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Published
May 18, 2009
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Saks shareholder seeks changes at upscale retailer

By
Reuters
Published
May 18, 2009

NEW YORK (Reuters) - A hedge fund firm with a stake in Saks Inc (SKS.N) called for governance reforms, contending the struggling luxury retailer needs to adopt annual elections for all directors and become more responsive to investors.


Dolce & Gabbana at Saks Fifth Avenue, New York

P. Schoenfeld Asset Management LP, which said on Monday 18 May it owned about 1.5 percent of Saks shares, said shareholders should hold the upscale department store chain's board responsible for Saks' poor performance, including weak 2008 holiday sales.

Saks stock gained 74 cents or 22.2 percent to end at $4.08 on Monday 18 May on the New York Stock Exchange, where it was the 12th-biggest gainer in percentage terms. The shares were boosted by news of the proxy contest and two investors disclosing sizable stakes in the retailer.

Saks posted a sales drop of nearly 15 percent in the fourth quarter, as the retailer discounted its products deeply and even well-heeled consumers tried to save money during the recession.

Saks, which is scheduled to report first-quarter results on Tuesday 19 May, has set its annual shareholder meeting for June 3.

Saks shares are down nearly 74 percent over the past year. The company was not immediately available for comment on Monday 18 May.

While thrifty consumers have led to weak sales at many retailers, Saks' troubles were due in large part to stores in several locations that generated an "unsatisfactory return," PSAM founder and chief executive Peter Schoenfeld said.

"Saks is a firm with a great global name and great real estate values that never seems to get the market right. There's always one excuse after another," Schoenfeld told Reuters in an interview. "We would like as shareholders to have a stronger say by having the right governance structure."

Schoenfeld's letter comes as Bill Ackman's Pershing Square Capital Management renews his long-running campaign pushing for changes at Target Corp (TGT.N).

Unlike Ackman and Target, Schoenfeld is not asking for new management or specific changes in how the business is run, though he complained results have been weak for some time.

"We're tired of hearing the CEO talk about his 8 percent margin target, when it's never gotten near 4 percent and now we have negative margins. Neiman Marcus, meanwhile, has 12 percent margins," Schoenfeld said. "We're getting a bit impatient."

For now, Schoenfeld hopes that a more responsive board will translate into a better-run company.

In his letter to fellow shareholders, he called for getting rid of the retailer's staggered board, which means only some board members are up for re-election each year.

Saks' directors also are elected for three-year terms, which reduces their accountability and denies shareholders a chance to vote for changes, Schoenfeld wrote. Saks Chief Executive Steve Sadove is up for re-election in 2011, for example, and so cannot be voted out this year.

Instead, Schoenfeld asked shareholders to withhold votes for Warren Neel, head of the board's governance committee and a director who is up for re-election this year.

P. Schoenfeld is a New York firm that buys debt as well as stocks worldwide that could benefit from special events, such as mergers. PSAM has held Saks shares for years, he said, and as much as 4.9 percent in the past.

The firm filed its letter and proxy statement with the U.S. Securities and Exchange Commission.

The vote is not binding on Saks, Schoenfeld said, though he hopes a strong vote will send a message to management and the board.

Separately, the chairman and chief executive of Italian luxury shoe and bag maker Tods SpA (TOD.MI), Diego Della Valle, acquired a 5.9 percent stake in Saks over the last few months, according to a regulatory filing last week.

By Aarthi Sivaraman
(Additional reporting Joe Giannone; editing by Matthew Lewis)

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