Dana Cohen, equity analyst at Bank of America Equity Research, said R. Brad Martin stepping aside was a surprise, but that there will not be any major changes in trajectory as a result. Cohen also said in a research note that the door is open to a possible Saks Fifth Avenue transaction, but added it likely would happen later, not sooner.
"We have never ruled out a potential transaction for the Saks Fifth business; rather, we have thought valuation was the sticking point between management and potential suitors," Cohen wrote. "Given that management spent some time enhancing the margins at Parisian, then put the business on the market, we would not rule out a similar process for Saks Fifth. However, we think some time will be first devoted to turning the performance at the business." Cohen maintained a neutral rating on shares of Saks Inc.
While the changes affecting Wilson and Martin are significant steps to right-size the company, additional cuts are inevitable, as assets continue to get sold and resources are allocated to individual businesses, such as Parisian and SFA, and decentralized. Some corporate and back-office support infrastructure has to be retained to support Saks Inc.'s businesses and to fulfill support service agreements with Belk and Bon-Ton. Officials said through "the strategic restructuring" of its organization, it is preparing for the independent operation of Saks Fifth Avenue and Parisian.
Consultant and former Wall Street retail analyst Walter Loeb observed, "I think this indicates that they will split the whole thing up and sell the company. Sadove is an administrator. In my opinion, you'll hear an announcement of Saks up for sale very shortly."
Others also were expecting a sale, although their time frame was somewhat further out.
"Today's announcement, we think, increases the possibility of the eventual sale of SFA along with the rest of Saks. Our read is that Brad Martin has been a chief proponent of having existing management continue to run SFA, and now his day-to-day role in the company would seem to have been reduced," wrote Robert Buchanan, analyst at A.G. Edwards Inc.
The analyst pegged the likelihood of such an event "occurring or not occurring at roughly 50-50 over the next two years." He wrote that, with private equity capital still chasing deals, the "midpoint of potential buyout offers [is] in the $21 to $22 [per share] range based on the real estate values or earnings potential under capable management."
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