##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



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FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended July 31, 2004

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

For
the transition period from _______________ to _______________

Commission file number 000-26207

BELK, INC.

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Delaware
    
    56-2058574(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)2801 West Tyvola Road, Charlotte, NC
    
    28217-4500(Address of Principal Executive Offices)
    
    (Zip Code)


Registrants Telephone Number, including Area Code (704) 357-1000



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Indicate by check þ whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days

Yes
þ
     No

Indicate by check þ whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).

Yes
þ
     No

At September 1, 2004, the registrant had issued and outstanding 50,296,681
shares of class A common stock and 1,274,980 shares of class B common stock.

1



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BELK, INC.
Index to Form 10-Q

PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed
Consolidated Statements of Income for the Three and Six Months Ended July 31, 2004 and August 2, 2003
    
    
    4Consolidated Balance Sheets as of July 31, 2004 and January 31, 2004
    
    
    5Consolidated Statement of Changes in Stockholders Equity and Comprehensive
Income for the Six Months Ended July 31, 2004
    
    
    6Condensed Consolidated Statements of Cash Flows for the Six Months Ended
July 31, 2004 and August 2, 2003
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    15PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    16Item 2. Changes in Securities, Use of Proceeds and Issuer
Repurchases of Equity Securities
    
    
    16Item 3. Defaults upon Senior Securities
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16Item 5. Other Information
    
    
    16Item 6. Exhibits and Reports on Form 8-K
    
    
    16


2



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This Report Contains Forward-Looking Statements

Certain statements made in this report, and other written or oral
statements made by or on behalf of the Company, may constitute forward-looking
statements within the meaning of the federal securities laws. Statements
regarding future events and developments and the Companys future performance,
as well as our expectations, beliefs, plans, estimates or projections relating
to the future, are forward-looking statements within the meaning of these laws.
You can identify these forward-looking statements through our use of words
such as may, will, intend, project, expect, anticipate,
believe, estimate, continue or other similar words. Forward-looking
statements include information concerning possible or assumed future results
from merchandising, marketing and advertising in our stores and through the
internet, our ability to be competitive in the retail industry, our ability to
execute profitability and efficiency strategies, our ability to execute our
growth strategies and achieve anticipated results in our new and expanded
stores, the expected benefit of our new systems and technology, the expected
increase in our sales and revenues generated through our proprietary charge
card program and anticipated benefits from the consolidation of our
merchandising, marketing and merchandise planning and allocation function.
These forward-looking statements are subject to certain risks and uncertainties
that may cause our actual results to differ significantly from the results we
discuss in such forward-looking statements. We believe that these
forward-looking statements are reasonable. However, you should not place undue
reliance on such statements.

For a detailed description of the risks and uncertainties that might cause
our results to differ from those we project in our forward-looking statements,
we refer you to the section captioned This Report Contains Forward-Looking
Statements in our Annual Report on Form 10-K for the fiscal year ended January
31, 2004 that we filed with the Securities and Exchange Commission (SEC) on
April 15, 2004. Our other filings with the SEC may contain additional
information concerning the risks and uncertainties listed above, and other
factors you may wish to consider. Upon request, we will provide copies of
these filings to you free of charge.

Our forward-looking statements are based on current expectations and speak
only as of the date of such statements. We undertake no obligation to publicly
update or revise any forward-looking statement, even if future events or new
information may impact the validity of such statements.

3



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BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)

Three Months Ended
    
    Six Months EndedJuly 31,
    
    August 2,
    
    July 31,
    
    August 2,2004
    
    2003
    
    2004
    
    2003Revenues
    
    $
    536,375
    
    
    $
    492,087
    
    
    $
    1,086,490
    
    
    $
    994,801Cost of goods sold (including occupancy and
buying expenses)
    
    
    359,977
    
    
    
    333,747
    
    
    
    723,200
    
    
    
    671,950Selling, general and administrative expenses
    
    
    144,197
    
    
    
    135,093
    
    
    
    284,527
    
    
    
    268,042Store closing costs
    
    
    
    
    
    
    
    
    
    
    373
    
    
    
    Operating income
    
    
    32,201
    
    
    
    23,247
    
    
    
    78,390
    
    
    
    54,809Interest expense, net
    
    
    (8,672
    )
    
    
    (9,961
    )
    
    
    (17,740
    )
    
    
    (19,264
    )Gain (loss) on property, equipment and investments
    
    
    (111
    )
    
    
    827
    
    
    
    (271
    )
    
    
    860Other income, net
    
    
    68
    
    
    
