Saks for Sale

Speculation is that Saks Inc. is on the market, and its Saks Fifth Ave. property as well

Saks Inc. (Birmingham, Ala.) has put its regional department stores up for sale, according to executives close to the company, and is also considering selling its crown jewel, the Saks Fifth Avenue chain.

According to a report in this morning’s New York Times, the Saks board has hired the investment banks Goldman Sachs and Citigroup to “explore strategic alternatives” for its properties.

While the board had initially expected to sell only its 241 regional department stores (Parisian, McRae’s and Carson Pirie Scott, among others), in recent days several suitors have evidently inquired about buying the 62-store Saks Fifth Avenue chain, prompting directors to consider putting the entire business up for sale.

The Times said Saks Inc. ceo Brad Martin is known to be eager to sell some assets to take advantage of the high premiums that department stores have been fetching. Because of the momentum of the luxury market and the value of real estate leases, analysts said the company might bring at least $3 billion.

The most likely candidate to buy the department store group was said to be Belk’s, a mid-level regional department store group based in Charlotte, N.C. But The Times noted that private equity firms have been frantically patrolling the retail industry lately. Among those said to be looking at Saks are the Blackstone Group, the Apollo Group, Bain Capital and Kohlberg Kravis Roberts. With luxury retailing still booming, the prospect of a Saks Fifth Avenue sale would be enticing to a number of these firms, which are also looking at Neiman Marcus.

In March, Neiman Marcus (Dallas) announced it had hired Goldman Sachs to put that company up for bids. Last month, Federated Department Stores (Cincinnati) paid $11 billion for the May Department Stores Company (St. Louis). Only nine months ago, May paid Target Corp. (Minneapolis) $3.2 billion for its Marshall Field’s department store chain, a price many considered more than the chain was worth.

“It’s the perfect time to sell,” Burt Flickinger III, managing director of the Strategic Resource Group, a retail consulting firm, told The Times. “The market will not be higher in the foreseeable future.”

Last month, same-store sales at the Saks Department Store Group were up only 0.9 percent. Saks Fifth Avenue sales, on the other hand, were up 7.1 percent.