Saks Fifth Avenue has proven to be a great investment for Diego Della Valle — so much so he’s scooped up almost 2 percent more.

This story first appeared in the October 20, 2010 issue of WWD. Subscribe Today.

So far, Della Valle’s stake has garnered him paper profits of $73.6 million — the difference between his $112.2 million investment in shares since the start of last year and its presumptive current value of $185.8 million.

While the chairman of Tod’s SpA continues to characterize his holdings as being for investment purposes, in the last week he scooped up another 2.9 million shares of the retailer for $29.4 million, according to a filing with the Securities and Exchange Commission Tuesday.

That brings Della Valle’s stake in Saks to 11.1 percent, up from 9.4 percent, and gives him a total of 17.9 million shares. It also helps explain some recent heavy trading in Saks’ stock.

The evolution of his Saks stake shows Della Valle is not only a bargain hunter, but also is a believer in the company. He began building the stake in February 2009 when the stock was trading around $1.70 and has continued to buy in spurts as the retailer’s shares increased sixfold.

The continued interest of Della Valle, and continued questions about exactly what his plans are and whether somebody will ultimately try to take over Saks, pushed the stock up 10 cents, or 1 percent, to $10.38 on Tuesday as the general market floundered.

The latest purchases move him closer to the amount held by the world’s richest man, Mexican telecommunications billionaire Carlos Slim Helú, who owns 16.1 percent of the retailer.

It’s unusual, although not unprecedented, for interests affiliated with a vendor, in this case Tod’s, to have such a significant ownership stake in one of the retailers to which it sells. Recently, Steven Madden Ltd. gained a 20 percent stake in Bakers Footwear Group in exchange for $5 million in subordinated debentures.

However, Della Valle’s investments don’t appear to be motivated either by a desire for control on his part or distress on Saks’ side.

“Saks is a beautiful investment,” Della Valle told WWD recently. “It’s a great company with managers of the highest level. For many years, I’ve been friends with and highly value [president and chief merchandising officer] Ron Frasch and [ceo] Steve Sadove. And Saks is in everyone’s collective imagination, it stands for America, with Rockefeller Center and Fifth Avenue, for example.”

Della Valle dismissed speculation that he’d be interested in bidding for all of Saks. Last year, he noted the stake was “a strategic investment of the family, not of Tod’s.” And Sadove has described Della Valle’s holdings as “a passive investment.”

A Saks spokeswoman declined comment Tuesday.

Della Valle was in Asia supporting a project that will give Italy’s La Scala theater more global exposure and could not be reached for comment.

However much Della Valle demurs, owning 17.9 million shares of a single company is not a small bet. Nor is it a particularly convenient investment.

“It’s not easy to dispose of a stake that big,” said Antony Karabus, founder and ceo of Karabus Management. “Even to acquire it just for investment purposes is a challenge. How do you monetize 12 percent of a company other than maybe to the other guy?”

“The other guy” here is Slim; together the two own 27.2 percent of the company.

“It’s an iconic brand,” said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates and formerly ceo of Saks Fifth Avenue. “It has international appeal and it has possibilities beyond North America, and Della Valle, being a European and a global operator in the luxury apparel business, probably understands the positive implications of Saks as well or better than anyone else around.”

But Aronson said that doesn’t mean he will make a play for the company: “It’s still unclear whether Della Valle regards this as a very good financial investment or a strategic investment in terms of potential control of the company.”

Retail is having a bit of a moment on Wall Street. Share prices are comparatively low and people wanting to bet on a rebound in consumer spending have a world of choices.

A couple of other investors, activist William Ackman and Vornado Realty Trust, have taken a 26.4 percent stake in J.C. Penney Co. Inc. They are expected to take a more aggressive approach than either Della Valle or Slim has and needle management to make changes.

Penney’s on Monday instituted a poison pill that would make it prohibitively expensive for anyone to try to takeover the company without the consent of its board. In 2008, Saks adopted a similar plan after Slim upped his stake in the firm, though it was abandoned after the company raised the change-of-control threshold in its credit agreement to 40 percent from 20 percent.

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