    25
    
    
    
    365
    
    
    
    164Income before income taxes
    
    
    23,486
    
    
    
    14,138
    
    
    
    60,744
    
    
    
    36,569Income taxes
    
    
    8,550
    
    
    
    5,200
    
    
    
    22,110
    
    
    
    13,550Net Income
    
    $
    14,936
    
    
    $
    8,938
    
    
    $
    38,634
    
    
    $
    23,019Basic and diluted net income per share
    
    $
    0.29
    
    
    $
    0.17
    
    
    $
    0.75
    
    
    $
    0.43Weighted average shares outstanding
    
    
    51,705,513
    
    
    
    52,376,231
    
    
    
    51,829,689
    
    
    
    53,497,126


See accompanying notes to consolidated financial statements.

4



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BELK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

July 31,
    
    January 31,2004
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    150,677
    
    
    $
    166,071Accounts receivable, net
    
    
    273,399
    
    
    
    311,141Merchandise inventory
    
    
    525,545
    
    
    
    496,242Prepaid income taxes
    
    
    8,645
    
    
    
    98Prepaid expenses and other current assets
    
    
    18,693
    
    
    
    17,188Total current assets
    
    
    976,959
    
    
    
    990,740Investment securities
    
    
    7,028
    
    
    
    6,975Property and equipment, net
    
    
    732,600
    
    
    
    702,682Pension assets
    
    
    4,349
    
    
    
    4,487Other assets
    
    
    28,272
    
    
    
    25,379Total assets
    
    $
    1,749,208
    
    
    $
    1,730,263Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    174,676
    
    
    $
    160,013Accrued liabilities
    
    
    124,057
    
    
    
    100,801Accrued income taxes
    
    
    
    
    
    
    36,499Deferred income taxes
    
    
    1,229
    
    
    
    785Note payable
    
    
    125,355
    
    
    
    Current installments of long-term debt and capital lease obligations
    
    
    8,143
    
    
    
    7,848Total current liabilities
    
    
    433,460
    
    
    
    305,946Deferred income taxes
    
    
    29,030
    
    
    
    18,540Long-term debt and capital lease obligations, excluding current installments
    
    
    172,275
    
    
    
    300,640Interest rate swap liability
    
    
    20,906
    
    
    
    35,367Deferred compensation and other noncurrent liabilities
    
    
    105,206
    
    
    
    100,271Total liabilities
    
    
    760,877
    
    
    
    760,764Stockholders equity:Preferred stock
    
    
    
    
    
    
    Common stock, 51.4 and 51.9 million shares issued and outstanding
as of July 31, 2004 and January 31, 2004, respectively
    
    
    514
    
    
    
    519Paid-in capital
    
    
    525,467
    
    
    
    530,612Retained earnings
    
    
    531,656
    
    
    
    517,721Accumulated other comprehensive loss
    
    
    (69,306
    )
    
    
    (79,353
    )Total stockholders equity
    
    
    988,331
    
    
    
    969,499Total liabilities and stockholders equity
    
    $
    1,749,208
    
    
    $
    1,730,263


See accompanying notes to consolidated financial statements.

5



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BELK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME
(dollars in thousands)

AccumulatedOtherCommon
    
    Paid-in
    
    Retained
    
    ComprehensiveStock
    
    Capital
    
    Earnings
    
    Loss
    
    TotalBalance at January 31, 2004
    
    $
    519
    
    
    $
    530,612
    
    
    $
    517,721
    
    
    $
    (79,353
    )
    
    $
    969,499Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    38,634
    
    
    
    
    
    
    
    38,634Unrealized loss on investments,
net of $12 income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )Unrealized gain on interest rate swaps,
net of $3,056 income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,508
    
    
    
    5,508Amortization of pension asset adjustment,
net of $2,678 income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,559
    
    
    
    4,559Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,681Cash dividends
    
    
    
    
    
    
    
    
    
    
    (24,699
    )
    
    
    
    
    
    
    (24,699
    )Common stock issued
    
    
    2
    
    
    
    2,020
    
    
    
    
    
    
    
    
    
    
    
    2,022Repurchase and retirement of common stock
    
    
    (7
    )
    
    
    (7,165
    )
    
    
    
    
    
    
    
    
    
    
    (7,172
    )Balance at July 31, 2004
    
    $
    514
    
    
    $
    525,467
    
    
    $
    531,656
    
    
    $
    (69,306
    )
    
    $
    988,331


See accompanying notes to consolidated financial statements.

