash. The holders may convert the notes at the following times, among others: if the Company’s share price is greater than 120% of the applicable conversion price for a certain trading period; if the credit ratings of the notes are below a certain threshold; or upon the occurrence of certain consolidations, mergers or share exchange transactions involving the Company.

In connection with the issuance of the convertible senior notes, the Company entered into a convertible note hedge and written call options on its common stock to reduce the Company’s exposure to dilution from the conversion of the notes. The terms and conditions of the note hedge include: the strike price is $11.97; the contract is indexed to 19,219 shares of the Company’s common stock; the maturity dates of the hedge instruments range from March 24, 2011 to April 20, 2011.

13

The terms of the written call options include: the strike price is $13.81; the contract is indexed to 19,219 shares of the Company’s common stock; the maturity date of the written call option instruments is August 2, 2011. These transactions were accounted for as a net reduction of stockholders’ equity of approximately $25,000 in 2004.

On February 1, 2009, the Company adopted FSP APB 14-1, which clarifies the accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that reflects the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 requires retrospective application of its provisions.

Upon adoption of FSP APB 14-1, the Company estimated the fair value, as of the date of issuance, of its 2.0% convertible senior notes assuming a 6.25% non-convertible borrowing rate to be $158,148. The difference between the fair value and the principal amount of the notes was $71,852. This amount was retrospectively recorded as a debt discount and as an increase to additional paid-in capital as of the issuance date. The discount is being accreted to interest expense over the ten-year period to the first put date of the notes in 2014 resulting in an increase in non-cash interest expense in prior and future periods.

The following tables set forth the effect of the retrospective application of FSP ABP 14-1 on certain previously reported items.

Condensed Consolidated Statement of Income:

	Three Months Ended May 3, 2008
	As Reported (1)		As Revised
Interest expense	$	10,057	$	11,626
Provision for income taxes for continuing operations	$	13,592	$	12,980
Income from continuing operations	$	19,912	$	18,955
Net income	$	18,277	$	17,320
Per share amounts - Basic
Income from continuing operations	$	0.14	$	0.13
Net income	$	0.13	$	0.12
Per share amounts - Diluted
Income from continuing operations	$	0.14	$	0.13
Net income	$	0.13	$	0.12

(1) As revised for discontinued operations.

14

Condensed Consolidated Balance Sheets:

	January 31, 2009						May 3, 2008
	As Reported			As Revised			As Reported		As Revised
Property and equipment, net	$	1,057,417		$	1,058,393		$	1,081,785	$	1,082,597
Other assets	$	21,378		$	19,947		$	51,192	$	49,643
Deferred income taxes, net	$	211,833		$	194,956		$	96,459	$	77,640
Long-term debt	$	635,400		$	593,103		$	482,130	$	434,686
Additional paid-in capital	$	1,105,199		$	1,147,104		$	1,108,504	$	1,150,364
Retained earnings (accumulated deficit)	$	(97,361	)	$	(114,301	)	$	75,513	$	61,542

The following tables provide additional information about the Company’s convertible senior notes that are subject to FSP ABP 14-1.

	May 2, 2009		January 31, 2009		May 3, 2008
Carrying amount of the equity component (additional paid-in capital)	$	71,852	$	71,852	$	71,852
Principal amount of the convertible senior notes	$	230,000	$	230,000	$	230,000
Unamortized discount of the liability component	$	40,528	$	42,297	$	47,444
Net carrying amount of liability component	$	189,472	$	187,703	$	182,556

	3 Months Ended
	May 2, 2009			May 3, 2008
Effective interest rate on liability component		6.2	%		6.2	%
Cash interest expense recognized	$	1,150		$	1,150
Non-cash interest expense recognized	$	1,769		$	1,664

The remaining period over which the unamortized discount will be recognized is 4.9 years. As of May 2, 2009, the if-converted value of the notes did not exceed its principal amount.

At May 2, 2009, the conversion criteria with respect to the credit rating requirements were met, however the Company’s share price was significantly below the conversion price. Due to the share price being significantly below the conversion price, the convertible notes were classified within “long-term debt” on the condensed consolidated balance sheet as of May 2, 2009. As of May 3, 2008, the conversion criteria with respect to the credit rating requirements were met however the Company’s share price was below the conversion price. Therefore, the convertible notes were classified within “long-term debt” on the condensed consolidated balance sheet as of May 3, 2008.

SHARE ACTIVITY

During the three months ended May 3, 2008, the Company repurchased 1,234 shares of its common stock at an average price of $11.97 per share and total cost of approximately $14,765. There were no repurchases and retirements of common stock during the three months ended May 2, 2009. At May 2, 2009, there were 32,709 shares remaining available for repurchase under the Company’s existing share repurchase program.

15

NOTE 5 – EMPLOYEE BENEFIT PLANS

The Company sponsors a defined benefit cash balance pension plan and supplemental executive retirement plan (“SERP”) for certain employees of the Company. The Company amended the pension plan during 2006, freezing benefit accruals for all participants except those who have attained age 55 and completed 10 years of credited service as of January 1, 2007, who are considered to be non-highly compensated employees. In January 2009, the Company suspended future benefit accruals for all remaining participants in the plan, effective March 13, 2009. The Company generally funds pension costs currently, subject to regulatory funding requirements. The components of net periodic pension expense (benefit) related to the Company’s pension plan and SERP for the three months ending May 2, 2009 and May 3, 2008 were as follows:

	Three Months Ended
	May 2, 2009			May 3, 2008
Service cost	$	25		$	169
Interest cost		2,150			2,123
Expected return on plan assets		(1,600	)		(3,037	)
Net amortization of losses and prior service costs		725			184
Net periodic pension (benefit) expense	$	1,300		$	(561	)

The Company expects no funding requirements in 2009.

NOTE 6 – FAIR VALUE MEASUREMENTS

Effective February 3, 2008, the Company partially adopted SFAS 157. The partial adoption is in accordance with FSP SFAS 157-2, which allowed for the delay of the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities that are not measured at fair value on a regular basis. The Company adopted the provisions of FSP SFAS 157-2 for the Company’s nonfinancial assets and liabilities measured at fair value on a nonrecurring basis on February 1, 2009.

SFAS 157 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions

16

The Company may also be required, from time to time, to measure certain other financial assets and liabilities at fair value on a non-recurring basis in accordance with GAAP.

As of May 2, 2009, the Company had no material assets or liabilities that required adjustments or write-downs.

NOTE 7 – SHAREHOLDERS’ EQUITY

The following table summarizes the changes in shareholders’ equity for the three months ended May 2, 2009:

	Common Stock Shares		Common Stock Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at January 31, 2009, revised	142,170		$	14,218		$	1,147,104		$	(114,301	)	$	(56,436	)	$	990,585
Net loss - Q1 2009										(5,117	)					(5,117	)
Dividend adjustment - cancelled restricted shares							3									3
Income tax benefit related to employee stock plans							(1,341	)								(1,341	)
Net activity under stock compensation plans	2,239			224			(224	)								—
Restricted shares withheld for taxes	(23	)		(3	)		(38	)								(41	)
Stock-based compensation							4,171									4,171
Balance at May 2, 2009	144,386		$	14,439		$	1,149,675		$	(119,418	)	$	(56,436	)	$	988,260

NOTE 8 – STOCK-BASED COMPENSATION

The Company maintains an equity incentive plan for the granting of options, stock appreciation rights, performance shares, restricted stock, and other forms of equity awards to employees and directors. Options granted generally vest over a four-year period after grant and have an exercise life of seven to ten years from the grant date. Restricted stock and performance shares generally vest three to five years after the grant date, although the plan permits accelerated vesting in certain circumstances at the discretion of the Human Resources and Compensation Committee of the Board of Directors.

