SAKS INCORPORATEDUp 2003 ANNUAL REPORT trend

2003 SAKS INCORPORATED

moving Saks Incorporated operates two distinct business segments.

SAKS DEPARTMENT STORE GROUP consists of 241 department stores Up under the nameplates of Parisian, Proffitt’s, McRae’s, , Herberger’s, Carson Pirie Scott, Bergner’s, and and 22 Club Libby Lu specialty stores.

SAKS FIFTH AVENUE ENTERPRISES consists of 62 luxury department stores and 53 Saks Off 5th stores. 2003 SAKS INCORPORATED

FINANCIAL HIGHLIGHTS

SAKS INCORPORATED FINANCIAL HIGHLIGHTS

Year Ended

January 31, February 1, February 2, (In thousands, except per share amounts) 2004 2003 2002

Net Sales $ 6,055,055) $ 5,911,122) $ 6,070,568)

Net Income Before Accounting Change $ 82,827) $ 69,837) $ 322)

Net Income $ 82,827) $ 24,244) $ 322)

Diluted Earnings Per Common Share, Before Accounting Change $ 0.58) $ 0.48) $ 0.00)

Diluted Earnings Per Common Share $ 0.58) $0.17) $ 0.00)

Diluted Weighted Average Common Shares 142,921) 146,707) 144,498)

Total Assets $ 4,654,869) $ 4,579,356) $ 4,595,521)

Total Long-Term Debt, Including Current Maturities $ 1,277,521) $ 1,332,162) $ 1,361,641)

Shareholders’ Equity $ 2,322,168) $ 2,267,272) $ 2,271,437

Total Debt To Capitalization 35.5% 37.0%) 37.5%) )

02 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

to our shareholders

2003 2003 was a year of progress for Saks Incorporated. We saw recovery in the business over the course of the year, and we are well positioned to take advantage of an improving economic environment in 2004.

Diluted earnings per share increased to $.58 in 2003, Upfrom $.48 (before the cumulative effect of an accounting change) in 2002. This improvement was driven by a 1.6% comparable store sales gain and higher merchandise margins. Progress was achieved in spite of increased SG&A expenses, largely related to a lower contribution from credit operations, due to our alliance with Household International, which was consummated in April 2003.

03 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

Our key strategic accomplishments included: We completed an exchange offer on our 2008 senior debt, which lowered the coupon rates, extended Upgrading our leadership team 2003 maturities, and reduced debt by approximately $50 and streamlining our million. At year end, our debt-to-capitalization ratio organizational structure. was 35.5%, and cash on hand totaled $366 million. We added key management at both Saks Fifth Avenue During the year, we purchased approximately 7.9 million Enterprises (“SFAE”) and the Parisian division of Saks shares of stock (for a total price of approximately $80 Department Store Group (“SDSG”). We also completed million) under our common stock repurchase programs. the consolidation of Younkers’ home offices into those We have approximately 21.9 million shares remaining of Carson Pirie Scott. under the authorization. In January 2004, we also made a voluntary cash contribution of $70 million to Improving our financial position our pension plans, substantially reducing the under- funded position of the plans and future cash and strengthening our balance sheet. contribution requirements. In addition to consummating the strategic credit card Subsequent to year end, the Board of Directors alliance with Household International, which reduced declared a special one-time cash dividend of $2 per risk and will enhance returns on invested capital, we share, with an expected pay out of approximately took additional steps to strengthen our financial condition. $284 million. We believe this dividend represents the We increased our revolving credit facility to $800 most efficient way to distribute surplus capital to our million and extended the maturity to 2009. shareholders and demonstrates our confidence in the continued profitable growth of the business and our commitment to enhancing total shareholder returns. We have the financial resources and liquidity to pursue our strategies. measuring 04 Up 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

Further enhancing our Investing in strategic real estate portfolio. systems improvements.