6



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BELK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)

Six Months EndedJuly 31,
    
    August 2,2004
    
    2003Cash flows from operating activities:Net income
    
    $
    38,634
    
    
    $
    23,019Adjustments to reconcile net income to net cash provided by operating activities:Store closing costs
    
    
    373
    
    
    
    Deferred income taxes
    
    
    14,450
    
    
    
    2,125Depreciation and amortization
    
    
    46,203
    
    
    
    45,983(Gain) loss on sale of property, equipment & investments
    
    
    271
    
    
    
    (860
    )(Increase) decrease in:Accounts receivable, net
    
    
    37,742
    
    
    
    56,148Merchandise inventory
    
    
    (29,304
    )
    
    
    13,463Prepaid expenses and other assets
    
    
    (13,431
    )
    
    
    (1,624
    )Increase (decrease) in:Accounts payable and accrued liabilities
    
    
    37,547
    
    
    
    17,105Accrued income taxes
    
    
    (36,499
    )
    
    
    (24,636
    )Deferred compensation and other liabilities
    
    
    (1,144
    )
    
    
    77Net cash provided by operating activities
    
    
    94,842
    
    
    
    130,800Cash flows from investing activities:Purchases of investments
    
    
    (167
    )
    
    
    Proceeds from sales of investments
    
    
    80
    
    
    
    2,450Purchases of property and equipment
    
    
    (74,544
    )
    
    
    (35,002
    )Proceeds from sales of property and equipment
    
    
    
    
    
    
    1,421Net cash used by investing activities
    
    
    (74,631
    )
    
    
    (31,131
    )Cash flows from financing activities:Principal payments on notes payable and capital lease obligations
    
    
    (4,074
    )
    
    
    (5,819
    )Net proceeds from lines of credit
    
    
    340
    
    
    
    Dividends paid
    
    
    (24,699
    )
    
    
    (15,029
    )Repurchase of common stock
    
    
    (7,172
    )
    
    
    (26,685
    )Net cash used by financing activities
    
    
    (35,605
    )
    
    
    (47,533
    )Net (decrease) increase in cash and cash equivalents
    
    
    (15,394
    )
    
    
    52,136Cash and cash equivalents at beginning of period
    
    
    166,071
    
    
    
    91,286Cash and cash equivalents at end of period
    
    $
    150,677
    
    
    $
    143,422Supplemental schedule of noncash investing and financing activities:Increase in property and equipment through assumption of capital leases
    
    $
    1,019
    
    
    $
    


See accompanying notes to consolidated financial statements.

7



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BELK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements of Belk, Inc.
and subsidiaries (the Company) have been prepared in accordance with the
instructions to Form 10-Q promulgated by the Securities and Exchange Commission
and should be read in conjunction with the Notes to Consolidated Financial
Statements (pages 28-44) in our Annual Report on Form 10-K for the fiscal year
ended January 31, 2004. In the opinion of management, this information is
fairly presented and all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for the interim
periods have been included; however, certain items are included in these
statements based on estimates for the entire year. Also, operating results in
periods which exclude the Christmas season may not be indicative of the
operating results that may be expected for the full fiscal year.

Certain prior period amounts have been reclassified to conform with
current year presentation.

(2) Comprehensive Income (Loss)

The following table sets forth the computation of comprehensive income:

Three Months Ended
    
    Six Months EndedJuly 31,
    
    August 2,
    
    July 31,
    
    August 2,2004
    
    2003
    
    2004
    
    2003Net income
    
    $
    14,936
    
    
    $
    8,938
    
    
    $
    38,634
    
    
    $
    23,019Other comprehensive income (loss):Net change in fair value of interest rate swaps, net of $496
and $3,146 income tax expense for the three months and six
months ended July 31, 2004, respectively and $5,462 and
$4,446 income tax expense for the three and six months ended
August 2, 2003, respectively
    
    
    844
    
    
    
    9,300
    
    
    
    5,356
    
    
    
    7,570Interest rate swap losses reclassified into interest expense from
other comprehensive income, net of $45 and $90 income tax
benefit for the three and six months ended July 31, 2004,
respectively and $56 and $112 income tax benefit for the three
and six months ended August 2, 2003, respectively
    
    
    76
    
    
    
    96
    
    
    
    152
    
    
    
    192Unrealized gain (loss) on investments, net of $55 income tax
expense and $12 income tax benefit for the three and six
months ended July 31, 2004, respectively and $140 and $280
income tax expense for the three and six months ended August 2,
2003, respectively
    
    
    94
    
    
    
    238
    
    
    
    (20
    )
    