Compensation cost for restricted stock and performance shares that cliff vest is expensed straight line over the requisite service period. Restricted stock and performance shares with graded vesting features are treated as multiple awards based upon the vesting date. The Company records compensation costs for these awards straight line over the requisite service period for each separately vesting portion of the award. Compensation cost for stock option awards with graded vesting are expensed straight line over the requisite service period.

Total pre-tax stock-based compensation expense for the three month periods ended May 2, 2009 and May 3, 2008 was $4,171 and $3,489, respectively.

17

NOTE 9 – CONTINGENCIES

LEGAL CONTINGENCIES

The Company is involved in 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 a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

TAX MATTERS

The Company is routinely under audit by federal, state or local authorities in the areas of income taxes and the remittance of sales and use taxes. These audits include questioning the timing and amount of deductions and the allocation of income among various tax jurisdictions. Based on the current evaluations of tax filing positions, the Company believes it has adequately accrued for its tax exposures.

OTHER MATTERS

From time to time the Company has issued guarantees to landlords under leases of stores operated by its subsidiaries. Certain of these stores were sold in connection with the Saks Department Store Group and Northern Department Store Group transactions. If the purchasers fail to perform certain obligations under the leases guaranteed by the Company, the Company could have obligations to landlords under such guarantees. Based on the information currently available, management does not believe that its potential obligations under these lease guarantees would be material.

NOTE 10 – CLUB LIBBY LU CLOSURE

In January 2009, the Company discontinued the operations of its CLL specialty store business, which consisted of 98 leased, mall-based stores, as CLL was no longer determined to be a strategic fit for the Company. The Company incurred charges of $44,521 in 2008 associated with the CLL store closings. The charges consisted of $16,993 for asset impairments, $14,045 in lease termination costs (net of a non-cash deferred rent benefit of $3,701), $6,965 in inventory liquidation costs, $5,074 in severance and personnel related costs and $1,444 in other closing costs.

The following table summarizes 2009 activity related to the discontinuation of the CLL business:

	Severance and Personnel Related Costs			Lease Termination Costs			Other Closing Costs			Total
Balance at January 31, 2009	$	3,651		$	9,780		$	172		$	13,603
Adjustments to the reserve		—			156			—			156
Cash payments		(3,651	)		(9,234	)		(172	)		(13,057	)
Balance at May 2, 2009	$	—		$	702		$	—		$	702

18

NOTE 11 – SUBSEQUENT EVENT

On May 27, 2009, the Company issued $120,000 of Convertible Notes due 2013 (the “Notes”) in a private offering to qualified institutional buyers, which included the exercise in full of the initial purchasers option to purchase $15,000 principal amount of additional Notes, solely to cover over-allotments. The Company received net proceeds from the Notes of approximately $115,400 after deducting initial purchasers’ discounts and estimated offering expenses. The Company intends to use the net proceeds to pay down amounts outstanding under its revolving credit facility and for general corporate purposes.

The Notes bear cash interest semiannually at an annual rate of 7.5%. The Notes are convertible at the option of holders at an initial conversion rate of 180.5869 shares of common stock per $1 principal amount of Notes into, at the Company’s election, cash, shares of the Company’s common stock or a combination thereof. The initial conversion rate is equivalent to an initial conversion price of approximately $5.54 per share of the Company’s common stock. The initial conversion price represented a premium of 25% relative to the closing price of the Company’s common stock on May 20, 2009. The Notes are not redeemable before the maturity date, December 1, 2013. The Notes are fully and unconditionally guaranteed by all of the Company’s subsidiaries that are guarantors under its existing revolving credit facility.

NOTE 12 – CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The following tables present condensed consolidating financial information for: (1) Saks Incorporated and (2) on a combined basis, the guarantors of Saks Incorporated’s senior notes (which are all of the wholly owned subsidiaries of Saks Incorporated).

The condensed consolidating financial statements presented as of and for the three-month periods ended May 2, 2009 and May 3, 2008 and as of January 31, 2009 reflect the legal entity compositions at the respective dates. Certain prior period amounts have been revised to reflect the adoption of FSP APB 14-1.

Separate financial statements of the guarantor subsidiaries are not presented because the guarantors are jointly, severally, fully and unconditionally liable under the guarantees. Borrowings and the related interest expense under the Company’s revolving credit agreement are allocated to Saks Incorporated and the guarantor subsidiaries under an intercompany revolving credit arrangement. There are also management and royalty fee arrangements among Saks Incorporated and the subsidiaries. At May 2, 2009, Saks Incorporated was the sole obligor for a majority of the Company’s long-term debt.

19

SAKS INCORPORATED

CONDENSED CONSOLIDATING BALANCE SHEETS AT MAY 2, 2009

(Dollar Amounts In Thousands)

	Saks Incorporated		Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets
Cash and cash equivalents	$	240	$	10,012					$	10,252
Merchandise inventories				779,474						779,474
Other current assets				97,977						97,977
Deferred income taxes, net				26,721						26,721
Total Current Assets		240		914,184			—			914,424
Property and Equipment, net				1,042,960						1,042,960
Deferred Income Taxes, net		63,925		136,364						200,289
Other Assets		3,255		16,429						19,684
Investment in and Advances to Subsidiaries		1,587,926		—		$	(1,587,926	)
Total Assets	$	1,655,346	$	2,109,937		$	(1,587,926	)	$	2,177,357
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable			$	140,252					$	140,252
Accrued expenses and other current liabilities	$	5,242		212,187						217,429
Dividend payable		932								932
Current portion of long-term debt		84,132		(79,446	)					4,686
Total Current Liabilities		90,306		272,993			—			363,299
Long-Term Debt		576,780		55,160						631,940
Other Long-Term Liabilities				193,858						193,858
Investment by and Advances from Parent				1,587,926		$	(1,587,926	)
Shareholders’ Equity		988,260								988,260
Total Liabilities and Shareholders’ Equity	$	1,655,346	$	2,109,937		$	(1,587,926	)	$	2,177,357

20

SAKS INCORPORATED

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MAY 2, 2009

(Dollar Amounts In Thousands)

	Saks Incorporated			Guarantor Subsidiaries			Eliminations		Consolidated
Net sales				$	621,266				$	621,266
Cost of Sales					382,858					382,858
Gross Margin		—			238,408			—		238,408
Selling, general and administrative expenses	$	193			155,241					155,434
Other operating expenses		1			79,969					79,970
Store pre-opening costs					627					627
Impairments and dispositions					186					186
Operating Income (loss)		(194	)		2,385			—		2,191
Other income (expense)
Equity in earnings of subsidiaries		(685	)				$	685
Interest expense		(6,781	)		(3,654	)				(10,435	)
Other income, net		97								97
Loss from continuing operations before provision for income taxes		(7,563	)		(1,269	)		685		(8,147	)
Benefit for income taxes		(2,682	)		(584	)				(3,266	)
Loss from continuing operations	$	(4,881	)	$	(685	)	$	685	$	(4,881	)
Discontinued Operations:
Equity in earnings of subsidiaries - discontinued operations (net of tax)		(236	)					236
Loss from discontinued operations before Provision for income taxes					(363	)				(363	)
Benefit for income taxes					(127	)				(127	)
Loss from discontinued operations		(236	)		(236	)		236		(236	)
Net Loss	$	(5,117	)	$	(921	)	$	921	$	(5,117	)

