Moody's Sinks Saks

Citing a soft operating performance of its department store group, Moody's Investor Services downgraded its rating of Saks, Inc. (Birmingham, Ala.) to below investment grade, the equivalent of a junk bond rating. Those store chains include Parisian, Younkers, Carson Pirie Scott, McRae's, Proffitt's, Herberger's, Boston Store and Bergner's. In 2000, the company announced plans to spin off its one luxury retailer, Saks Fifth Avenue, to a separate company, Saks Fifth Avenue Enterprises. That spin-off should be completed by June 2001.

In the company's most recently reported quarter, ending Oct. 31, 2000, its revenues had dropped 2 percent and its total net income was a negative $8 million. In all-important December, same-store sales fell 0.4 percent from a year ago, though the company attributed that largelt to a poor performance at its Off 5th stores. (That chain will become part of SFA Enterprises.) Moody's actions will affect $3 billion of debt and bank loans.

Perhaps taking advantage of the troubled retailer's situation, Mexican investor Carlos (Slim) Helu bought an additional 1.95 million Saks shares for $17 million, increasing his ownership stake to nearly 15 percent.

Saks Inc. grew from the eight regional Proffitt's department stores in Tennessee that Brad Martin purchased in the 1980s. He subsequently added onto his Proffitt's empire with the acquisitions of McRae's (Jackson, Miss.) in 1994, Younker's (Des Moines, Iowa) and Parisian (Birmingham) in 1996, Herberger's (St. Cloud, Minn.) in 1997, Carson Pirie Scott (Milwaukee) and then Saks in 1998, at which time it renamed itself Saks Inc.. At that time, Saks Inc. was the fourth-largest department store organization in the U.S. It currently operates 362 stores in 39 states – 62 Saks Fifth Avenue stores, 43 Parisian specialty department stores, 31 Proffitt's, 30 McRae's, 51 Younkers, 40 Herberger's, 33 Carson Pirie Scott, 11 Boston Stores, 14 Bergner's and 48 Off 5th outlet stores. The Company also operates Saks Direct, which includes the Folio and Bullock & Jones catalogs and the saksfifthavenue.com web site.