    
    477Reclassification adjustment for investment gains included in
net income, net of $77 income tax expense for the three and
six months ended August 2, 2003
    
    
    
    
    
    
    (131
    )
    
    
    
    
    
    
    (131
    )Amortization of pension asset adjustment, net of $1,339 and
$2,678 income tax expense for the three and six months ended
July 31, 2004, respectively
    
    
    2,280
    
    
    
    
    
    
    
    4,559
    
    
    
    Other comprehensive income
    
    
    3,294
    
    
    
    9,503
    
    
    
    10,047
    
    
    
    8,108Total comprehensive income
    
    $
    18,230
    
    
    $
    18,441
    
    
    $
    48,681
    
    
    $
    31,127


8



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BELK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

(3) Accumulated Other Comprehensive Loss

The following table sets forth the components of accumulated other
comprehensive loss:

July 31,
    
    January 31,2004
    
    2004Unrealized loss on interest rate swaps, net of $6,062
and $9,926 income tax benefit as of July 31,
2004 and January 31, 2004, respectively
    
    $
    (10,322
    )
    
    $
    (15,831
    )Unrealized gains on investments, net of $937 and $948
income tax expense as of July 31, 2004 and January
31, 2004, respectively
    
    
    1,618
    
    
    
    1,640Pension asset adjustment, net of $35,592 and $38,269
income tax expense as of July 31, 2004 and January
31, 2004, respectively
    
    
    (60,602
    )
    
    
    (65,162
    )Accumulated other comprehensive loss
    
    $
    (69,306
    )
    
    $
    (79,353
    )


(4) Accounts Receivable, Net

Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels. Installments of deferred payment accounts receivable maturing
after one year are included in current assets in accordance with industry
practice.

Accounts receivable, net consists of:

July 31,
    
    January 31,2004
    
    2004Customer receivables
    
    $
    274,889
    
    
    $
    309,058Other receivables
    
    
    8,933
    
    
    
    15,119Less allowance for doubtful accounts
    
    
    (10,423
    )
    
    
    (13,036
    )Accounts receivable, net
    
    $
    273,399
    
    
    $
    311,141


(5) Note Payable

The Companys note purchase agreement among the Company, The Belk Center,
Inc., Enterprise Funding Corporation and Bank of America, as amended, (the
Note Payable) expires on April 5, 2005 and, accordingly, the outstanding
balance as of July 31, 2004 of $125 million has been included in current
liabilities. However, the Note Payable may be renewed by mutual consent
of the parties, and it is the Companys intent to renew the facility and
utilize it as long-term financing.

(6) Implementation of New Accounting Standards

In December 2003, the Financial Accounting Standards Board (FASB)
revised Statement of Financial Accounting Standards No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits (Revised
Statement 132). Revised Statement 132 revises employers required disclosures
about pension plans and other postretirement benefit plans. It does not change
the measurement or recognition of those plans required by FASB Statements No.
87, Employers Accounting for Pensions, No. 88, Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits and No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions (Statement 106). Revised Statement 132 requires
disclosures in addition to those in the original FASB Statement No. 132. The
interim-period disclosures required by Revised Statement 132 are
effective for interim periods beginning after

9



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BELK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

December 15, 2003. The Company adopted the
interim disclosure requirements set forth in Revised Statement 132 for the
first quarter of fiscal year 2005.

In May 2004, the FASB issued Staff Position FAS 106-2, Accounting and
Disclosure Requirements Relating to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003. The Company offers an access-only prescription
drug plan to retirees and therefore the adoption of the provisions under Staff
Position FAS 106-2 did not have an impact on the Companys consolidated
financial position or results of operations.

(7) Pension and Postretirement Benefits

The Company has a defined benefit pension plan covering substantially all
of its employees. The benefits are based on years of service and the
employees compensation. The Company also has a defined benefit health care
plan that provides postretirement medical and life insurance benefits to
certain retired full-time employees.