21

SAKS INCORPORATED

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MAY 2, 2009

(Dollar Amounts In Thousands)

	Saks Incorporated			Guarantor Subsidiaries			Eliminations			Consolidated
OPERATING ACTIVITIES
Net Loss	$	(5,117	)	$	(921	)	$	921		$	(5,117	)
Loss from discontinued operations		(236	)		(236	)		236			(236	)
Loss from continuing operations		(4,881	)		(685	)		685			(4,881	)
Adjustments to reconcile net income to net cash used in operating activities:
Equity in earnings of subsidiaries		685						(685	)		—
Amortization of discount on convertible senior notes		1,769									1,769
Depreciation and amortization					33,340						33,340
Equity compensation		4,171									4,171
Deferred income taxes		465			(3,795	)					(3,330	)
Impairments and dispositions					186						186
Changes in operating assets and liabilities, net		(2,647	)		(23,702	)					(26,349	)
Net Cash Provided By (Used In) Operating Activities - Continuing Operation		(438	)		5,344			—			4,906
Net Cash Used In Operating Activities - Discontinued Operations					(13,596	)					(13,596	)
Net Cash Used In Operating Activities		(438	)		(8,252	)		—			(8,690	)
INVESTING ACTIVITIES
Purchases of property and equipment					(27,956	)					(27,956	)
Proceeds from the sale of assets					8						8
Net Cash Used In Investing Activities - Continuing Operations		—			(27,948	)		—			(27,948	)
Net Cash Used In Investing Activities - Discontinued Operations					—						—
Net Cash Used In Investing Activities		—			(27,948	)		—			(27,948	)
FINANCING ACTIVITIES
Intercompany borrowings, contributions and distributions		(37,412	)		37,412
Payments on long-term debt and capital lease obligations					(1,237	)					(1,237	)
Proceeds from revolving credit facility		38,325									38,325
Cash dividends paid		(471	)								(471	)
Net Cash Provided By Financing Activities		442			36,175			—			36,617
Net Cash Provided By Financing Activities - Discontinued Operations					—						0
Net Cash Provided By Financing Activities		442			36,175			—			36,617
Decrease In Cash and Cash Equivalents		4			(25	)					(21	)
Cash and Cash Equivalents at beginning of period		236			10,037						10,273
Cash and Cash Equivalents at end of period	$	240		$	10,012		$	—		$	10,252

22

SAKS INCORPORATED

CONDENSED CONSOLIDATING BALANCE SHEETS AT MAY 3, 2008

(Dollar Amounts In Thousands)

	Saks Incorporated (Revised)		Guarantor Subsidiaries (Revised)		Eliminations (Revised)			Consolidated (Revised)
ASSETS
Current Assets
Cash and cash equivalents	$	107,014	$	17,509				$	124,523
Merchandise inventories				841,068					841,068
Other current assets				141,677					141,677
Deferred income taxes, net				41,428					41,428
Total Current Assets		107,014		1,041,682		—			1,148,696
Property and Equipment, net				1,082,597					1,082,597
Deferred Income Taxes, net		52,305		25,335					77,640
Other Assets		5,673		43,970					49,643
Investment in and Advances to Subsidiaries		1,512,905			$	(1,512,905	)
Total Assets	$	1,677,897	$	2,193,584	$	(1,512,905	)	$	2,358,576
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable			$	204,382				$	204,382
Accrued expenses and other current liabilities	$	6,195		249,059					255,254
Dividend payable		1,475							1,475
Current portion of long-term debt		84,132		4,848					88,980
Total Current Liabilities		91,802		458,289		—			550,091
Long-Term Debt		374,839		59,847					434,686
Other Long-Term Liabilities				162,543					162,543
Investment by and Advances from Parent				1,512,905	$	(1,512,905	)
Shareholders’ Equity		1,211,256							1,211,256
Total Liabilities and Shareholders’ Equity	$	1,677,897	$	2,193,584	$	(1,512,905	)	$	2,358,576

23

SAKS INCORPORATED

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MAY 3, 2008

(Dollar Amounts In Thousands)

	Saks Incorporated (Revised)			Guarantor Subsidiaries (Revised)			Eliminations			Consolidated
Net sales				$	850,041					$	850,041
Cost of Sales					527,198						527,198
Gross Margin		—			322,843			—			322,843
Selling, general and administrative expenses	$	248			199,139						199,387
Other operating expenses		10			80,573						80,583
Store pre-opening costs					241						241
Impairments and dispositions					18						18
Operating Income (loss)		(258	)		42,872			—			42,614
Other income (expense)
Equity in earnings of subsidiaries		24,158					$	(24,158	)
Interest expense		(9,280	)		(2,346	)					(11,626	)
Other income, net		947									947
Income from continuing operations before provision for income taxes		15,567			40,526			(24,158	)		31,935
Provision (benefit) for income taxes		(3,388	)		16,368						12,980
Income from continuing operations	$	18,955		$	24,158		$	(24,158	)	$	18,955
Discontinued Operations:
Equity in earnings of subsidiaries - discontinued operations (net of tax)		(1,635	)					1,635
Loss from discontinued operations before Provision for income taxes					(2,497	)					(2,497	)
Benefit for income taxes					(862	)					(862	)
Loss from discontinued operations		(1,635	)		(1,635	)		1,635			(1,635	)
Net Income	$	17,320		$	22,523		$	(22,523	)	$	17,320

24

SAKS INCORPORATED

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MAY 3, 2008

(Dollar Amounts In Thousands)

	Saks Incorporated (Revised)			Guarantor Subsidiaries (Revised)			Eliminations			Consolidated
OPERATING ACTIVITIES
Net Income	$	17,320		$	22,523		$	(22,523	)	$	17,320
Loss from discontinued operations		(1,635	)		(1,635	)		1,635			(1,635	)
Income from continuing operations		18,955			24,158			(24,158	)		18,955
Adjustments to reconcile net income to net cash used in operating activities:
Equity in earnings of subsidiaries		(24,158	)					24,158			—
Depreciation and amortization					31,865						31,865
Equity compensation		3,489									3,489
Accretion of discount on convertible notes		1,664									1,664
Deferred income taxes		451			9,393						9,844
Impairments and dispositions					18						18
Changes in operating assets and liabilities, net		15,943			(18,473	)					(2,530	)
Net Cash Provided By Operating Activities - Continuing Operation		16,344			46,961			—			63,305
Net Cash Provided By Operating Activities - Discontinued Operations					702						702
Net Cash Provided By Operating Activities		16,344			47,663			—			64,007
INVESTING ACTIVITIES
Purchases of property and equipment					(24,267	)					(24,267	)
Proceeds from the sale of assets					14						14
Net Cash Used In Investing Activities - Continuing Operations		—			(24,253	)		—			(24,253	)
Net Cash Used In Investing Activities - Discontinued Operations					(701	)					(701	)
Net Cash Used In Investing Activities		—			(24,954	)		—			(24,954	)
FINANCING ACTIVITIES
Intercompany borrowings, contributions and distributions		19,372			(19,372	)
Payments on long-term debt and capital lease obligations					(1,498	)					(1,498	)
Payment of Dividend		(1,139	)								(1,139	)
Repurchase and retirements of common stock		(14,765	)								(14,765	)
Proceeds from issuance of common stock		1,710									1,710
Net Cash Provided By (Used In) Financing Activities		5,178			(20,870	)		—			(15,692	)
Net Cash Used In Financing Activities - Discontinued Operations					—						—
Net Cash Used In Financing Activities		5,178			(20,870	)		—			(15,692	)
Increase In Cash and Cash Equivalents		21,522			1,839						23,361
Cash and Cash Equivalents at beginning of period		85,492			15,670						101,162
Cash and Cash Equivalents at end of period	$	107,014		$	17,509			—		$	124,523