Our real estate strategy remains centered on enhancing We completed the conversion of each of our operating our position in existing core markets and on entering divisions to a common technology platform with key strategic markets. During the year, our capital greatly enhanced inventory management tools, expenditures totaled $180 million, with nearly half permitting more sophisticated inventory planning and related to opening seven new stores and renovating more precise by-store inventory allocation. We also six others. Saks Fifth Avenue opened stores in two new began the company-wide installation of advanced key markets—Indianapolis, and Richmond, point-of-sale systems, which will allow for more Virginia. At SDSG, we strengthened our position in clienteling and customer relationship management several important existing markets including Omaha, capabilities. Logistics enhancements installed at our Nebraska; Lansing, ; Green Bay, ; distribution centers have increased the efficiency at and Peoria, . In addition, we opened a new which merchandise arrives at our stores. Web- Off 5th store in St. Louis, Missouri. We also closed or enabled technology is becoming more important, converted six under-productive units. We ended the with multiple applications throughout the Company, year with 34.4 million square feet of store space. including benefits administration, travel management, As a result of our approach, we are generating e-procurement for supply purchasing, and “reverse” improved returns on invested capital and higher sales auctions for private brand merchandise sourcing, per square foot from our real estate portfolio. which is leading to greater profitability in this increasingly important area of our business.

05 SAKS DEPARTMENT STORE GROUP

the“h 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

SDSG operates 241 department stores, core vendors, and most in 24 states, with 26.4 million square feet, important, from our own under the nameplates of Parisian, Proffitt’s, proprietary brands. McRae’s, Younkers, Herberger’s, Carson Differentiated products Pirie Scott, Bergner’s, and Boston Store, represented nearly 30% of our revenues in 2003, up from and 22 Club Libby Lu specialty stores. 17% two years ago. We are the “hometown” stores and have the number one or number two market Our key item strategy is delivered with authoritative share in 90% of our trade areas. presentations of “must-have” selections in meaningful quantities on our sales floor, supported by compelling SDSG comparable store sales grew 0.4%, and this fixturing and signing. Revenues from key items exceeded performance was at the upper end of our traditional 16% of total sales in 2003, up from 11% two years ago. department store peer group. SDSG operating income We are continuing to add unique elements and totaled $183 million compared to $197 million last departments that make us a shopping destination and year. The decline primarily was a result of a $33 bring a new level of energy to our stores. An example million pre-tax decrease in net credit contribution related of this is Club Libby Lu, to the sale of the private label credit card portfolio. a fresh, distinctive retail concept that offers a truly Areas of focus in 2003 for SDSG included: unique assortment of Adding excitement to our merchandise products and experiences assortments through differentiation, key for the “tween” customer. We acquired this specialty retailer last May and now have 22 mall-based Club items, and expanded categories. Libby Lu stores and Club Libby Lu shops in six of our We are successfully providing product differentiation department stores. This special customer receives the through merchandise from unique vendors, selections “royal” treatment as she enters the preteen fantasyland from emerging suppliers, exclusive products from our for shopping, birthday parties, and special events.

07 SAKS DEPARTMENT STORE GROUP ometown”stores 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

Transforming the shopping experience. our Customer Relationship Management objectives, using customer spending habits to not only build our We continued to make our stores more customer- merchandise assortments by location, but also to market friendly and convenient to shop. We have added more effectively to unique customer groups and to many innovative features including high-visibility directional signing, “comfort zones” and “living room” improve the in-store experience by offering a variety of areas, headsets in high-traffic shoe departments, and fresh events catered to local markets. a “Wrap-it Express” program. Independent monitoring indicates that we are making progress in the service Reinvigorating the Parisian business. arena as our marks in customer satisfaction continue to George Jones, President and CEO of SDSG, assumed improve year over year. the CEO role at Parisian in addition to his SDSG responsibilities, and subsequently appointed new Reducing pricing confusion. leadership in key merchandising, store, and marketing We are maintaining our emphasis on simplifying positions at this division. With strengthened leadership, pricing and offering great value for our customers. we have renewed our Our “Incredible Value” program has proven highly commitment to assuring successful in providing great products that are that these stores indeed guaranteed to never be on provide our customers sale for less during the season. more differentiated We also support this value product, an even higher level of customer service, and proposition by offering a “price guarantee” on widely intensified one-on-one clienteling. As a result, comparable distributed brands. store sales grew substantially in the second half of 2003.

Executing innovative localized marketing. In 2004, we will remain focused on delivering the right product, enhancing the shopping experience, eliminating Our marketing supports our strategy of offering pricing confusion, executing innovative localized differentiated products, key items, and enjoyable marketing, and maximizing the opportunities in the in-store experiences. In addition, we are executing Parisian business.

