Through The Fly's Eyes: Saks Inc.

from Theflyonthewall.com






A Private Equity Candidate?


Saks (SKS) has been one a dog of stock this decade, essentially unchanged from its valuation in the 1990s. However, its lack of stock appreciation and OK fundamentals have made this stock reasonably cheap. It has reached a point where private equity is most likely looking at the company.

Same store sales comps are expected to be up 5% for February, which is up from negative comps earlier this decade. The company also has gone through a restructuring program and is now focused on the Saks Fifth Avenue brand.

According to a Bloomberg report, Saks owns $1.0 billion in real estate. It also has $767 million in cash on the balance sheet with a total enterprise valuation of $2.4 billion. Operating income is expected to be $194 million for FY2008. Management's goal is 8% operating margins which will bring it up $240 million.

From a valuation perspective, it is a close call if private equity will go after Saks. However, it appears this company is getting its act together. If comp improvement is sustainable, this stock could go for a good run. Wait for more evidence of consistent growth before getting into this stock.

This stock has been in the doghouse for so long, Saks has to show performance before its stock will move.