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SAKS INCORPORATED

CONDENSED CONSOLIDATING BALANCE SHEETS AT JANUARY 31, 2009

(Dollar Amounts In Thousands)

	Saks Incorporated (Revised)		Guarantor Subsidiaries (Revised)			Eliminations (Revised)			Consolidated (Revised)
ASSETS
Current Assets
Cash and cash equivalents	$	236	$	10,037					$	10,273
Merchandise inventories				728,841						728,841
Other current assets				105,350						105,350
Deferred income taxes, net				29,916						29,916
Total Current Assets		236		874,144			—			874,380
Property and Equipment, net				1,058,393						1,058,393
Deferred Income Taxes, net		61,243		133,713						194,956
Other Assets		3,612		16,335						19,947
Investment in and Advances to Subsidiaries		1,554,554					($1,554,554	)
Total Assets	$	1,619,645	$	2,082,585		$	(1,554,554	)	$	2,147,676
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable			$	90,208					$	90,208
Accrued expenses and other current liabilities	$	6,829		267,312						274,141
Dividend payable		1,406								1,406
Current portion of long-term debt		84,132		(79,459	)					4,673
Total Current Liabilities		92,367		278,061			—			370,428
Long-Term Debt		536,693		56,410						593,103
Other Long-Term Liabilities				193,560						193,560
Investment by and Advances from Parent				1,554,554		$	(1,554,554	)
Shareholders’ Equity		990,585								990,585
Total Liabilities and Shareholders’ Equity	$	1,619,645	$	2,082,585		$	(1,554,554	)	$	2,147,676

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis (“MD&A”) is intended to provide an analytical view of the business from management’s perspective and has four major components:

• Management’s Overview

• Results of Operations

• Liquidity and Capital Resources

• Critical Accounting Policies

MD&A should be read in conjunction with the condensed consolidated financial statements and related notes thereto contained elsewhere in this report.

MANAGEMENT’S OVERVIEW

GENERAL

The operations of Saks Incorporated and its subsidiaries (together the “Company”) consist of Saks Fifth Avenue (“SFA”), Saks Fifth Avenue OFF 5^th (“OFF 5^th”), and SFA’s e-commerce operations. Previously, the Company also operated Club Libby Lu (“CLL”), the operations of which were discontinued in January 2009. The Company is primarily a fashion retail organization offering a wide assortment of distinctive luxury fashion apparel, shoes, accessories, jewelry, cosmetics and gifts. SFA stores are principally free-standing stores in exclusive shopping destinations or anchor stores in upscale regional malls. Customers may also purchase SFA products by catalog or online at www.saks.com. OFF 5^th is intended to be the premier luxury off-price retailer in the United States. OFF 5^th stores are primarily located in upscale mixed-use and off-price centers and offer luxury apparel, shoes, and accessories, targeting the value-conscious customer. As of May 2, 2009, Saks operated 53 SFA stores with 5.9 million square feet and 52 OFF 5^th stores with 1.5 million square feet.

FINANCIAL PERFORMANCE SUMMARY

The Company recorded a loss from continuing operations of $4.9 million, or $0.04 per share compared to income from continuing operations of $19.0 million, or $0.13 per share, for the three months ended May 2, 2009 and May 3, 2008, respectively. After recognition of the Company’s after-tax loss from discontinued operations of $0.2 million, the Company’s net loss totaled $5.1 million, or $0.04 per share for the three months ended May 2, 2009. After recognition of the Company’s after-tax loss from discontinued operations of $1.6 million, or $0.01 per share, net income totaled $17.3 million, or $0.12 per share for the three months ended May 3, 2008.

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The Company believes that an understanding of its reported financial condition and results of operations is not complete without considering the effect of all other components of MD&A included herein.

RESULTS OF OPERATIONS

The following table shows, for the periods indicated, items from the Company’s Condensed Consolidated Statements of Income expressed as percentages of Net Sales. (numbers may not total due to rounding)

	Three Months Ended
	May 2, 2009		May 3, 2008
Net sales	100.0	%	100.0	%
Cost of sales (excluding depreciation and amortization)	61.6	%	62.0	%
Gross margin	38.4	%	38.0	%
Selling, general & administrative expenses	25.0	%	23.5	%
Other operating expenses	12.9	%	9.5	%
Store pre-opening costs	0.1	%	0.0	%
Impairments and dispositions	0.0	%	0.0	%
Operating Income	0.4	%	5.0	%
Interest expense	-1.7	%	-1.4	%
Loss on extinguishment of debt	0.0	%	0.0	%
Other income, net	0.0	%	0.1	%
Income (loss) from continuing operations before income taxes	-1.3	%	3.8	%
Provision (benefit) for income taxes	-0.5	%	1.5	%
Income (loss) from continuing operations	-0.8	%	2.2	%
Discontinued Operations:
Loss from discontinued operations	-0.1	%	-0.3	%
Benefit for income taxes	0.0	%	-0.1	%
Loss from discontinued operations	0.0	%	-0.2	%
Net Income (loss)	-0.8	%	2.0	%

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THREE MONTHS ENDED MAY 2, 2009 COMPARED TO THREE MONTHS ENDED MAY 3, 2008

DISCUSSION OF OPERATING INCOME- CONTINUING OPERATIONS

The following table shows the changes in operating income from continuing operations for the three-month period ended May 3, 2008 compared to the three-month period ended May 2, 2009:

(In Millions)	Total Company
For the three months ended May 3, 2008	$	42.6
Store sales and margin		(84.4	)
Operating expenses		44.2
Impairments and dispositions		(0.2	)
Decrease		(40.4	)
For the three months ended May 2, 2009	$	2.2

For the three month period ended May 2, 2009, operating income was $2.2 million compared to $42.6 million for the same period last year. The $40.4 million decrease in operating income for the quarter was primarily driven by an $84.4 million decrease in gross margin resulting from a comparable store sales decline of 27.6% offset by SG&A reductions of $44 million or 22%. The lower SG&A expenses are attributable to reduced variable selling expenses and other cost savings initiatives implemented by the Company.

NET SALES

For the three months ended May 2, 2009, total Net Sales decreased 26.9% to $621.3 million from $850.0 million for the three months ended May 3, 2008. Similarly, consolidated comparable store sales decreased $231.9 million, or 27.6%, from $838.6 million for the three months ended May 3, 2008 to $606.7 million for the three months ended May 2, 2009. The Company experienced continued weakness across all merchandise categories, geographies, and channels of distribution during the quarter due to weak consumer demand.