08 SAKS DEPARTMENT STORE GROUP SAKS FIFTH AVENUE ENTERPRISES 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

SFAE operates 62 Saks Fifth Avenue luxury Enhanced the luxury shopping experience. department stores, in 26 states, with 6.5 In our stores, warm environments, progressive training million square feet of space, and 53 Saks and hiring, and various new service initiatives combine Off 5th stores, in 23 states, with 1.4 million to create an inviting luxury experience. We added square feet. “living room” areas to our stores and completed the nationwide roll-out of our At SFAE, comparable store sales grew by 3.4%. ServiceFirst desks. These areas, Operating income rose to $109 million, from $102 prominently located in each store, million in the prior year, in spite of a $17 million pre- are a single point of contact for tax decline in net credit contribution related to the sale all of our service offerings, of the private label credit card portfolio. including personal shopping, alterations, credit services, and Excellent progress was made in 2003 to position SFAE returns. Independent monitoring shows meaningful for a promising future. Specifically, we: year-over-year improvement in service levels.

Added outstanding leadership to the SFAE We offer an unsurpassed luxury shopping experience organization. and the same great merchandise assortments regardless Fred Wilson, former Chairman, President, and CEO of the channel our customer of Donna Karan, joined SFAE as Chairman and CEO selects—in store, on-line, or via in December 2003. Shortly after year end, Andrew catalog. More and more Jennings, former President of Holt Renfrew, Canada’s customers are buying on-line or definitive luxury store, was named President of Saks through our catalogs, and these Fifth Avenue, reporting to Fred. We have also added revenues grew by more than new marketing and Customer Relationship Management 50% in 2003. talent at SFAE. We now have the leadership in place to capitalize on the enormous power and opportunities inherent in this great franchise.

10 world classluxury 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

Reinforced our style leadership in focus We also are focused on important, cause-related businesses. marketing efforts to further create a connection with the communities and Saks Fifth Avenue is intent on being the foremost style customers we serve. authority in several key businesses, including cosmetics, Examples include handbags, women’s footwear, fine jewelry, "gold “Key to the Cure,” range" women’s apparel (positioned between bridge a special, nation- and designer), and contemporary women’s apparel. wide shopping In each of these areas, we expanded inventory, event to support staffing, and space commitments. Revenues for these women’s cancer research, and “Save the Music,” our six focus businesses grew nearly 12% during 2003 holiday charitable initiative charged with restoring music and comprise approximately 40% of the business. programs in public schools across the U.S.

Cultivated customer relationships. Entered new business categories. We intensified our emphasis on Customer Relationship We are extending our style authority into other Management (CRM) in order to foster engagement, businesses, as well. For example, we now offer a full repeat visits, and loyalty through marketing and clienteling bridal service— efforts. Our CRM initiatives emphasize differentiated gowns, jewelry, service and experiences based on shopping patterns and gift registry— and a personalized direct marketing approach. which was introduced into ten We elevated our SaksFirst Rewards program, the most stores in 2003. rewarding affinity program in retail. A new Diamond Tier was introduced for $25,000 spenders. We also As we enter 2004 at SFAE, we will remain focused added more benefits from our strategic partners, on improving the luxury shopping experience, reinforcing including Ritz-Carlton, Cunard, and British Airways. our style leadership, strengthening relationships with Sales from SaksFirst customers now comprise nearly our customers, and entering new business categories. 30% of Saks Fifth Avenue’s revenues.

11 SAKS FIFTH AVENUE ENTERPRISES brands 2003 SAKS INCORPORATED

LETTER TO OUR SHAREHOLDERS

We recently announced the appointment of Steve In June, Bernard E. Bernstein will retire from Saks Sadove, Vice Chairman of Saks Incorporated, to the Incorporated’s Board of Directors. Bernie has made additional post of Chief Operating Officer of the countless contributions to Saks, and we are extremely Company. Steve has made an outstanding contribution appreciative of his counsel and dedicated service in the two years since he joined the leadership team over the years. We are also pleased that Robert B. of Saks Incorporated. In the role of COO, he will Carter, Executive Vice President and Chief Information foster an enhanced connection between the operations Officer of FedEx Corporation, has joined our Board. of our two principal business segments and our central With his exceptional business and technology corporate support group, including information background, Rob will make an outstanding contribution technology, credit administration, and logistics. He will to our Board and to the Company. also provide leadership on key business processes, such as strategic planning and human resources policies Looking ahead, we have the leadership team and and practices. clear business plans in place to grow sales, expand operating margins, and improve returns on invested We are pleased that Ron Frasch, former Bergdorf capital. Thank you for your support and investment in Goodman Chairman and CEO, has recently joined our Company. our Company. We expect Ron to play a very important role in the future success of our enterprise.

