Saks Inc. said that its internal investigation confirmed the results of an earlier audit that one of its Saks Fifth Avenue stores overcharged vendors by millions.
Saks said that next month it plans to make restatements to financial statements from 1999 through the third quarter of 2004. The pricing discrepancies during those years arose from one of Saks' merchandising divisions improperly collecting $26 million in markdown allowances from suppliers, as well as another $8 million in allowances from 1996 to 1998.
A markdown allowance is when a store collects money from a supplier to shore up the profit cut a store takes when merchandise doesn't sell at full price and ends up on sale.
The company's management ordered the investigation in March, originally believing that the improper allowances totaled closer to $20 million. In May the company fired its chief accounting officer and other top executives after the first stages of the investigation turned up falsified accounts. Saks said that it has already begun reimbursing suppliers and will pay out a total of appoximately $14 million. A side inquiry by Saks' audit committee found improper timing of recording of inventory markdowns for three over their past five fiscal years, although the timing is not expected to affect the annual financial results reported for those years. Saks said that is it continuing to cooperate with investigations being conducted by the Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York.
