* Won't "see that again," says of Q4 discounts
* To cut inventory 20 percent in 2009
* Eyes better customer service
By Aarthi Sivaraman
NEW YORK, Feb 25 (Reuters) - Saks Inc is taking steps to ensure that the upscale store chain will not have to repeat the margin-dissolving discounts it took in the 2008 holiday season, its top executive said on Wednesday.
The retailer, which operates 53 Saks Fifth Avenue stores, is less than two months out of the holiday season when it marked down some merchandise as much as 70 percent to lure thrifty shoppers into its stores.
The effort helped it clear inventory, Saks said, but hurt its gross margin, and the company posted a quarterly loss that was steeper than Wall Street had expected.
"That was a one-time phenomenon," Steve Sadove told Reuters in an interview, referring to the discounts. "That imbalance in supply and demand was a one-time phenomenon, a correction that we had to deal with. I would not anticipate that you would see that again."
Investors shrugged off Saks' loss and the company's shares rose 21.6 percent after Sadove on a conference call dismissed rumors that Saks may have to seek bankruptcy protection.
Sadove said Saks is targeting a 20 percent decrease in inventory for 2009 -- a move that would put less pressure on it to clear inventory later.
Lower inventory, better customer service and offering attractive products would help it stick to its resolve going forward to avoid steep sales promotions, Sadove said.
He added that Saks had no plans to target shoppers who may have traded up to Saks' deeply discounted merchandise such as designer clothes, handbags and shoes in the past months.
"Our intent is not to go after a mid-tier customer who happened to come in for a deal and make them a core customer at Saks," Sadove said. "(Saks) is a luxury player."
Though Sadove acknowledged that the luxury sector was suffering, he said in the interview that Saks was taking all possible steps to combat the economic downturn.
Its efforts include a 9 percent cut in its workforce, and shaving capital expenditures by over 50 percent to $60 million in fiscal 2009.
"We said we intend to be cash flow positive. Clearly as we demonstrate all that, it should stop the discussion," Sadove said, referring to the bankruptcy rumors. (Reporting by Aarthi Sivaraman; Editing by Brian Moss)