R. Brad Martin Chairman of the Board and Chief Executive Officer

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12 2003 SAKS INCORPORATED

DIRECTORS AND CERTAIN OFFICERS

directors & certain officers

BOARD OF DIRECTORS CERTAIN CORPORATE BUSINESS UNIT AND OFFICERS STORE OFFICERS R. BRAD MARTIN Chairman of the Board and Chief Executive R. BRAD MARTIN SAKS DEPARTMENT STORE GROUP Officer of Saks Incorporated Chairman of the Board and Chief Executive Officer GEORGE L. JONES RONALD DE WAAL President and Chief Executive Officer Vice Chairman of the Board; Chairman of STEPHEN I. SADOVE of Saks Department Store Group We International, B.V. Vice Chairman and Chief Operating Officer TONI E. BROWNING BERNARD E. BERNSTEIN President and Chief Executive Senior Partner in the law firm of Bernstein, JAMES A. COGGIN Officer of Proffitt’s/McRae’s Stair & McAdams LLP President and Chief Administrative Officer ANTHONY J. BUCCINA STANTON J. BLUESTONE President of Carson Pirie Scott & Co. Retired Chairman and Chief Executive DOUGLAS E. COLTHARP Officer of Carson Pirie Scott & Co. Executive Vice President and MICHAEL R. MACDONALD Chief Financial Officer Chairman and Chief Executive Officer ROBERT B. CARTER of Carson Pirie Scott & Co. Executive Vice President and Chief Information CHARLES J. HANSEN Officer of FedEx Corporation Executive Vice President SAKS FIFTH AVENUE ENTERPRISES and General Counsel JAMES A. COGGIN FREDERICK W. WILSON President and Chief Administrative Officer DONALD E. WRIGHT Chairman and Chief Executive Officer of Saks Incorporated Executive Vice President of Finance of Saks Fifth Avenue Enterprises and Chief Accounting Officer JULIUS W. ERVING ANDREW R. JENNINGS President of The Erving Group President of Saks Fifth Avenue MICHAEL S. GROSS Principal of Apollo Management, L.P.

DONALD E. HESS Chairman Emeritus of Parisian; Chief Executive Officer of Southwood Partners

GEORGE L. JONES President and Chief Executive Officer of Saks Department Store Group

NORA P. McANIFF Executive Vice President of Time, Inc.

DR. C. WARREN NEEL Executive Director, Corporate Governance Center at the University of Tennessee STEPHEN I. SADOVE Vice Chairman and Chief Operating Officer of Saks Incorporated MARGUERITE W. SALLEE 13 Staff Director, Senate Subcommittee on Children and Families

CHRISTOPHER J. STADLER Managing Director of Investcorp, S.A. 2003 SAKS INCORPORATED

SAKS FIFTH AVENUE ENTERPRISES STORE LOCATIONS

Saks Fifth Avenue Enterprises

SAKS FIFTH AVENUE ILLINOIS OKLAHOMA CONNECTICUT NEW JERSEY STORES Chicago Tulsa Clinton Elizabeth Highland Park Paramus ALABAMA Skokie OREGON FLORIDA NEW YORK Birmingham Portland Ellenton INDIANA Miami Central Valley ARIZONA Indianapolis PENNSYLVANIA Naples Niagara Falls Phoenix Bala Cynwyd Orlando Riverhead LOUISIANA Pittsburgh Sunrise Westbury CALIFORNIA New Orleans SOUTH CAROLINA NORTH CAROLINA Beverly Hills GEORGIA MARYLAND Charleston Concord Carmel Dawsonville Chevy Chase Hilton Head Morrisville Costa Mesa Lawrenceville La Jolla MASSACHUSETTS TEXAS HAWAII OHIO Mission Viejo Boston Austin Waipahu Aurora Palm Desert Dallas Cincinnati Palos Verdes MICHIGAN Houston ILLINOIS Pasadena Troy Hurst Gurnee PENNSYLVANIA San Diego San Antonio Schaumburg Grove City San Francisco Skokie Philadelphia Santa Barbara Minneapolis VIRGINIA McLean MARYLAND SOUTH CAROLINA COLORADO MISSOURI Richmond Baltimore Myrtle Beach Denver St. Louis Kansas City MASSACHUSETTS TENNESSEE OFF 5TH STORES CONNECTICUT Worcester Nashville (2) Greenwich NEVADA Wrentham ARIZONA Stamford Las Vegas Tempe TEXAS MICHIGAN Grapevine FLORIDA Tucson NEW JERSEY Auburn Hills Katy Bal Harbor Hackensack Dearborn San Marcos Boca Raton CALIFORNIA Short Hills Stafford Ft. Lauderdale Anaheim MINNESOTA Cabazon Ft. Myers NEW YORK Minneapolis Camarillo VIRGINIA Naples Garden City Folsom Leesburg Orlando Huntington MISSOURI Milpitas Woodbridge Palm Beach New York City St. Louis Ontario Palm Beach Gardens Southampton Sarasota Petaluma NEVADA San Diego South Miami OHIO Las Vegas Tampa Beachwood COLORADO Cincinnati Castle Rock GEORGIA Columbus Atlanta Denver

