Byline: Sidney Rutberg

NEW YORK — Saks Fifth Avenue is expected to go public this spring, possibly in May, with Goldman, Sachs & Co. as the lead underwriter, according to market reports Tuesday.
Morgan Stanley will be a co-manager, sources said.
“The underwriting group is complete,” said one investment banker.
All three companies declined to comment on the reports.
Another source said the timing of the offering revolves around early spring. That’s because Saks’ fiscal year concluded at the end of January, and if audited figures aren’t quite ready yet, they should be shortly.
“I don’t think they’ll file with the Securities and Exchange Commission until those numbers are ready,” said a source. “Then by the time the SEC is finished with its processing procedures, the first quarter may be close to over. I would guess that the issue will hit the market about the middle of May.”
Another source said he thought the issue might come to market in early May.
It’s likely Saks will come to market soon because retail stocks have been very strong recently. From the end of 1995 to Tuesday’s close, Federated Department Stores was up to 33 7/8 from 27 1/4; The Gap, 54 3/8 from 42; Ann Taylor, 19 from 10 3/8; Kohl’s, 64 3/8 from 51 1/2; Sears, Roebuck, 49 from 39; Dillard Department Stores, 35 from 28 1/2, and Nordstrom 48 3/4 from 40 1/2.
In addition, Saks could capitalize on the ongoing excitement over recent fashion issues, such as Gucci, Tommy Hilfiger and EstAe Lauder. Saks and Gucci are both owned by Investcorp, a London and Bahrain-based investment firm.
Michael B. Exstein, retail analyst for PaineWebber, said he thinks Saks is “an ideal candidate for an IPO. It’s a very successful company with a strong and logical niche. I think the company would use most of the proceeds of the IPO to expand the franchise and take advantage of opportunities in the retail industry.”
Asked whether he though the offering would be used by Investcorp to recoup its investment, Exstein said that was not Investcorp’s style. “I think that the proceeds from the IPO will be used to enable Saks to capitalize on the restructuring of the retail industry. I don’t think Saks will be making many acquisitions, but there’s lots of good retail real estate out there.”
In the slumping retail landscape, Saks is a standout, managing solid sales growth throughout the sorry Christmas ’95 season.
The chain has come a long way since Investcorp bought it in 1990 for $1.6 billion. Problems were bad around the time of the acquisition. In July of 1991, one factoring firm withdrew credit approvals on Saks’ shipments. Several credit reporting agencies also were turning down Saks credit around the same time. However, in early August of that year, credit lines were reopened.
Saks also experienced disappointments with some merchandise experiments, including owning some A/X Armani stores which were eventually let go. The store sold a line on the QVC home shopping channel, but that strategy didn’t meet profit expectations. Saks also signed up some designer exclusives, such as Gordon Henderson and Nancy Heller, which flopped.
In February of 1992, the company received an equity injection of $300 million from Investcorp, and while interest costs and depreciation charges resulted in a bottom line loss of $84.5 million in 1992, the recovery phase began.
A big coup was recruiting Rose Marie Bravo, who has been instrumental in casting Saks Fifth Avenue as a launch store for cosmetics and bridge lines and taking a more aggressive merchandising stance. As a former I. Magnin chief executive officer, Bravo is very familiar with California, a market where Saks in the past year has taken over some former I. Magnin sites and recovered some lost market share.
Bravo, Philip Miller, chairman and chief executive officer of Saks, and many other senior Saks employees have been working furiously to get the company in shape. Many have equity interests in the business and stand to gain substantially from the public offering.
Saks has also been beefing up some underperforming branches and is hot for new real estate, particularly in Florida, where it’s broken ground on a store in Sarasota and plans units in Fort Meyer and Orlando. It’s also eyeing the Tampa/St. Petersburg market.
However, its best property remains the Fifth Avenue flagship, which has capitalized on the popularity in luxury goods and the city’s steady tourist traffic.
— Fairchild News Service

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