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."Stacy Turnoff, analyst at Merrill Lynch, believes that SFA is worth between $18 and $21 per share. She noted that Parisian, a 40-store operation, had $700 million in sales in 2004. She estimated a sale of Parisian on an aftertax amount of between "0.5x or 0.9x sales, or $350 million to $630 million." The midpoint amount of $490 million, she added, is $17 million more than the $473 million that Saks paid for Parisian in 1996.
Investors at institutional firms were pleased with the news, believing that a sale of SFA would happen by mid- to late 2006 or early 2007.
"In six to 18 months, I'm betting that SFA will be gone. Once all the deals are done in selling assets like Parisian, the company's balance sheet will be in phenomenal shape and the company could even become overcapitalized," noted one sell-side analyst.
The analyst believes that Saks Inc. is proceeding in the right order, first ridding itself of certain assets and then using a couple of quarters to show great earnings while it is undergoing a turnaround.
A portfolio manager for an institutional firm called the changes "very exciting. Brad was the hurdle to the whole process, whereas Steve has sold businesses before."
The portfolio manager said the retailer once received an offer for all of Saks Inc. last August at $26 a share, but that had been rejected by Saks Inc.'s board. He believes that private equity firms such as Bain, Texas Pacific, Cerberus and Blackstone are the likely players to take a second look at the luxury chain.
Another portfolio manager added, "This will be a slow process that will take a couple of quarters. Brad needed to move on and the company needed to get rid of assets so that all you have left is just SFA because that will make it easier to put a valuation on the company. It means no hiding of the performance of the business."
“What he has done at Vuitton is really exceptional,” said @gameofthrones’ actress Gwendoline Christie on @mrkimjones’ final show for @louisvuitton. “He has rebooted luxury in terms of making it commercial, viable and contemporary. And most importantly artistic. He has never compromised his artistic vision for the sake of commodity.” (📷: @zefashioninsider)
After seeing a demand for men’s wear from its customers, British contemporary women’s wear label @ariesarise has added a men’s wear component and will launch a unisex collection with @mrporterlive. The 20-piece collection includes jackets, denim, logo T-shirts and more with deconstructed ‘90s vibes. Set to launch on January 18, you can shop the pieces on Aries’ website and on mrporter.com. #wwdfashion
“And so spending so much time with a character who thinks like that, inevitability you try and analyze yourself and go back and think about your own demons and dark chapters that you had in your life,” says @thedanielbruhl of his role in TNT’s “The Alienist.” The show, set in the Gilded Age of New York, also stars Dakota Fanning and Luke Evans. Head to WWD.com to read about how 39-year-old Brühl prepared for the role and why he thinks the show is so relevant to today #wwdeye ( 📷: @Eriktanner)
Now that Celine Dion’s collection has topped $10 million in sales, the pop superstar, fashion icon and newly-minted industry player is eyeing growth in Asia. Read the full report by @tiffanyap, link in bio. #wwdnews #celinedion
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
Among the familiar faces at @off____white’s show was a surprise figure: Japanese artist @takashipom, pictured here on Wednesday morning. Other show-goers included @jerrylorenzo, who spoke about his upcoming project: a @nike collaboration for back to school, with designs inspired by his childhood on the West Coast. Sitting in the front row were Future, Don Crawley, @miguel and more. See the rest of the photos on WWD.com #wwdeye (📷: Stephane Feugere)
According to @laurentsai, former “Terrace House: Aloha State” cast member, she didn’t know she was auditioning for the Japanese version of “Real World.” “I was telling a couple of my friends and someone’s like, ‘That sounds a lot like Terrace House.’ I was like, ’No it can’t be.’” Turns out, it was. But Tsai isn’t just a reality star — she’s an illustrator who has worked with Starbucks Japan and most recently, she’s dipping her toes into the fashion world. Head to WWD.com to read about her time on the show, modeling and her art. #wwdeye (📷: @danieldorsa)
More changes are coming to New York Fashion Week: Beginning with the spring 2019 collection, @alexanderwangny will move his New York show to June from September, adopting a biannual schedule with collections shown in June and December. Additionally, the @cfda is planning for an official summer/winter fashion season taking place as soon as June and December 2018. Read more about the upcoming changes on WWD.com. #wwdnews #wwdfashion (📷: @slovekinpics)