Saks (SKS): A Poison Pill For A Dying Company

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Saks (SKS), which was up until recently one of the world’s premier brands for high-end shoppers, has voted itself a "poison pill". The purpose of this may be to block Mexican billionaire Carlos Slim from taking the company over.

According to The Wall Street Journal, "Just days after Mexican billionaire Carlos Slim Helu raised his stake in Saks Inc. to nearly 18%, the beleaguered luxury retailer has adopted a shareholder rights plan intended to thwart a potential takeover."

The board at Saks should let him have the company.

Saks now trades at $4.33, down from a 52-week high of $22.19.

The quarter that the firm closed was remarkably poor. Saks recorded a net loss of $42.8 million, or $.31 per share, for the third quarter ended November 1, 2008. Last year Saks had net income of $21.6 million, or $.14 per share. Revenue fell from $796 million last year to $698 in the most recent period.

Each month of the period, things got worse.  Comparable store sales declined 5.9%, 10.9%, and 16.6% in August, September, and October, respectively, culminating in an 11.5% decline for the quarter. Saks said that the fourth quarter would be hard and that gross margins would face pressure.

Saks has long-term debt of $480 million. It prospects are dim.

If Slim will buyout public shareholders for $7 or $8 they should sell with glee.

Douglas A. McIntyre