The components of net periodic benefit expense are as follows:

Three Months EndedPension Plan
    
    Postretirement PlanJuly 31,
    
    August 2,
    
    July 31,
    
    August 2,2004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    2,763
    
    
    $
    2,880
    
    
    $
    53
    
    
    $
    73Interest cost
    
    
    5,319
    
    
    
    5,158
    
    
    
    384
    
    
    
    483Expected return on plan assets
    
    
    (6,558
    )
    
    
    (6,634
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    65Amortization of prior service cost
    
    
    69
    
    
    
    69
    
    
    
    
    
    
    
    Amortization of the net (gain) loss
    
    
    2,095
    
    
    
    918
    
    
    
    (124
    )
    
    
    (69
    )Net periodic benefit expense
    
    $
    3,688
    
    
    $
    2,391
    
    
    $
    378
    
    
    $
    552Six Months EndedPension Plan
    
    Postretirement PlanJuly 31,
    
    August 2,
    
    July 31,
    
    August 2,2004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    5,526
    
    
    $
    5,760
    
    
    $
    107
    
    
    $
    145Interest cost
    
    
    10,637
    
    
    
    10,316
    
    
    
    768
    
    
    
    965Expected return on plan assets
    
    
    (13,117
    )
    
    
    (13,268
    )
    
    
    
    
    
    
    Amortization of transition obligation
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    131Amortization of prior service cost
    
    
    138
    
    
    
    138
    
    
    
    
    
    
    
    Amortization of the net (gain) loss
    
    
    4,191
    
    
    
    1,836
    
    
    
    (249
    )
    
    
    (138
    )Net periodic benefit expense
    
    $
    7,375
    
    
    $
    4,782
    
    
    $
    757
    
    
    $
    1,103


The Company previously disclosed in its financial statements for the
fiscal year ended January 31, 2004, that it did not expect to contribute to its
pension plan in fiscal year 2005. As of July 31, 2004, there have been no
contributions to the pension plan, and the Company does not anticipate any
contributions for the remainder of the current fiscal year.

(8) Curtailment and Settlement of Defined Benefit Supplemental Executive Retirement Plan

On April 1, 2004, certain participants elected to waive their benefits in
the Companys non-qualified defined benefit supplemental executive retirement
plan in exchange for participation in the Companys new non-qualified defined
contribution 2004 Supplemental Executive Retirement Plan. This election
resulted in the curtailment and settlement of their benefits in the defined
benefit plan. The Company recognized a net charge of $1.9 million in selling, general and administrative expenses in the first quarter of fiscal year 2005
related to the curtailment and settlement.

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BELK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)

(9) Derivative Financial Instruments

During the first quarter of fiscal year 2005, the Company terminated two
interest rate swaps with a total notional value of $50 million. The interest
rate swaps had previously been dedesignated as cash flow hedges during the
third quarter of fiscal year 2004.

(10) Stock Repurchase

On June 14, 2004, the Company repurchased 643,071 shares of outstanding
Class A common stock at a cost of $7.2 million.

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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations:

Overview

Belk, together with its subsidiaries, is the largest privately owned
department store business in the United States, with total revenues of
approximately $2.26 billion for the fiscal year ended January 31, 2004. The
Company and its predecessors have been successfully operating department stores
since 1888 by seeking to provide superior service and merchandise that meets
customers needs for fashion, value and quality.

The Companys fiscal year ends on the Saturday closest to each January 31.
All references to fiscal year 2005 refer to the fiscal year ending January
29, 2005 and all references to fiscal year 2004 refer to the period ended
January 31, 2004.

As of the end of its second quarter of fiscal year 2005, the Company
operated 225 retail department stores in 13 states primarily in the
southeastern United States. Belk stores seek to provide customers the
convenience of one-stop shopping, with an appealing merchandise mix and
extensive offerings of brands, styles, assortments and sizes. Belk stores sell
top national brands of fashion apparel, shoes and accessories for women, men
and children, as well as cosmetics, home furnishings, housewares, gifts and
other types of quality merchandise. The Company also sells exclusive private
label brands, which offer customers differentiated merchandise selections at
better values. Larger Belk stores may include hair salons, spas, restaurants,
optical centers and other amenities.

Belks mission is to be the dominant department store in its markets by
selling merchandise to customers that meets their needs for fashion, selection,
value, quality and service. To achieve this mission, Belks business strategy
includes five key elements: (1) a target customer focus; (2) focused
merchandise assortments; (3) compelling sales promotions; (4) distinctive
customer service; and (5) a winning store and market strategy.

The Company operates retail department stores in the highly competitive
retail apparel industry. The Companys primary competitors are traditional
department stores, mass merchandisers, national apparel chains, individual
specialty apparel stores and direct merchant firms. In addition to intense
competition, the retail industry has experienced downward sales pressure in
recent years due primarily to national, regional and local economic conditions.

