Byline: Sidney Rutberg, David Moin and Valerie Seckler

With the market for luxury stocks sizzling, Saks Fifth Avenue has made its move to get in on the action.
Saks, as expected, filed a registration statement with the Securities and Exchange Commission on Thursday for the sale of up to $345 million worth of stock. The proceeds are to be used to reduce debt of $976 million.
Although neither a specific date nor an estimated price range for the offering wasn’t given Thursday, sources estimated the issue could come to market around the $22 mark.
The filing confirms reports in these columns March 5 and March 6 that the retailer had assembled an underwriting group for an initial public offering. The prospectus provides a rare glimpse into the health of the privately held company and its plans.
Significantly, the figures reveal a strong top line, with sales in 1995 up 19 percent to $1.69 billion and same-store sales up 10.6 percent, but there have been bottom-line losses for five years. The losses were largely the result of heavy interest costs, special charges for writedowns of assets and for early debt repayment.
The filing does not disclose how many shares are being sold or what percentage of the company the proposed sale represents.
Investcorp purchased Saks Fifth Avenue in 1990 for $1.6 million and a year and a half later sank another $300 million into the company when the business was rocky. It was generally felt that Investcorp paid too much for the company, and it would be a long time before it would get any return on its money.
According to the filing, Saks lost $64.1 million in 1995 after interest charges of $94.2 million, a writedown of assets of $36.4 million and a $6 million charge for early repayment of debt. In 1994, sales were $1.4 billion, and the loss was only $10.6 million. This is after $76.2 million in interest charges and $535,000 for early debt repayment.
Going back to 1991, Saks lost $180.5 million on sales of $1.27 billion. The loss was after $126.2 million in interest costs and $11.5 million in early debt repayment charges.
Losses peaked in 1993 at $255.8 million on sales of $1.4 billion. That year there was a $177.7 million charge to writedown assets, interest charges of $73.8 million and a $27.6 million charge for early debt repayment.
Recent losses notwithstanding, analysts see a bright future for the upscale chain.
“It’s a multipronged attack for growth,” Walter Loeb, president, Loeb Associates, said of Saks’ decision to go public.
The full-line stores are still expected to produce about 25 percent of Saks’ sales, Loeb noted, with more aggressive growth planned for its resort stores, off-price outlets and catalog business.
Fourteen new Off Fifth Avenue off-price stores will bow in 1996, said Loeb, who projected the division’s sales will rocket 85 percent to $200 million this year from $108 million in 1995.
Further, he estimated the catalog business, whose volume surged 58 percent last year to $82.8 million, could grow another 21 percent to $100 million, as more mailings are planned.
“Saks Fifth Avenue’s fashion cachet and strong management team can easily be exploited for growth overseas,” Loeb said.
Should the Saks issue be well received, it would be two big scores in the luxury market for Investcorp. The investment firm is coming off a triumphant public offering for Gucci, which went public last October with only one year of profits out of the past five. Nevertheless, the stock came out at $22 a share and went straight up. On Thursday, Gucci stock closed at 45 3/8, up 1 1/4 on the New York Stock Exchange.
The continued rise in Gucci’s stock followed an announcement early in the week that Investcorp planned to sell out its remaining 51.8 percent stake in the Italian luxury goods company. The sale of Investcorp’s remaining 30 million shares at Thursday’s price would bring about $1.36 billion, as reported.
This would come on top of the $228 million Investcorp realized in the October IPO. The London and Bahrain-based investment company paid about $245 million for its entire stake in Gucci. While Gucci’s total sales last year were about $500 million, they were nearly double the prior year’s and earnings of $81.4 million compared with $17.3 million in the prior year.
The Saks offering is being made in the name of Saks Holdings Inc., the parent of Saks Fifth Avenue. The underwriters are Goldman Sachs & Co., CS First Boston, Morgan Stanley & Co. and Salomon Bros.
The prospectus indicates Saks is positioned for strong growth, citing its emphasis on better-to-designer-priced goods and the current popularity of luxury labels. In addition, the 45-to-54-year-old women’s bracket is a fast growing segment of the population and one targeted by Saks.
Since the Investcorp acquisition in 1990, Saks has spent $183 million on new stores, remodels, replacements and expansions, and 60 percent of the selling space has been renovated or is new.
Saks has also intensified marketing efforts to its best customers through the Saks First Program and the Fifth Avenue Club and stepped up merchandise planning to better tailor assortments to each store.
The company has 40 full-line stores, generally 60,000 to 140,000 square feet, and plans three more over the next three years in addition to two replacement units and four resort stores, which range from 30,000 to 50,000 square feet.
