Not in the Moody for Saks

Saks Inc. (Birmingham, Ala.), parent company of several department store chains, said it expects to meet its earnings estimates for the 2002 fourth quarter and fiscal year and that its bond rating downgrade by Moody's Investors Services last week is not warranted. On Friday, Moody's downgraded Saks'two notches, to B1(the fourth-highest of 11 high-yield ratings the services company awards). It also reduced Saks'long-term issuer rating to B2, the fifth-highest rating, down from Ba3.

Moody's cited Saks'decline in same-store sales and profit margins, and said it saw no hope for a rebound in the short term. The debt ratings affect the $3.2 billion in debt that Saks currently owes, which is already carrying high-yield (or “junk”) ratings.

Saks noted that sales have “recovered significantly” since September 11 at its regional department stores and at its upscale Saks Fifth Avenue division. The company said its expects to meet earnings expectations for its fiscal fourth quarter and full year, ending Feb. 2, 2002.

Hard-hit by the September 11 blow to the New York economy, Saks reported a loss of $22 million for the third quarter ending in early November 2001. For the closely examined holiday shopping month of December, Saks'same-store sales gained 3.5 percent at its regional department stores and declined 1.1 percent at its Saks Fifth Avenue division, for a company-wide increase of 1.9 percent.

Saks'chain of more than 300 regional department stores, concentrated in the Southeast and Midwest, includes Parisian, Younkers, Carson Pirie Scott, McRae's, Proffitt's, Herberger's, Boston Store and Bergner's.