Management believes that significant opportunities for growth exist in
Belk markets where the Belk name and reputation are well known and in
contiguous markets where Belk can distinguish its stores from the competition.
Although the Company will continue to take advantage of prudent opportunities
to expand into large markets, the Company will focus its expansion in
medium-sized markets with store units in the 50,000 to 80,000 square-foot size
range. One of the more significant challenges currently facing the Companys
management is to continue to identify new Belk markets and to effectively
increase the Companys net store selling square footage. In fiscal year 2004,
the Company increased net store selling square footage by 343,700 square feet,
or 2.4%, and plans to expand by an additional 644,600 square feet, or 4.4%, in
fiscal year 2005.

The Company focuses on four key indicators to assess performance and
growth. These key indicators are: (1) comparable store sales, (2) gross profit
rate, (3) expense rate, and (4) net square footage growth.

Results of Operations

The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Companys condensed
consolidated statements of income, as well as a period comparison of changes in
comparable store net revenue.

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Three Months Ended
    
    Six Months EndedJuly 31,
    
    August 2,
    
    July 31,
    
    August 2,2004
    
    2003
    
    2004
    
    2003SELECTED FINANCIAL DATARevenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    67.1
    
    
    
    67.8
    
    
    
    66.6
    
    
    
    67.6Selling, general and administrative expenses
    
    
    26.9
    
    
    
    27.5
    
    
    
    26.2
    
    
    
    26.9Operating income
    
    
    6.0
    
    
    
    4.7
    
    
    
    7.2
    
    
    
    5.5Interest expense, net
    
    
    1.6
    
    
    
    2.0
    
    
    
    1.6
    
    
    
    1.9Income taxes
    
    
    1.6
    
    
    
    1.1
    
    
    
    2.0
    
    
    
    1.4Net income
    
    
    2.8
    
    
    
    1.8
    
    
    
    3.6
    
    
    
    2.3Comparable store net revenue increase (decrease)
    
    
    4.9
    
    
    
    (2.4
    )
    
    
    5.3
    
    
    
    (4.6
    )


Comparison of the Three and Six Months Ended July 31, 2004 and August 2, 2003

Revenues. The Companys revenues for the three months ended July 31, 2004
increased 9.0%, or $44.3 million, to $536.4 million from $492.1 million over
the same period in fiscal year 2004. The increase is attributable to a 4.9%
increase in revenues from comparable stores and $21.8 million of additional
sales from new stores.

The Companys revenues for the six months ended July 31, 2004 increased
9.2%, or $91.7 million, to $1,086.5 million from $994.8 million over the same
period in fiscal year 2004. The increase is attributable to a 5.3% increase in
revenues from comparable stores and $44.4 million of additional sales from new
stores.

As disclosed in the Companys Annual Report on Form 10-K for the fiscal
year ended January 31, 2004, which was filed on April 15, 2004, comparable
store sales no longer exclude replacement and expansion stores. Non-comparable
stores include only closing stores and new stores that have not reached the
one-year anniversary of their opening prior to the beginning of the fiscal year
in which they were constructed. The Company believes this revised measure is a
more accurate indicator of existing store performance and is a common basis
used by other retailers in the reporting of their results. The Company has
revised the previous years comparable store net revenue decrease to conform
with this new definition.

Cost of goods sold.As a percentage of revenues, cost of goods sold
decreased to 67.1% and 66.6% for the three months and six months ended July 31,
2004, respectively, compared to 67.8% and 67.6% for the same periods in fiscal
year 2004. The decrease is primarily attributable to improved margin on
inventory purchases, a 0.16% and 0.17% reduction in buying expenses as a
percentage of revenues for the three and six months ended July 31, 2004,
respectively, and a 0.03% and 0.11% reduction in occupancy expenses as a
percentage of revenues over the same time period in fiscal year 2004. Although
the majority of expenses included in cost of goods sold are variable with
sales, increasing sales volumes, improved expense leverage and certain
non-variable costs, primarily the buying and occupancy expenses noted above,
did not increase to the same extent as revenues.

Selling, general and administrative expenses.As a percent of revenues,
selling, general and administrative (SG&A) expenses decreased to 26.9% for
the three months ended July 31, 2004 compared to 27.5% for the same period in
fiscal year 2004. The decrease resulted primarily from a decrease in
depreciation expense as a percentage of revenues of approximately 0.29%, an
increase in credit and finance charge income as a percentage of revenues of
0.18% and a decrease in bad debt expense as a percentage of revenues of 0.15%

As a percentage of revenues, selling, general and administrative (SG&A)
expenses decreased to 26.2% for the six months ended July 31, 2004 compared to
26.9% for the same period in fiscal year 2004. The decrease resulted primarily
from a decrease in depreciation expense as
a percentage of revenues of approximately 0.38%, a decrease in payroll as a
percentage of revenues of 0.24% and a decrease in bad

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debt expense as a
percentage of revenues of 0.23%. These decreases were partially offset by a
$1.9 million charge recognized in the first quarter of fiscal year 2005 for the
curtailment and settlement of the Companys defined benefit supplemental
executive retirement plan.