14 store locatio 2003 SAKS INCORPORATED

SAKS DEPARTMENT STORE GROUP STORE LOCATIONS

Saks Department Store Group

PARISIAN STORES NORTH CAROLINA YOUNKERS STORES HERBERGER’S CARSON PIRIE Asheville STORES SCOTT STORES ALABAMA Goldsboro ILLINOIS Birmingham (6) Greenville Moline COLORADO ILLINOIS Decatur Kinston Grand Junction Aurora (3) Dothan Rocky Mount Bloomingdale Florence Ames IOWA Bourbonnais Huntsville (2) SOUTH CAROLINA Cedar Falls Ottumwa Calumet City Mobile Greenville Cedar Rapids (2) Chicago (3) Montgomery (2) Spartanburg Coralville MINNESOTA Chicago Ridge Tuscaloosa Davenport Albert Lea Dundee TENNESSEE Des Moines (4) Alexandria Evergreen Park FLORIDA Athens Dubuque Bemidji Joliet Jacksonville Chattanooga (2) Fort Dodge Bloomington Lincolnwood Orlando (2) Cleveland Iowa City Brainerd Lombard (2) Pensacola Greeneville Marshalltown Fergus Falls Matteson Tallahassee Johnson City Mason City Mankato Mount Prospect Kingsport Sioux City (2) Moorhead Naperville GEORGIA Knoxville (2) Waterloo New Ulm Norridge Atlanta (7) Maryville West Burlington Rochester North Riverside Columbus Morristown Roseville Orland Park Macon Oak Ridge MICHIGAN St. Cloud St. Charles Bay City St. Paul Schaumburg (2) INDIANA VIRGINIA Grandville Stillwater Vernon Hills Indianapolis (2) Bristol Holland Virginia Wilmette (2) Lansing Willmar MICHIGAN WEST VIRGINIA Marquette INDIANA Livonia Morgantown Muskegon MONTANA Hammond Rochester Hills Parkersburg Okemos Billings Merrillville Port Huron Butte Michigan City MISSISSIPPI Traverse City Great Falls Tupelo McRAE’S STORES Havre MINNESOTA Kalispell OHIO BOSTON STORES ALABAMA Austin Missoula Cincinnati Birmingham (3) Duluth WISCONSIN Dayton NEBRASKA Dothan Brookfield (2) NEBRASKA Hastings SOUTH CAROLINA Gadsden Janesville Grand Island Kearney Charleston Huntsville Madison (2) Lincoln Norfolk Columbia (2) Mobile (4) Omaha (3) North Platte Selma Racine Scottsbluff TENNESSEE Tuscaloosa SOUTH DAKOTA Chattanooga Sioux Falls NORTH DAKOTA Knoxville FLORIDA Bismarck BERGNER’S STORES Nashville Mary Esther WISCONSIN Dickinson Pensacola ILLINOIS Appleton Fargo Bloomington Eau Claire Minot LOUISIANA Champaign PROFFITT’S STORES Fond du Lac Baton Rouge Forsyth Green Bay (2) SOUTH DAKOTA Monroe Galesburg GEORGIA Manitowoc Aberdeen Machesney Park Dalton MISSISSIPPI Marinette Rapid City Pekin Rome Biloxi Marshfield Watertown Peoria (2) Columbus Sheboygan KENTUCKY Peru Gautier Sturgeon Bay WISCONSIN Ashland Quincy Greenville Superior Beaver Dam Elizabethtown Rockford (2) Hattiesburg Wausau La Crosse Springfield 15 Jackson (4) Wisconsin Rapids Rice Lake Sterling Laurel McComb WYOMING Meridian Rock Springs Natchez Tupelo ns Vicksburg 2003 SAKS INCORPORATED

