Saks Stock Up 6.8 Percent Wednesday

S&P Retail Index dipped 0.3 percent Wednesday, but J.P. Morgan was bullish on luxe retailer Saks Fifth Avenue, lifting the company's stock.

Shares of Saks Inc. kicked off the second half in style, rising 6.8 percent to $4.73 Wednesday as retailers were generally on the wane.

This story first appeared in the July 2, 2009 issue of WWD.  Subscribe Today.

Things looked bright for Saks from the start, with J.P. Morgan analyst Charles Grom preaching patience to investors in a morning research note titled “Rome Wasn’t Built in a Day.”

But it wasn’t until the early afternoon that Saks really took off, jumping from $4.56 to more than $5 in a matter of minutes before receding slightly. More than 6.4 million shares traded hands Wednesday, above the three-month average of 4.7 million shares. Over the last year, Saks has traded as high as $12.30 and as low as $1.50. The stock inched up 1.1 percent over the first six months of the year.

The luxe firm has been among the hardest-hit retailers in the recession, but has still managed to attract deep-pocketed investors, including Mexican billionaire Carlos Slim Helú, who owns 18.6 percent of the firm, and Diego Della Valle, chief executive officer of Tod’s SpA, who picked up a 5.9 percent stake earlier this year. From February into May, Della Valle paid $30.3 million for shares now worth $40.1 million.

“While Saks is certainly not out of the woods yet, we believe the necessary steps to right-size its business and manage through the current difficult environment have been taken, allowing for margin recovery in the second half of 2009,” wrote Grom, who reiterated his “overweight” rating on the stock with a year-end target price of $6.

The analyst said the chain was getting back into its normal promotional cadence and that reduced fall orders would get inventories in line by the beginning of the third quarter. Still, Grom is projecting at least two more years of losses for the firm, which registered $155 million in red ink last year.

On Wednesday, Saks outshone the S&P Retail Index, which dipped 0.3 percent, or 0.94 points, to 321.61, and the Dow Jones Industrial Average, which rose 0.7 percent, or 57.06 points, to 8,504.06.