Saks workers put on leave in payment probe

Saks Inc. shares tumbled more than 7 percent Friday after the upscale retail store operator delayed its annual report amid an expanding investigation into its payment and accounting practices. The company also said some employees had been put on leave.

The Birmingham, Ala.-based company said Thursday that an initial internal investigation, which concerned payments from vendors, had been broadened to include related financial and accounting issues. As a result, Saks said it had not been able to complete its financial statements for fiscal 2004.

On Friday, the company said that “certain individuals who are not executive officers” as defined by Securities and Exchange Commission had been placed on administrative leave because of the probe. The SEC has launched its own investigation.

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In early March, Saks announced it was launching a probe of vendor payments known as markdown money — funds that vendors pay department stores to compensate for merchandise that doesn’t sell. The probe triggered an informal SEC inquiry. Late last month, Saks said that the SEC has upgraded the probe to a “formal” inquiry.

The company also postponed its May 31 annual shareholders meeting without offering another date.

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Saks said that during its fiscal years 1999 through 2003, its Saks Fifth Avenue division improperly collected up to $21.5 million in markdown money from vendors, and it intended to reimburse or otherwise compensate the affected vendors.

At the time, Saks said it expects to restate its financial statements for fiscal 1999 through the third quarter of fiscal 2004 and the financial statements for these periods should no longer be relied upon.

In addition to its luxury Saks Fifth Avenue stores, the company owns Carson Pirie Scott, Parisian and other chains.