SHAREHOLDER INFORMATION

SALES RELEASE DATES FOR 2004 Address shareholder inquiries to:

Sales Period Release Date Shareholder Relations Department February 2004 3/4/04 P.O. Box 11258 March 2004 4/8/04 Church Street Station April 2004 5/6/04 New York, New York 10286 May 2004 6/3/04 June 2004 7/8/04 Send certificates for transfer and address changes to: July 2004 8/5/04 Receive and Deliver Department August 2004 9/2/04 P.O. Box 11002 September 2004 10/7/04 Church Street Station October 2004 11/4/04 New York, New York 10286 November 2004 12/2/04 December 2004 1/6/05 In all correspondence or telephone inquiries, please mention January 2005 2/3/05 Saks Incorporated, your name as printed on your stock certificate, your Social Security number, your address, and EARNINGS RELEASE DATES FOR 2004 your phone number.

Quarter Release Date Beneficial shareholders (shares held by you in the name of First 5/18/04 your broker or other nominee) should direct communications Second 8/17/04 on all administrative matters to your nominee owner. Third 11/16/04 Fourth To be announced TO REACH US Visit www.saksincorporated.com/investor_relations.html to: ANNUAL MEETING • Receive news releases by signing up for e-mail alerts The Annual Meeting of Shareholders of Saks Incorporated • View SEC filings, investor presentations, financial results, will be held at 11:30 a.m. Eastern Time, Tuesday, June 8, and other company information. 2004, at the Ritz-Carlton Hotel, 181 Peachtree Street N.E., Atlanta, Georgia 30303. Shareholders are cordially Contact us at: invited to attend. Investor Relations Department INQUIRIES REGARDING YOUR Saks Incorporated P.O. Box 9388 STOCK HOLDINGS Alcoa, Tennessee 37701 Registered shareholders (shares held by you in your name) (865) 981-9541 (telephone) should address communications to the Company’s Transfer (865) 981-6325 (facsimile) Agent and Registrar: [email protected] (e-mail) The Bank of New York (866) 455-3121 (telephone) [email protected] (e-mail) www.stockbny.com (web site)

16 shareholderinformation 2003 SAKS INCORPORATED

CORPORATE INFORMATION

WE ARE COMMITTED TO CORPORATE HEADQUARTERS FOSTERING AN INCLUSIVE 750 Lakeshore Parkway ENVIRONMENT FOR OUR Birmingham, Alabama 35211 ASSOCIATES, CUSTOMERS, (205) 940-4000 AND SUPPLIERS.

Understanding and valuing diversity are core to this SAKS FIFTH AVENUE ENTERPRISES commitment. At Saks, HEADQUARTERS managing diversity is a 12 East 49th Street strategic imperative. New York, New York 10017 Through an intentional (212) 940-4048 combination of recruiting, retention, and development efforts, over the past 5 years we have improved minority SAKS DEPARTMENT STORE GROUP representation among our HEADQUARTERS management associates by PARISIAN more than 20%. We will continue this focus. 750 Lakeshore Parkway Birmingham, Alabama 35211 Building upon this momentum, (205) 940-4000 in 2003 we created a Diversity Steering Committee. PROFFITT’S AND McRAE’S This Steering Committee is 115 North Calderwood Street charged with furthering our Alcoa, Tennessee 37701 diversity strategy. Our strategy (865) 983-7000 is focused in four key areas: education and awareness, representation, talent NORTHERN DEPARTMENT STORE GROUP management and (CARSON PIRIE SCOTT, BOSTON STORE, development, and business BERGNER’S, HERBERGER’S, AND YOUNKERS) growth initiatives. Our Board 331 West Wisconsin Avenue of Directors monitors our Milwaukee, Wisconsin 53203 performance in this regard. (414) 347-4141

INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP Birmingham, Alabama

© 2004 Saks Incorporated