Saks Inc. (SKS), which announced last month it is selling off its Proffitt's and McRae's department stores, on Tuesday reported a lower-than-expected profit for the first quarter as its mid-price department-store business continues to languish.

For the first quarter ended April 30, income was $17.1 million, or 12 cents per share. The latest results include a gain of a penny per share from disposing of closed stores, offset by a penny per share related to expenses from an investigation of alleged improper collections of money from vendors at its Saks Fifth Avenue (search) division.

On average, analysts surveyed by Thomson Financial were expecting earnings of 16 cents per share in the latest quarter.

Sales totaled $1.55 billion, a slight 0.6 percent increase from $1.54 billion a year earlier and a bit below the $1.56 billion expected from Wall Street analysts.

At all of Saks' stores open at least a year, sales grew 1.9 percent last quarter, with a 5.5 percent increase at Saks Fifth Avenue shops offsetting a 0.9 percent drop in its department-store group.

Saks did not report its year-ago profit results because it expects to restate financial results for fiscal 1999 through the third quarter of fiscal 2004 due to the investigation of markdown money and other related financial and accounting issues.

Markdown money is what suppliers pay to compensate stores when they don't sell products or are forced to take deeper markdowns than expected. Last week, the company announced it fired its chief accounting officer and other top officers as a result of the investigation.

The company, which is also the target of an informal inquiry by the Securities and Exchange Commission (search) and U.S. Attorney's Office in New York, said Tuesday it is working to confirm the amount of total vendor markdown allowances determined to have been improperly collected. As a result, all the results are preliminary and remain subject to change.

Last month, Saks said it agreed to sell its Proffitt's (search) and McRae's department stores (search) to privately held retailer Belk Inc. for $622 million in cash. The stores have annual revenue of about $700 million. The company also said it's exploring strategic options for its northern mid-price department store division, which consist of 143 stores under the names of Carson, Pirie Scott, Bergner's, Boston Store, Younkers and Herberger's.

Shares of Saks fell 12 cents to $16.82 on the New York Stock Exchange.