Tags: Saks | Goldman Sachs | Sale

Saks Said to Hire Goldman to Explore Options Including Sale

Wednesday, 22 May 2013 01:10 PM

 

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Saks Inc. hired Goldman Sachs Group Inc. to explore strategic alternatives, including a sale of the company, said two people with knowledge of the matter.

The New York-based retailer may consider selling itself to a private-equity firm in a leveraged buyout, said the people, who asked not to be identified because the process is private.

Saks may be exploring a sale now because its shares have increased by almost a third this year and interest rates are low, giving potential buyers cheap financing, said one of the people familiar with the situation. Saks’s Dallas-based rival, Neiman Marcus Group Inc., owned by TPG Capital and Warburg Pincus LLC, hired Credit Suisse Group AG earlier this month to explore an initial public offering or sale.

Finding a buyer for a leveraged buyout could be difficult, one of the people said. While financing is cheap, many private- equity firms that bought retail assets in 2007 have been unable to exit the businesses, the person said.

“It is against our policy to comment on rumors or speculation,” Julia Bentley, a spokeswoman for Saks, said in an e-mailed statement. Andrew Williams, a spokesman for Goldman Sachs, declined to comment.

The New York Post previously reported that Saks hired Goldman Sachs. The shares rose 16 percent to $15.85 in late trading following the report, after gaining 11 percent to $13.67 in regular trading. Saks climbed 30 percent this year through Tuesday’s close, compared with a 17 percent gain for the Standard & Poor’s 500 Index.

Closing Stores

Saks’s annual sales still haven’t recovered from their pre-recession high. The retailer posted revenue of $3.15 billion last year, short of the $3.28 billion it recorded in the retail year that ended in early 2008. Analysts estimate its adjusted per-share profit will fall 9 percent this year as the company spends more to integrate its store and online inventories into a so-called omni-channel.

Chief Executive Officer Stephen Sadove, who has held the post for six years, has been closing the chain’s underperforming branches. It now operates 42 namesake stores, compared with 54 in early 2007.

The overall luxury industry is not as “robust” as the surging Dow Jones Industrial Average might suggest, and the retail environment is very promotional, damping profitability, Sadove, 61, said in a conference call with analysts.

Saks increased its own discount to 25 percent from 20 percent during its recent friends and family promotional event to generate sales, he said. Luxury-goods shoppers have become more “informed” and “particular,” he said.

Saks owns 27 of its Saks Fifth Avenue locations, including stores in Manhattan, Chicago, Beverly Hills, California, Las Vegas and Atlanta.

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