By and  on May 18, 2005

NEW YORK — It was another bad day for Saks Inc. on Tuesday as the retailer issued disappointing first-quarter figures and was hit by a second lawsuit from a disgruntled vendor.

The Birmingham, Ala.-based retailer said net income was $17.1 million, or 12 cents per share, for the quarter ended April 30. That fell below Wall Street analysts' expectations of 16 cents per share, according to Thomson Financial. Sales for the first quarter rose 0.6 percent to $1.55 billion versus $1.54 billion a year ago.

Meanwhile, International Design Concepts filed a lawsuit Tuesday in Manhattan federal court against Saks Inc. and its Saks Fifth Avenue unit, alleging claims for breach of contract and fraud in connection with its chargeback and vendor allowance practices.

IDC, represented by the law firm Phillips Nizer, said in the lawsuit that it is the assignee of assets of Apparel Group International, the licensee of Oscar de la Renta for the "Oscar by Oscar de la Renta" trademarks that AGI used in connection with the women's sportswear bridge collection at SFA. IDC also said in the lawsuit that AGI is "no longer in operation," alleging that it was "forced out of business by the actions of the Saks defendants."

A spokeswoman for Saks said Tuesday that the company does not comment on pending litigation. Onward Kashiyama had earlier sued Saks for $9,275,643 for "substantial deductions and credits which were not allowed under the terms of the agreement," according to legal papers. The retailer is said to be repaying Onward Kashiyama, which no longer supplies Saks.

The lawsuit charged that AGI had the license for the Oscar mark through Dec. 31, 2005. The lawsuit said that from 1996 until 2003, AGI sold licensed products to Saks and other retailers, but that Saks was its most important customer, representing 60 percent of AGI's total sales. AGI, from 1996 to 2003, issued invoices to Saks totaling $90.2 million for the purchase of licensed products, which Saks accepted. The chargebacks issued and deductions taken by the Saks defendants against AGI invoices for claimed vendor allowances totaled $31.4 million and represented nearly 35 percent of AGI's sales to Saks, the lawsuit charged.

The lawsuit also charged that as a direct consequence of the alleged "improper and excessive chargebacks to AGI and resulting deductions against the AGI invoices, AGI was unable to pay its royalty obligations due under the Oscar de la Renta license." That allegedly led to Oscar de la Renta ending the licensing agreement in February 2004. Another consequence was AGI's inability to meet its financial obligations to HSBC Bank, its bank and principal lender. HSBC foreclosed on its loan, forcing AGI out of business, a "direct consequence of the improper and excessive chargebacks issued by Saks," the lawsuit charged.

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