Dahling, You Look Simply Maahvelous! by Tom Sullivan
Summary: After years of subpar profits, Saks (SKS) may have turned the corner. Analysts expect net EPS of $0.46 in F2008 (ending Feb. 2008), and $0.73 in F2009. Same-store sales were up 24.7% in February, making January's and December's otherwise stellar gains (11.4% and 11.1%) seem downright paltry. At 2%, margins are way behind competitors Neiman Marcus (9.9%) and Nordstrom Inc. (JWN) (12.2%). CEO Steven Sadove, who engineered the store's current makeover (a W.R. Hambrecht analyst says she was "blown away" after visiting the new Saks), says he expects margins to reach 4% by year-end and 8% within three years. Although share prices are flat from a year ago, the company returned $8 to shareholders through two special dividends. Industry analysts call the chain "a turnaround story" and laud management for doing "wonders with merchandising." At 42x 2007e profits, its shares aren't cheap, and some skeptics think its recovery is already fully factored in -- and then some. But LBO rumors, if true, would likely see any buyer paying at least $24 a share (from a current $19,37), and if not, a mid-20s share price should be easy to achieve as margins and earnings grow.