Saks Inc. Down at Fair Value

Saks Incorporated (SKS - Analyst Report) is a national retailer operating traditional and luxury department stores. The company reported disappointing results for the third quarter and issued a gloomy outlook for the fourth quarter and 2009. Management indicated that the "current macroeconomic and retail environment is unprecedented," and it is taking decisive measures on inventory levels, costs, and capital expenditures.

The company’s results deteriorated throughout the third quarter and trends are not improving. Saks shares look dirt cheap, trading at less than book value and with a price-to-sales ratio of just 0.1x. Using that EPS estimate, SKS shares are trading at about 33x.

We would not bottom fish in SKS shares until its sales trends begin to stabilize. We are reducing our estimates again, and we are not forecasting a full-year profit until 2010, when we expect the company to earn $0.10 per share. We maintain our Hold rating.

Read the full analyst report on SKS

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