Comparable store sales are determined on a rolling 13-month basis. Thus, to be included in the comparison, a store must be open for 13 months. The additional month is used to transition the first month impact of a new store opening. Correspondingly, closed stores are removed from the comparable store sales comparison when they begin liquidating merchandise. Expanded, remodeled and converted stores are included in the comparable store sales comparison, except for the periods in which they are closed for remodeling and renovation.

GROSS MARGIN

For the three months ended May 2, 2009, gross margin was $238.4 million, or 38.4% of Net Sales, compared to $322.8 million, or 38.0% of Net Sales, for the three months ended May 3, 2008. The Company’s gross margin rate increased 40 basis points in the quarter as a result of a clearance event shift into the second quarter of 2009 from the first quarter of 2008. The Company estimates that on an adjusted comparable basis, gross margin for the current quarter would have decreased by approximately 135 basis points due to increased markdowns as a percentage of sales as well as deleverage on the buying and distribution component of cost of sales.

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (“SG&A”)

For the three months ended May 2, 2009, SG&A was $155.4 million, or 25.0% of Net Sales, compared to $199.4 million, or 23.5% of Net Sales, for the three months ended May 3, 2008. The $44.0 million decrease was principally related to lower variable costs associated with the $228.8 million sales decrease, as well as other cost savings initiatives implemented by the Company.

OTHER OPERATING EXPENSES

For the three months ended May 2, 2009, other operating expenses, including store pre-opening costs, were $80.6 million, or 13.0% of Net Sales, compared to $80.8 million, or 9.5% of Net Sales, for the three months ended May 3, 2008. As a percent of sales, other operating expenses increased 350 basis points in 2009, reflecting the rate deleverage caused by the 27.6% comparable store sales decline in the current year first quarter.

IMPAIRMENTS AND DISPOSITIONS

For the three months ended May 2, 2009, the Company recorded losses from impairments and dispositions of $0.2 million, compared to a loss of $0.02 million for the three months ended May 3, 2008. The current and prior quarter net charges were primarily due to asset dispositions in the normal course of business.

INTEREST EXPENSE

For the three months ended May 2, 2009, interest expense was $10.4 million, or 1.7% of Net Sales, compared to $11.6 million, or 1.4% of Net Sales, for the three months ended May 3, 2008. The decrease in interest expense is primarily due to the retirement of $84.1 million of senior notes on November 15, 2008 partially offset by the increase in borrowings under the revolving credit facility in the first quarter of 2009. Non cash interest expense associated with the adoption of Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) Accounting Principles Board (“APB”) No. 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”) was $1.8 million and $1.7 million for the three months ended May 2, 2009 and May 3, 2008, respectively.

INCOME TAXES

The effective income tax rate for the three-month periods ended May 2, 2009 and May 3, 2008 was 40.1% and 40.6%, respectively. There was no material change in the effective rate or its components for the three month period ending May 2, 2009.

Our consolidated balance sheet as of May 2, 2009 includes a gross deferred tax asset of $166 million related to U.S. federal and state net operating loss and alternative minimum tax credit carryforwards. Based on our evaluation of all available evidence both positive and negative, we have concluded that no additional valuation allowance with respect to

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the deferred tax assets needs to be recorded during the quarter ended May 2, 2009. We will continue to assess the need to increase the valuation allowance in the future. If future results are less than projected or tax planning alternatives are no longer viable, then a valuation allowance may be required to reduce the deferred tax assets which could have a material impact on our results of operations in the period in which it is recorded.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW

The primary needs for cash are to fund operations, acquire or construct new stores, renovate and expand existing stores, provide working capital for new and existing stores, invest in technology and distribution centers and service debt. The Company anticipates that cash on hand, cash generated from operating activities and borrowings under its revolving credit facility will be sufficient to sustain its current level of operations.

Cash provided by operating activities from continuing operations was $4.9 million for the three months ended May 2, 2009 and $63.3 million for the three months ended May 3, 2008. Cash provided by operating activities principally represents income before depreciation and non-cash charges and after changes in working capital. Working capital is significantly impacted by changes in inventory and accounts payable. Inventory levels typically increase or decrease to support expected sales levels and accounts payable fluctuations are generally determined by the timing of merchandise purchases and payments. The $58.4 million decrease in operating cash flows from continuing operations in the first quarter of 2009 from the first quarter of 2008 was primarily driven by the loss from continuing operations of $4.9 million for the three months ended May 2, 2009 compared to income from continuing operations of $19.0 million for the three months ended May 3, 2008. The decrease was also driven by an increase in inventory of $50.6 million during the three months ending May 2, 2009 compared to a decrease in inventory levels of $15.9 million during the three months ended May 3, 2008. The $50.6 million increase in inventory during the three months ended May 2, 2009 was primarily due to a 27.6% decrease in comparable store sales for the period. Net cash used in operating activities for discontinued operations was $13.6 million for the three months ended May 2, 2009 and was primarily related to the payment of severance, lease termination and other closing costs associated with the CLL store closings.

Cash used in investing activities from continuing operations was $27.9 million for the three months ended May 2, 2009 and $24.3 million for the three months ended May 3, 2008. Cash used in investing activities principally consists of construction of new stores, renovation and expansion of existing stores and investments in support areas (e.g., technology and distribution centers). The $3.6 million increase in cash used in investing activities is due to an increase in capital expenditures of approximately $3.7 million.

Cash provided by (used in) financing activities from continuing operations was $36.6 million for the three months ended May 2, 2009 and ($15.7) million for the three months ended May 3, 2008. The current year cash provided by financing activities was driven by

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$38.3 million of proceeds from borrowings under the revolving credit facility partially off-set by the repayments of long-term debt and capital lease obligations of approximately $1.2 million. The prior year use primarily relates to the repurchase of approximately 1.2 million shares of common stock at a cost of approximately $14.8 million.

CASH BALANCES AND LIQUIDITY

The Company’s primary sources of short-term liquidity are cash on hand and availability under its $500 million revolving credit facility. At May 2, 2009 and May 3, 2008, the Company maintained cash and cash equivalent balances of $10.3 million and $124.5 million, respectively. Exclusive of approximately $10.0 million and $17.5 million of store operating cash at May 2, 2009 and May 3, 2008, respectively, cash was invested principally in various money market funds. There was no restricted cash as of May 2, 2009 and May 3, 2008.

At May 2, 2009, the Company had $195.0 million of direct borrowings under its revolving credit facility, and had $23.0 million in unfunded letters of credit. The Company had maximum unfunded letters of credit of $23.3 million on its revolving credit facility for the quarter ended May 2, 2009, which reduces the amount of borrowings available under the facility. Borrowings are limited to a prescribed percentage of eligible inventories and receivables. There are no debt ratings-based provisions in the revolving credit facility. The facility includes a fixed-charge coverage ratio requirement of 1 to 1 that the Company is subject to only if availability under the facility becomes less than $60 million. The Company had unutilized availability under the facility of $222.0 million after factoring in the outstanding borrowings and outstanding letters of credit at May 2, 2009 and excluding the last $60 million of availability due to the fixed charge ratio falling below the required 1 to 1 coverage. The amount of cash on hand and borrowings under the facility are influenced by a number of factors, including sales, inventory levels, vendor terms, the level of capital expenditures, cash requirements related to financing instruments, and the Company’s tax payment obligations, among others.

