Why Saks Shares Soared
May 21st 2013 9:17PM
Updated May 22nd 2013 1:00AM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Saks jumped twice today, first gaining 11% during the trading session on strong sales in its earnings report, and then surging another 19% after-hours on reports that it retained Goldman Sachs to look into a possible sale. Its share price climbed 33% over the two sessions
So what: The upscale retailer first reported an adjusted earnings per share of $0.19, in line with estimates, but same-store sales came in well ahead of expectations, growing 5.9% versus the projected 2.6%. Overall revenue was up 5.2% to $793.2 million, topping expectations of $778.1 million.
After hours, the New York Post said that the high-end clothing chain may be sold to a private equity firm in a leveraged buyout, though the company refused to comment. Interested parties include KKR and Leonard Green & Partners.
Now what: Ironically, today's jump could help spoil the buyout, as shares may be too highly priced for a potential buyer, now worth a third more than they were just a day ago. Saks Fifth Avenue is a strong brand, but shares look pricey at a P/E near 40 with little anticipated growth. Similarly, the company said it expects same-store sales of 4%-6% for the rest of the year, down from its current clip. Considering the above that shares are at a five-year high, I'd say now is a great time to sell.
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The article Why Saks Shares Soared originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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