For the prior year six months ended July 30, 2011, the Company recorded net income of $20.0 million, or $.12 per diluted share. Those results included after-tax charges totaling $2.9 million composed of the aforementioned pension and related benefit charge, third-party receivable write-down, and asset impairment charge totaling $1.8 million, $1.8 million of store closing expenses, a $0.3 million loss on debt extinguishment (related to the early retirement of approximately $1.9 million of senior notes) and the aforementioned reversal of approximately $1.0 million in state income tax reserves. Excluding these after-tax charges, the Company would have recorded net income of $22.9 million, or $.14 per share, for the six months ended July 30, 2011.

Comments on the Second Quarter and Six Months Ended July 28, 2012

Stephen I. Sadove, Chairman and Chief Executive Officer of the Company, noted, “While our second quarter results (before certain items) were approximately flat with the prior year second quarter results, we were able to post a modest increase in year-over-year net income (before certain items) for the six months in spite of a challenging economic environment.

“Our comparable store sales increases of 4.7% in both the second quarter and six months were on top of very strong 15.5% and 12.7% increases in the second quarter and first six months of last year, respectively. As expected, we experienced gross margin rate deterioration and SG&A deleverage (excluding certain items) during the quarter and first half.”

Several merchandise categories showed sales strength during the second quarter, including women’s and men’s contemporary apparel, women’s and men’s shoes, fashion and fine jewelry, and cosmetics and fragrances. The New York City flagship store sales performance was positive but modestly below the comparable store sales performance of the Company’s Saks Fifth Avenue stores in the aggregate during the quarter.

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