On May 27, 2009, the Company issued $120.0 million of Convertible Notes due 2013 (the “Notes”), which bear cash interest semiannually at an annual rate of 7.5%. The Notes are convertible at the option of holders at an initial conversion rate of 180.5869 shares of common stock per $1 thousand principal amount of Notes into, at the Company’s election, cash, shares of the Company’s common stock, or a combination thereof. The Company received net proceeds from the Notes of approximately $115.4 million after deducting initial purchasers’ discounts and estimated offering expenses. The Company intends to use the net proceeds to pay down amounts outstanding under its revolving credit facility and for general corporate purposes.

Based on the Company’s operating plans and cash management actions, the Company expects to have ample availability on its revolving credit facility throughout fiscal year 2009 and to be cash flow positive for fiscal year 2009. The Company does not expect to be subject to the fixed charge coverage ratio at any time during fiscal year 2009.

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The Company is very focused on cash management and capital preservation and has implemented a number of actions in an effort to be free cash flow positive for the remainder of 2009. The planned actions include a reduction in year over year capital expenditures, a reduction in year over year inventory purchases, an approximate 9% reduction in force that was implemented in January 2009, future salary reductions for certain corporate employees to be effective in June 2009, and general operating expense reductions throughout the Company. Based on these actions and the fact that the Company has no maturities of debt until late 2010, the Company expects to have sufficient liquidity to fund operations in 2009.

There were no repurchases and retirements of common stock during the three months ended May 2, 2009. During the three months ended May 2, 2009 there were 32.7 million shares remaining available for repurchase under the Company’s existing share repurchase program. During the three months ended May 3, 2008, the Company repurchased 1.2 million shares of its common stock at an average price of $11.96 per share and total cost of approximately $14.8 million.

CAPITAL STRUCTURE

The Company continuously evaluates its debt-to-capitalization ratio in light of the economic trends, business trends, levels of interest rates, and terms, conditions and availability of capital in the capital markets. At May 2, 2009, the Company’s capital and financing structure was comprised of a revolving credit agreement, senior unsecured notes, convertible senior unsecured notes, and capital and operating leases. On May 2, 2009, total funded debt (including the equity component of the convertible debentures) was $677.2 million, representing an increase of $106.1 million from a balance of $571.1 million at May 3, 2008. This increase was primarily related to an increase of $195.0 million in outstanding borrowings from the revolving credit facility as of May 2, 2009 partially offset by the $84.1 million maturity of senior notes in November 2008. Additionally, the debt-to-capitalization ratio increased to 41.7% from 32.9% in the prior year, as a result of the increase in debt in the current year.

At May 2, 2009, the Company maintained a senior revolving credit facility maturing in 2011, which is secured by inventory and certain third party credit card accounts receivable. Borrowings are limited to a prescribed percentage of eligible inventories and receivables. There are no debt ratings-based provisions in the revolving credit facility. The facility includes a fixed-charge coverage ratio requirement of 1 to 1 that the Company is subject to only if availability under the facility becomes less than $60 million. At May 2, 2009, the Company’s fixed charge coverage was below the 1 to 1 requirement; however, the Company was not subject to the fixed charge coverage ratio as its availability under the facility exceeded $60 million. The facility contains default provisions that are typical for this type of financing, including a provision that would trigger a default under the facility if a default were to occur in another debt instrument resulting in the acceleration of principal of more than $20 million in that other instrument. At May 2, 2009, the Company had $195.0 million in borrowings under the revolving credit facility. The senior revolving credit facility has a maximum capacity of $500 million.

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At May 2, 2009, the Company had $192.3 million of senior notes outstanding, excluding the convertible notes, comprising four separate series having maturities ranging from 2010 to 2019 and interest rates ranging from 7.00% to 9.88%. The terms of each senior note call for all principal to be repaid at maturity. The senior notes have substantially identical terms except for the maturity dates and interest rates payable to investors. Each senior note contains limitations on the amount of secured indebtedness the Company may incur. The Company believes it will have sufficient cash on hand, availability under its revolving credit facility and access to various capital markets to repay these notes at maturity.

The Company had $230 million of convertible senior notes, at May 2, 2009, that bear interest of 2.0% and mature in 2024. The provisions of the convertible notes allow the holder to convert the notes to shares of the Company’s common stock at a conversion rate of 83.5609 shares per one thousand dollars in principal amount of notes. The most significant terms and conditions of the senior notes include: the Company can settle a conversion with shares and/or cash; the holder may put the debt back to the Company in 2014 or 2019; the holder cannot convert until the Company’s share price is greater than 120% of the applicable conversion price for a certain trading period; the Company can call the debt on or after March 11, 2011; the conversion rate is subject to a dilution adjustment; and the holder can convert upon a significant credit rating decline and upon a call. The Company used approximately $25 million of the proceeds from the issuances to enter into a convertible note hedge and written call options on its common stock to reduce the exposure to dilution from the conversion of the notes. The Company believes it will have sufficient cash on hand, availability under its revolving credit facility and access to various capital markets to repay both the senior notes and convertible notes at maturity.

On February 1, 2009, the Company adopted FSP APB 14-1, which clarifies the accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that reflects the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 requires retrospective application of its provisions.

Upon adoption of FSP APB 14-1, the Company estimated the fair value, as of the date of issuance, of its 2.0% convertible senior notes assuming a 6.25% non-convertible borrowing rate to be $158.1 million. The difference between the fair value and the principal amount of the notes was $71.9 million. This amount was retrospectively recorded as a debt discount and as an increase to additional paid-in capital as of the issuance date. The discount is being accreted to interest expense over the ten-year period to the first put date of the notes in 2014 resulting in an increase in non-cash interest expense in prior and future periods.

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At May 2, 2009, the conversion criteria with respect to the credit rating requirements were met; however the Company’s share price was significantly below the conversion price. Due to the share price being significantly below the conversion price, the convertible notes were classified within “long-term debt” on the condensed consolidated balance sheet as of May 2, 2009. As of May 3, 2008, the conversion criteria with respect to the credit rating requirements were met, however the Company’s share price was below the conversion price; therefore, the convertible notes were classified within “long-term debt” on the condensed consolidated balance sheet as of May 3, 2008.

At May 2, 2009, the Company had $59.8 million in capital leases covering various properties and pieces of equipment. The terms of the capital leases provide the lessor with a security interest in the asset being leased and require the Company to make periodic lease payments, aggregating between $4 million and $6 million per year.

The Company is obligated to fund a cash balance pension plan. The Company’s current policy is to maintain at least the minimum funding requirements specified by the Employee Retirement Income Security Act of 1974. The Company expects no funding requirements in 2009. The Company amended the SFA Pension Plan during 2006, freezing benefit accruals for all participants except those who have attained age 55 and completed 10 years of credited service as of January 1, 2007, who are considered to be non-highly compensated employees. In January 2009, the Company suspended future benefit accruals for all remaining participants in the plan, effective March 13, 2009.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

The Company has not entered into any off-balance sheet arrangements which would be reasonably likely to have a current or future material effect, such as obligations under certain guarantees or contracts, retained or contingent interests in assets transferred to an unconsolidated entity or similar arrangements, obligations under certain derivative arrangements, or obligations under material variable interests.

There were no material changes in the Company’s contractual obligations specified in Item 303(a)(5) of Regulation S-K during the three months ended May 2, 2009. For additional information regarding the Company’s contractual obligations as of January 31, 2009, see the Management’s Discussion and Analysis section of the Form 10-K for the year ended January 31, 2009.

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CRITICAL ACCOUNTING POLICIES

A summary of the Company’s critical accounting policies is included in the Management Discussion and Analysis section of the Company’s Form 10-K for the year ended January 31, 2009 filed with the Securities and Exchange Commission.

NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Pronouncements

In May 2008, the FASB issued FSP APB 14-1 which clarifies the accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). The Company adopted the provisions of FSP APB 14-1 on February 1, 2009.

In February 2008, the FASB issued FSP Statement of Financial Accounting Standard (“SFAS”) No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP SFAS 157-2”), which delayed the effective date of SFAS No. 157 “Fair Value Measurements” (“SFAS 157”) for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company adopted the provisions of FSP SFAS 157-2 for the Company’s nonfinancial assets and liabilities measured at fair value on a nonrecurring basis on February 1, 2009.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”), which addresses the recognition and accounting for identifiable assets acquired, liabilities assumed, and non-controlling interests in business combinations. SFAS 141(R) also establishes expanded disclosure requirements for business combinations. The Company adopted the provisions of SFAS 141(R) on February 1, 2009 and will apply them to any future business combinations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). This standard outlines the accounting and reporting for ownership interest in a subsidiary held by parties other than the parent. SFAS 160 is effective as of the beginning of the 2009 fiscal year. The adoption of SFAS 160 as of February 1, 2009 did not have an impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). This Statement amends and expands the disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), to require an entity to provide an enhanced understanding of its use of derivative instruments, how they are accounted for under SFAS 133 and their effect on the entity’s financial position, financial performance, and cash flows. The provisions of SFAS 161 are effective as of the beginning of the 2009 fiscal year. The adoption of SFAS 161 as of February 1, 2009 did not have an impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

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In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of both basic and diluted earnings per share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The application of FSP EITF 03-6-1 did not have a material impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

In June 2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity’s own stock. The adoption of EITF 07-5 as of February 1, 2009 did not have an impact on the Company’s condensed consolidated financial statements for the three months ended May 2, 2009.

In June 2008, the FASB ratified EITF Issue No. 08-3, “Accounting by Lessees for Nonrefundable Maintenance Deposits” (“EITF 08-3”). EITF 08-3 clarifies how a lessee shall account for a maintenance deposit under an arrangement accounted for as a lease. The adoption of EITF 08-3 as of February 1, 2009 did not have a material impact on the Company’s consolidated financial statements for the three months ended May 2, 2009.

Recently Issued Pronouncements

In December 2008, the FASB issued FSP SFAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP SFAS 132(R)-1”), which provides additional guidance on employers’ disclosures about the plan assets of defined benefit pension or other postretirement plans. The disclosures required by FSP SFAS 132(R)-1 include a description of how investment allocation decisions are made, major categories of plan assets, valuation techniques used to measure the fair value of plan assets, the impact of measurement using significant unobservable inputs and concentrations of risk within plan assets. FSP SFAS 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Company will adopt the new disclosure requirements in the 2009 annual reporting period.

In April 2009, the FASB issued FSP SFAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP SFAS 157-4”), which provides additional guidance on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and includes guidance on identifying

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circumstances that indicate when a transaction is not orderly. FSP SFAS 157-4 is effective for interim and annual periods ending after June 15, 2009. The Company does not believe the adoption of FSP SFAS 157-4 will have a material impact on the Company’s condensed consolidated financial statements in future periods.

In April 2009, the FASB issued FSP SFAS 115-2 and SFAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS 115-2 and SFAS 124-2”), which: 1) clarifies the interaction of the factors that should be considered when determining whether a debt security is other than temporarily impaired, 2) provides guidance on the amount of an other-than-temporary impairment recognized in earnings and other comprehensive income and 3) expands the disclosures required for other-than-temporary impairments for debt and equity securities. FSP SFAS 115-2 and SFAS 124-2 is effective for interim and annual periods ending after June 15, 2009. The Company does not believe the adoption of FSP SFAS 115-2 and SFAS 124-2 will have a material impact on the Company’s condensed consolidated financial statements in future periods.

In April 2009, the FASB issued FSP SFAS 107-1 and APB No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1 and APB 28-1”), which requires disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP SFAS 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009. The Company will adopt the new disclosure requirements for the interim period beginning May 3, 2009.

FORWARD-LOOKING INFORMATION

The information contained in this Form 10-Q that addresses future results or expectations is considered “forward-looking” information within the definition of the Federal securities laws. Forward-looking information in this document can be identified through the use of words such as “may,” “will,” “intend,” “plan,” “project,” “expect,” “anticipate,” “should,” “would,” “believe,” “estimate,” “contemplate,” “possible,” and “point.” The forward-looking information is premised on many factors, some of which are outlined below. Actual consolidated results might differ materially from projected forward-looking information if there are any material changes in management’s assumptions.

The forward-looking information and statements are or may be based on a series of projections and estimates and involve risks and uncertainties. These risks and uncertainties include such factors as: the level of consumer spending for luxury apparel and other merchandise carried by the Company and its ability to respond quickly to consumer trends; macroeconomic conditions and their effect on consumer spending; the Company’s ability to secure adequate financing; adequate and stable sources of merchandise; the competitive pricing environment within the retail sector; the effectiveness of planned advertising, marketing, and promotional campaigns; favorable customer response to relationship marketing efforts of proprietary credit card loyalty

38

programs; appropriate inventory management; effective expense control; successful operation of the Company’s proprietary credit card strategic alliance with HSBC Bank Nevada, N.A.; geo-political risks; the performance of the financial markets; changes in interest rates; and fluctuations in foreign currency. For additional information regarding these and other risk factors, please refer to the Company’s Form 10-K for the fiscal year ended January 31, 2009 filed with the SEC, which may be accessed via EDGAR through the Internet at www.sec.gov.

Management undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events, or otherwise. Persons are advised, however, to consult any further disclosures management makes on related subjects in its reports filed with the SEC and in its press releases.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s exposure to market risk primarily arises from changes in interest rates and the U.S. equity and bond markets. 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. Such derivative instruments can be used 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 borrowings, and derivative financial instrument activities.

Based on the Company’s market risk sensitive instruments outstanding at May 2, 2009, 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.

Item 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of such date. The Company’s disclosure controls and procedures are designed

39

to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely discussions regarding required disclosures.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended May 2, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

The information in “Part I – Financial Information, Note 9 – Contingencies- Legal Contingencies,” is incorporated into this Item by reference.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended May 2, 2009, the Company did not sell any equity securities which were not registered under the Securities Act.

The Company has a share repurchase program that authorizes it to purchase shares of the Company’s common stock in order to both distribute cash to stockholders and manage dilution resulting from shares issued under the Company’s equity compensation plans. The Company did not repurchase and retire any shares of common stock during the quarter ending May 2, 2009. At May 2, 2009, 32.7 million shares remained available for repurchase under the Company’s 70.0 million share repurchase authorization.

Item 6. EXHIBITS

4.1 Indenture related to the 7.50% Convertible Notes Due 2013, dated as of May 27, 2009, between Saks Incorporated, the subsidiary guarantors named therein and The Bank of New York Mellon, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 27, 2009)

40

4.2	Form of 7.50% Convertible Notes Due 2013 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 27, 2009)
10.1	Form of Performance Unit Award Agreement ((incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 2, 2009)
10.2	Amendment to Employment Agreement between Saks Incorporated and Stephen I. Sadove, Chairman and Chief Executive Officer, dated April 9, 2009
10.3	Amendment to Employment Agreement between Saks Incorporated and Ronald L. Frasch, President and Chief Merchandising Officer, dated April 9, 2009
10.4	Amendment to Employment Agreement between Saks Incorporated and Kevin G. Wills, Executive Vice President and Chief Financial Officer, dated April 9, 2009
31.1	Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
32.2	Certification of Chief Financial Officer, Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

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SIGNATURE

Pursuant to the requirements 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.

