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Profit Is Light at Saks

Below-plan gross margins are cited.
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first-quarter earnings were slightly below Wall Street estimates, weighed down by weaker-than-expected gross margins and negative same-store sales at its flagship department store.

The company, which previously disclosed that its financial statements for past periods are no longer reliable because of shoddy accounting for vendor allowances, earned $17.1 million, or 12 cents a share, in the first quarter ended April 30. The period included a gain of 1 cent a share for the sale of closed stores and a 1-cent charge related to the accounting investigation.

First-quarter sales were $1.55 billion, reflecting sales of $844 million at its department-store division and $706 million at its Saks Fifth Avenue Enterprises division. The latter encompasses its Parisian, Proffitt's, McRae's, Younkers, Herberger's, Carson Pirie Scott, Bergner's and Boston Store properties.

Companywide same-store sales rose 1.9% from a year ago, reflecting a 0.9% decrease at Saks department stores and a 5.5% increase at the Fifth Avenue Enterprise division.

Analysts surveyed by Thomson First Call had been forecasting earnings of 16 cents a share on sales of $1.56 billion.

The company said earnings in the first quarter reflected "below-plan gross margin performance and a modest amount of continued investment spending at Saks Fifth Avenue Enterprises." Inventories at April 30 were $1.56 billion, up slightly from a year ago, while consolidated comparable-store inventories were essentially flat with last year.

Regarding the accounting situation, Saks said it's still trying to confirm the amount of total vendor markdown allowances that were improperly collected, and is reviewing bookkeeping practices related to the timing and the recognition of certain vendor allowances. It expects to file its 2004 annual report with the

Securities and Exchange Commission

by Sept. 1.