Amended: Fitch Ratings Downgrades Saks Inc.'s IDR to 'B'; Outlook Negative.

NEW YORK -- (This release replaces the one released earlier today)

Fitch Ratings has downgraded its ratings on Saks Incorporated (Saks) as follows:

--Long-term Issuer Default Rating (IDR) to 'B' from 'B+';

--Senior secured bank credit facility to 'BB/RR1' from 'BB+/RR1';

--Senior unsecured notes to 'B+/RR3' from 'BB-/RR3'.

The Rating Outlook is Negative. Saks had $649 million in debt outstanding, including a $230 million 2% convertible note due 2024, as of Nov. 1, 2008.

The downgrade reflects the considerable deterioration in luxury department store sales and the resulting pressure on operating margins that already trail its peers, free cash flow and credit metrics. Fitch expects free cash flow to be negative in 2008, with a decline in cash from $101 million in 2007 and increased borrowings under its $500 million credit facility. Further, operating EBITDA could turn negative in 2009 if sales trends remain at recently reported levels which would require further borrowings on its facility to fund operations. Fitch expects liquidity to remain adequate in 2009 but will monitor Saks' ability to manage inventory levels, store expenses and capital expenditures in a timely fashion in the face of the rapid top line deceleration.

While Saks' comparable store sales had been tracking well above its industry peers (with the highest comparable store sales growth among the luxury department store retailers for eight quarters through the first half of 2008), revenue trends for the luxury department stores deteriorated rapidly in the last two months, with the softness no longer just contained to weakness in aspirational consumer spending. Saks comparable store sales in the third quarter was -11.5% as sales trends deteriorated from -5.9% in August to -16.6% in October, with sales at its New York City flagship store, which accounted for over 20% of sales in 2007, also pulling back significantly.

Operating EBITDA for the first three quarters declined by 48% to $78 million from $150 million in the comparable year ago period, reflecting the significant pressure on gross margin in the third quarter which declined by 640 basis points year over year. Saks will continue to face substantial gross margin pressure during the holiday season as inventory is misaligned against recent comparable store sales trends (with comparable inventory up 4.4% year over year at the end of the third quarter) and given heightened promotional activity in the sector. With comparable inventory still expected to be up at the end of the fourth quarter, gross margin pressure will likely continue into 2009.

Saks had $20 million in cash and approximately $85 million in borrowings under its credit facility as of Nov. 1, 2008. Subsequently, the company retired $84.1 million in debt using borrowings on its facility. Total borrowings on the facility reflect the buildup in seasonal working capital and should decrease by year end. Leverage measured by adjusted debt/EBITDAR deteriorated to 5.5 times (x) for the latest 12 months ending Nov. 1, 2008, from the 4.2x reported in each of the last three quarters, while EBITDAR coverage of interest and rents has declined to 1.8x from 2.3x, respectively.

Saks is taking steps to cut inventory receipts by 15% for the spring season and has reduced its capital expenditures to $75 million in 2009 from $125 million anticipated in 2008. However, Fitch expects that same store sales trends could remain considerably weak through 2009 and credit metrics could weaken significantly from current levels as cost cutting measures and reduction in capital expenditures may not be adequate to preserve cash.

The ratings on the company's $500 million secured bank facility and the senior unsecured notes are derived from the IDR and the relevant recovery rating. Fitch's recovery analysis assumes a liquidation value in a distressed scenario of approximately $1 billion. Saks' senior credit facility, which is secured by inventories and certain receivables, is rated 'BB/RR1', indicating outstanding (90%-100%) recovery prospects. The facility terminates in September 2011 and is not subject to any covenants unless the availability falls below $60 million. At that time, it is subject to a fixed charge coverage ratio of at least 1:1. The senior unsecured notes are rated 'B+/RR3', indicating good recovery prospects (51%-70%). Debt maturities are $0 in 2009, $46 million in December 2010 and $142 million in October 2011. The company's significant real estate holdings, which include its Fifth Avenue New York City store, provide a source of liquidity for the company.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.