Stock of the Day
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Saks (SKS)
Despite Loss, Saks Investors Push Stock Up 20%
Although the nation is still struggling with many economic concerns, some companies have begun to show signs of recovery. Home improvement stores Lowe's (LOW: Charts, News, Offers) and Home Depot (HD: Charts, News, Offers) both reported strong profits yesterday, a relief to investors. However, although some companies have been able to complete the necessary steps towards recovery, many others are still struggling to some degree. Among them is Saks, a high-end retail store, which reported a first quarter loss this morning. What steps must Saks take to reach profitability again, and how have Saks' investors reacted to the news?
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| Daily Chart |
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| Stock Analysis |
Saks reported a first quarter loss of $5.1 million, or 4 cents per share. The year before, the company reported a first quarter profit of $17.3 million, or 12 cents per share. Furthermore, revenue fell 27% to $621.3 million, and same store sales fell 28%. In the last year, shares of Saks have fallen almost 75%. Some investors are concerned that Saks' board is responsible, and changes should be made within the leadership. On Monday, hedge fund P. Schoenfeld Asset Management (PSAM) LP announced that they had purchased a 1.5% share in Saks, and at the same time sent out a letter to shareholders calling for a change in leadership.
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Although some investors are not pleased with the situation, many others were quite thrilled with the results, despite the loss. Analysts had actually been predicting a loss of 26 cents per share, so a loss of only 4 cents per share was much better than expected; following the announcement, shares of Saks have increased over 20%. The company has already begun to take steps to counteract the drawback in spending, by announcing job cuts of 1,100 employees, and general cost cutting techniques. This morning the company increased their target for the upcoming year, announcing that they hope to cut approximately $60 million in costs this year alone.
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Although some investors such as PSAM are concerned about the job that the management is doing, Saks officials are optimistic. Chairman Sadove announced that "carefully managing inventories, expenses and capital spending" was what helped the company beat expectations this quarter. The company expects that same store sales will continue to decline throughout the year, and although things may be tough for as long as the economy remains troubled, Sadove believes that they will be able to recover once the economy improves. Although some investors are greatly concerned at the idea that Saks will not fully recover anytime soon, many others have embraced Sadove's thoughts and seem quite optimistic. Coming back from near-bankruptcy is certain hard, but perhaps if these investors continue to support the company, and the company continues to reach their goals, Saks can do as well as it hopes.
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Profile |
Click here to view a detailed profile of Saks.
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