Saks considers its 35,000-square-foot Greenwich, Conn., unit, scheduled to open in the third quarter on a former Woolworth site, as a prototype for a new “Main Street” format for local shopping areas of affluent suburban markets.
According to the prospectus, women’s designer apparel accounted for 14 percent of sales last year; women’s sportswear, 32 percent; men’s apparel, 16 percent; shoes and accessories, 22 percent;, fragrances and cosmetics, 14 percent, and other, 2 percent.
Private label merchandise including the Real Clothes for casual/active sportswear for women, The Works for career coordinates and Saks Fifth Avenue Men’s Collection for sportswear and furnishings.
Special sizes accounts for 5 percent of sales last year, rising 24 percent from the year before.
The growth record reflects the aggressive approach of the Saks team put in place by Investcorp, a team that stands to gain handsomely from the IPO.
Philip Miller, Saks chairman and chief executive officer, Rose Marie Bravo, president, and Brian Kendrick, vice chairman and chief financial officer each hold less than a 5 percent stake in Saks prior to the offering, including shares they can purchase within 60 days of March 13, by exercising stock options.
The prospectus also reveals that Miller’s salary was $1.1 million in 1995. His bonus was $360,000. Kendrick and Bravo each earned salaries of $666,667, and bonuses of $225,000.
The Saks prospectus shows that prior to the offering, Investcorp is the beneficial owner of 18.42 percent of Saks’ common stock but does not hold any shares directly. The stake includes all of the shares owned by SFA Folio Limited, SFA Label Limited, SFA Collection Limited, SFA Designer Limited, Saks Fifth Avenue Holdings II Limited, Saks Fifth Avenue Investments II Limited, Flair Limited and Chemical Nominees (Guernsey) Limited.
Other than Flair Limited, which is an indirect wholly owned subsidiary of Investcorp, Investcorp owns no stock in these entities. However, Investcorp shares beneficial ownership of the stock because the entities have struck revocable agreements with a wholly owned subsidiary of Investcorp, giving it the authority to direct the voting and disposition of the shares.
A 10.01 percent stake is beneficially held by Prince Al Waleed Bin Talal Abdulaziz in Riyadh, Saudi Arabia. He does not hold any shares directly. The stock showed as owned by him includes all shares held by SFA Saudi Holdings Limited, of which he owns a majority of the outstanding stock.
Fifth Avenue Equity Limited, a Cayman Islands corporation, has a 5.57 percent stake; Trustees of the Estate of Bernice Pauahi Bishop, an educational charitable trust in Hawaii, 5.56 percent, and Work Holdings Limited, another Cayman Islands corporation, 5.22 percent.
Saks noted in its prospectus that it distributes the products of Gucci, Ebel and Chaumet through its stores and believes the arrangements are on an arms’-length basis. “Except for these arrangements, upon completion of the offering, Saks will have no business relationships with Investcorp or any of its affiliates or related parties.”
Saks also said Gucci sells women’s and men’s wear that competes with its own private label apparel business, but it believes competition with Gucci is limited because Saks’ goods are generally sold at different prices and target different market segments.
Investcorp and its affiliates have an ownership interest in, control a majority of the voting stock of and have directors serving on the boards of Gucci Group NV and its affiliates; Ebel SA, Swiss manufacturer of watches, and Chaumet International SA, French retailer of jewelry and other luxury goods.

The Saks Fifth Avenue prospectus paints a telling picture of the 130-year retail institution. Among the highlights:
* The 646,000-square-foot Fifth Avenue flagship accounted for 22 percent of total sales last year.
* Saks is heavily dependent on the Christmas season, when it does 31 percent to 32 percent of its business.
* Saks plans to open in early 1997 a 600,000-square-foot distribution center in Aberdeen, Md., designed to handle larger volume and replace the 511,000-square-foot center in Yonkers, N.Y.
* The 19 Off 5th Outlet clearance stores posted $108 million in sales last year, almost doubling its business due to new stores, and 21 more should open over the next two years.
* Folio catalog sales accounted for $82.8 million in sales and 29 million catalogs were mailed last year.
* Saks is considering overseas expansion, but stores are not cited. Catalog distribution in Japan and selling private label goods to one unnamed Japanese department store, as well as trunk shows and special events in Latin America are being considered.
* Saks does 41 percent of its business in the Northeast; 20 percent in the Midwest; 15 percent in the Southeast, and 24 percent in the West. Top three markets are New York, California and Florida.
* The Saks credit card generated about half of 1995 net sales, with about 1.7 million Saks cards as of last month.
* Saks has 11,800 employees in it stores and 750 at its New York City headquarters.

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