	SAKS INCORPORATED
	Registrant
Date: June 4, 2009	/s/ Kevin G. Wills
	Kevin G. Wills
	On behalf of registrant and as Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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EX-10.2

Exhibit 10.2

April 9, 2009

Stephen I. Sadove

7 Hickory Pine Court

Purchase, NY 10577

Re: Employment Agreement between Saks Incorporated and Stephen I. Sadove, dated as of July 31, 2007, as amended on December 16, 2008 (“Employment Agreement”)

Dear Steve:

This letter agreement serves to amend the Employment Agreement in accordance with Section 13(c) thereof. All capitalized terms in this letter agreement shall have the same meaning as in the Employment Agreement, except as provided herein.

Effective June 1, 2009, solely for purposes of Sections 3(a) and 3(b) and the definition of “Good Reason” contained in Section 4(c) of the Employment Agreement, Executive’s Base Salary shall be reduced 7% from $1,060,000.00 to $985,800. Notwithstanding the preceding sentence, for all other purposes of the Agreement, the term Base Salary shall be $1,060,000.00 (or any higher rate from time to time in effect).

The Company acknowledges that “Good Reason” under the Employment Agreement includes, among other things, “any reduction in the Executive’s Base Salary [or] annual bonus opportunity in any such case below the level specified by this Agreement without the substitution of an equivalent benefit”, and that the Executive may terminate employment for Good Reason following the effective date of the change in Base Salary mentioned above. Executive, by signing below, hereby irrevocably waives Executive’s right to claim Good Reason solely as a consequence of the changes provided above. This waiver is a one time waiver of Executive’s right under the Employment Agreement, and shall not be binding on the Executive in any other respect.

The changes to the Employment Agreement described above are subject to the approval of the Human Resources and Compensation Committee of the Company’s Board of Directors and shall only become effective upon such approval.

Sincerely,

SAKS INCORPORATED

/s/ Christine A. Morena

Christine A. Morena

Executive Vice President, Human Resources

By signing on the line below, Executive expressly agrees to the change in Base Salary and waives Executive’s right to claim “Good Reason” under the Employment Agreement
By:	/s/ Stephen I. Sadove
	Stephen I. Sadove
Title:	Chairman and CEO

Date: 4-12-09

Page 2

EX-10.3

Exhibit 10.3

April 9, 2009

Ronald L. Frasch

19 Hirst Road

Briarcliff Manor, NY 10510

Re: Employment Agreement between Saks Incorporated and Ronald L. Frasch, dated as of July 31, 2007, as amended on December 18, 2008 (“Employment Agreement”)

Dear Ron:

This letter agreement serves to amend the Employment Agreement in accordance with Section 13(c) thereof. All capitalized terms in this letter agreement shall have the same meaning as in the Employment Agreement, except as provided herein.

Effective June 1, 2009, solely for purposes of Sections 3(a) and 3(b) and the definition of “Good Reason” contained in Section 4(c) of the Employment Agreement, Executive’s Base Salary shall be reduced 7% from $1,050,000 to $976,500. Notwithstanding the preceding sentence, for all other purposes of the Agreement, the term Base Salary shall be $1,050,000 (or any higher rate from time to time in effect).

The Company acknowledges that “Good Reason” under the Employment Agreement includes, among other things, “any reduction in the Executive’s Base Salary [or] annual bonus opportunity in any such case below the level specified by this Agreement without the substitution of an equivalent benefit”, and that the Executive may terminate employment for Good Reason following the effective date of the change in Base Salary mentioned above. Executive, by signing below, hereby irrevocably waives Executive’s right to claim Good Reason solely as a consequence of the changes provided above. This waiver is a one time waiver of Executive’s right under the Employment Agreement, and shall not be binding on the Executive in any other respect.

The changes to the Employment Agreement described above are subject to the approval of the Human Resources and Compensation Committee of the Company’s Board of Directors and shall only become effective upon such approval.

Sincerely,

SAKS INCORPORATED

/s/ Christine A. Morena

Christine A. Morena

Executive Vice President, Human Resources

By signing on the line below, Executive expressly agrees to the change in Base Salary and waives Executive’s right to claim “Good Reason” under the Employment Agreement
By:	/s/ Ronald L. Frasch
	Ronald L. Frasch
Title:	President

Date: 4-15-09

Page 2

EX-10.4

Exhibit 10.4

April 9, 2009

Kevin G. Wills

1310 Legacy Drive

Birmingham, AL 35242

Re: Employment Agreement between Saks Incorporated and Kevin G. Wills, dated as of April 17, 2007, as amended on December 18, 2008 (“Employment Agreement”)

Dear Kevin:

This letter agreement serves to amend the Employment Agreement in accordance with Section 13(c) thereof. All capitalized terms in this letter agreement shall have the same meaning as in the Employment Agreement, except as provided herein.

Effective June 1, 2009, solely for purposes of Sections 3(a) and 3(b), Executive’s Base Salary shall be reduced 5% from $615,000.00 to $584,250.00. Notwithstanding the preceding sentence, for all other purposes of the Agreement, the term Base Salary shall be $615,000.00 (or any higher rate from time to time in effect).

The changes to the Employment Agreement described above are subject to the approval of the Human Resources and Compensation Committee of the Company’s Board of Directors and shall only become effective upon such approval.

Sincerely,

SAKS INCORPORATED

/s/ Christine A. Morena

Christine A. Morena

Executive Vice President, Human Resources

By signing on the line below, Executive expressly agrees to the change in Base Salary and waives Executive’s right to claim “Good Reason” under the Employment Agreement
By:	/s/ Kevin G. Wills
	Kevin G. Wills
Title:	EVP and CFO

Date: 4/17/09

Page 2

EX-31.1

Exhibit 31.1

Pursuant to the certification requirements of Section 302 of the Sarbanes-Oxley Act of 2002, the principal executive officer of the registrant has complied as follows.

I, Stephen I. Sadove, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Saks Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 4, 2009

/s/ Stephen I. Sadove

Stephen I. Sadove

Chief Executive Officer

EX-31.2

Exhibit 31.2

Pursuant to the certification requirements of Section 302 of the Sarbanes-Oxley Act of 2002, the chief financial officer of the registrant has complied as follows.

I, Kevin G. Wills, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Saks Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls or procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 4, 2009

/s/ Kevin G. Wills

Kevin G. Wills

Executive Vice President

and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

The undersigned, Stephen I. Sadove, Chief Executive Officer of Saks Incorporated (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 2, 2009 (the “Report”).

The undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 4th day of June, 2009.

/s/ Stephen I. Sadove

Stephen I. Sadove

Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Saks Incorporated and will be retained by Saks Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF ACCOUNTING OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

The undersigned, Kevin G. Wills, Executive Vice President and Chief Financial Officer of Saks Incorporated (the “Company”), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 2, 2009 (the “Report”).

The undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 4th day of June, 2009.

/s/ Kevin G. Wills

Kevin G. Wills

Executive Vice President

and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Saks Incorporated and will be retained by Saks Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.