Store closing costs.The Company incurred $0.4 million in store closing
costs in the first quarter of fiscal year 2005 related to the post-closing real
estate holding costs for three stores located in Lenoir, North Carolina and
Beaufort and Myrtle Beach, South Carolina.

Net income.As a percentage of revenues, net income increased to 2.8% and
3.6% for the three months and six months ended July 31, 2004, respectively,
compared to 1.8% and 2.3% for the same periods in fiscal year 2004. The
increase was primarily due to the changes discussed above.

Seasonality and Quarterly Fluctuations

The retail business is highly seasonal with approximately one-third of
annual revenues being generated in the fourth quarter, which includes the
Christmas selling season. As a result, a disproportionate amount of the
Companys operating and net income is realized during the fourth quarter and
significant variations can occur when comparing the Companys financial
condition between quarters.

Liquidity and Capital Resources

The Companys primary sources of liquidity are cash on hand, cash flow
from operations, and borrowings under debt facilities. The Companys debt
facilities consist of a $250 million variable rate note, a $125 million
ten-year variable rate bond facility, a $200 million revolving line of credit
and a $126.8 million standby letter of credit.

The $250 million variable rate note is governed by a note payable
agreement that expires on April 5, 2005 and, accordingly, the outstanding
balance as of July 31, 2004 of $125.4 million has been included in current
liabilities. However, the note payable agreement is renewable by mutual
consent of the parties, and the Company intends to renew the facility and
utilize it as long-term financing. The $200 million revolving line of credit
is governed by a credit agreement that expires on July 31, 2005. The $126.8
million standby letter of credit also expires on July 31, 2005. Prior to July
31, 2005, the Company intends to replace the existing revolving line of credit
and standby letter of credit with a facility that provides a comparable source
of liquidity.

Net cash provided by operating activities decreased $36.0 million to $94.8
million for the six months ended July 31, 2004 from $130.8 million for the six
months ended August 2, 2003. The decrease in cash provided by operating
activities for the first six months of fiscal year 2005 was principally due to
higher levels of inventory purchases, attributable to the addition of new
stores and higher comparable store sales during the first six months of fiscal
year 2005, and increased income tax payments, due to higher net income in
fiscal year 2004.

Expenditures for property and equipment increased $39.5 million to $74.5
million for the six months ended July 31, 2004 from $35.0 million for the same
time period in fiscal year 2004. The increase was principally due to the
addition of four new stores and three replacement stores in the first six
months of fiscal year 2005, as compared to the addition of one new store during
the same time period in fiscal year 2004.

During the six months ended July 31, 2004, the Company opened seven new
stores in Waco, Kerrville, and Sherman, Texas; Beaufort and Myrtle Beach, South
Carolina; Mandeville, Louisiana; and Lenoir, North Carolina. The Texas and
Louisiana stores are in new markets for the Company and the other new stores
are replacements of stores in existing markets. The Company also completed the
expansion of two stores in Corinth, Mississippi and Cullman, Alabama during the
first six months of fiscal year 2005.

Net cash used by financing activities decreased $11.9 million to $35.6
million for the six months ended July 31, 2004 from $47.5 million for the six
months ended August 2, 2003. This decrease resulted from lower levels of common
stock repurchases in the first six months of fiscal year 2005 compared to the
same period in fiscal year 2004, partially offset by a higher dividend per
share amount attributable to a special one-time dividend paid in fiscal 2004.

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Management of the Company believes that cash flows from operations and the
existing credit facilities will be sufficient to cover working capital needs,
capital expenditures and debt service requirements for at least the next twelve
months.

Contractual Obligations and Commercial Commitments

A table representing the scheduled maturities of the Companys contractual
obligations and commercial commitments as of January 31, 2004 was included
under the heading Contractual Obligations and Commercial Commitments on page
17 of the Companys fiscal year 2004 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 15, 2004. To facilitate an
understanding of the significant changes in the Companys commercial
commitments, which occur in the normal course of business, the following data
has been updated as of July 31, 2004.

