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Reading the Tea Leaves: As Saks Inc. Nears Deal, SFA Speculation Swirls

As its parent, Saks Inc., inches closer to shedding its northern department store group and Club Libby Lu division, speculation continues to swirl over the...

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Filing the annual report has given Saks and its SFA operation some breathing room. Financial sources, such as factors, said they were awaiting the statements to determine whether or not to approve orders for the upcoming holiday shopping season. Factors are companies that handle a supplier's accounts receivables for a fee. A critical part of the factoring process is assessing the creditworthiness of retailers. As of last month, approvals were granted for orders through September, meaning that at least fall merchandise is being shipped to the stores.

Still, one sell-side analyst said on Monday the results have been "less than stellar," and that the turnaround still seems to need much work. As a result, the company may get less for SFA than it had previously hoped.

Saks, sources said, had expected to get a premium for its luxury flagship business, which includes the SFA stores and its Off 5th operation, especially after seeing Neiman's sold for $5.1 billion.

The perception in the market is that Neiman's is a top performer, well beyond reach of SFA. The numbers back up the claim. In its most recent quarter, Neiman's said net income grew by 66.8 percent on a revenue gain of 8.5 percent, while same-store sales jumped 9.6 percent. Revenues at the Neiman Marcus nameplates increased 7 percent, while those at Bergdorf Goodman gained 14.5 percent.

SFA, meanwhile, has posted inconsistent results over the past four months. In May, June and July, same-store sales showed gains of 0.8, 7 and 4.1 percent, respectively. In August, same-store sales rose 5.3 percent.

Meanwhile, financial sources said Saks is getting close to finalizing a deal with Bon-Ton Stores for the sale of its northern department store group, which consists of the Carson Pirie Scott, Bergner's, Younker's and Boston Store nameplates. Sources said that, after Cerberus Capital Management bowed out of a possible run at Saks with Bon-Ton as a partner, the retailer searched for and found another, unnamed private equity player to team up with.

Now it is looking like the bid price for the northern department store group will be less than the $1.5 billion that was the prior asking price for the operation, as reported by WWD.
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