Amount of Commitment
Expiration per Period (in thousands)Total AmountsOther Commercial Commitments
    
    Committed
    
    Within 1 Year
    
    2 - 3 Years
    
    4 - 5 Years
    
    After 5 YearsStandby Letters of Credit (a)
    
    $
    133,849
    
    
    $
    133,849
    
    
    $
    
    
    
    $
    
    
    
    $
    Import Letters of Credit
    
    
    40,982
    
    
    
    40,982
    
    
    
    
    
    
    
    
    
    
    
    Total Commercial Commitments
    
    $
    174,831
    
    
    $
    174,831
    
    
    $
    
    
    
    $
    
    
    
    $
    


(a) Standby letters of credit include a $126.8 million facility that
supports the ten-year bonds (accrued principal and interest) due July 2008.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the first quarter of fiscal year 2005, the Company terminated two
interest rate swaps with a total notional value of $50 million. The interest
rate swaps had previously been dedesignated as cash flow hedges during the
third quarter of fiscal year 2004.

There have been no other material changes to the Companys quantitative
and qualitative market risk disclosures during the six months ended July 31,
2004 from the disclosures contained in the Companys Annual Report on Form 10-K
for the fiscal year ended January 31,2004.

Item 4. Controls and Procedures

Disclosure controls and procedures are the Companys controls and other
procedures that are designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Securities
Exchange Act of 1934, as amended, (the Exchange Act) is recorded, processed,
summarized and reported, within the time periods specified in SEC rules and
forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files under the Exchange Act is
accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.

As of the end of the period covered by this report, the Company has
evaluated under the supervision and with the participation of the Companys
management, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), the effectiveness of the design and operation of the Companys
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act). Based on the evaluation, the CEO and CFO have concluded that the Companys
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in SEC rules and forms.

During the period covered by this report, there were no changes or
corrective actions in the Companys internal control over financial reporting
that materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

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PART II  OTHER INFORMATION

Item 1.Legal Proceedings

In the ordinary course of business, the Company is subject to various
legal proceedings and claims. The Company believes that the ultimate outcome
of these matters will not have a material effect on its financial statements.

Item 2.Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities

The following table contains information about our purchases of our equity
securities during the second quarter of fiscal year 2005.

ISSUER PURCHASES OF EQUITY SECURITIES

Total Number of
    
    Approximate DollarShares Purchased
    
    Value of Sharesas Part of
    
    that May Yet BeTotal Number of
    
    Average Price Paid
    
    Publicly Announced
    
    Purchased Under thePeriod
    
    Shares Purchased
    
    per Share
    
    Plans or Programs
    
    Plans or ProgramsMay 2 - May 29, 2004
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    May 30 - July 3, 2004
    
    
    643,071
    (1)
    
    
    11.15
    
    
    
    
    
    
    
    July 4 - July 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    643,071
    
    
    $
    11.15
    
    
    
    
    
    
    
    


(1) The Company repurchased 643,071 shares from Davidson College in connection
with the retirement of John M. Belk.

Item 3.Defaults Upon Senior Securities

Not applicable

Item 4.Submission of Matters to a Vote of Security Holders

Not applicable

Item 5.Other Information

Not applicable

Item 6.Exhibits and Reports on Form 8-K

(a) Exhibits

3.1
    
    Form of Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to pages B-24 to B-33 of the
Companys Registration Statement on Form S-4, filed on March 5, 1998
(File No. 333-42935)).3.2
    
    Form of Second Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.2 of the Companys Annual
Report on Form 10-K for the fiscal year ended January 31, 2004).


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4.1
    
    Articles Fourth, Fifth and Seventh of the Amended and Restated
Certificate of Incorporation of the Company (incorporated by
reference to pages B-24 to B-33 of the Companys Registration
Statement on Form S-4, filed on March 5, 1998 (File No. 333-42935)).4.2
    
    Articles I and IV of the Second Amended and Restated Bylaws of
the Company (incorporated by reference to Exhibit 3.2 of the
Companys Annual Report on Form 10-K for the fiscal year ended
January 31, 2004).31.1
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted under Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934,
as amended, as adopted under Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.


(b) Reports on Form 8-K

A current report on Form 8-K dated May 26, 2004, contained disclosure
under Item 5, Other Events and Required FD Disclosure, Item 7, Financial
Statements, Pro Forma Financial Information and Exhibits, and Item 12,
Results of Operations and Financial Condition.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

BELK, INC.Dated: September 9, 2004
    
    By:
    
    /s/ Ralph A. PittsRalph A. PittsExecutive Vice President, General Counsel andCorporate Secretary(Authorized Officer of the Registrant)By:
    
    /s/ Brian T. MarleyBrian T. MarleyExecutive Vice President andChief Financial Officer


18