TALK OF ICELAND IN SAKS’ FUTURE

As Saks Inc. continues to polish its image after years of misguided management, the luxury department store chain is once again drawing speculation that a sale of the company is in the works.

Such talk gained steam earlier this week, when an Icelandic investment comPany, BauGur, revealed through a Securities and Exchange Commission filing that it had amassed an 8 percent stake, or 11.5 million shares, in Saks at an estimated cost of roughly $253 million.

Though Baugur’s investment is said to be passive at this time, the firm clearly sees an opportunity to make money with Saks.

Saks has been a historic laggard compared with its luxury peers, but better merchandising and marketing of the stores is helping it close the gap. The company has sold off its middle market department stores to focus on its crown jewel, the Saks Fifth Avenue chain.

Sales at the retailer’s stores open at least one year have outpaced rivals for the past few months, and margins are on the rise.

“Saks is generating the highest sales productivity per store right now,” said Todd Slater of Lazard Capital Markets.

Baugur could also use its stake to negotiate distribution agreements in Saks stores for some of its fashion labels, which include the apparel brand All Saints and jeweler Mappin & Webb.

Saks management has in the past downplayed talk of an imminent sale, saying they are committed to seeing the turnaround plan through. A Saks spokeswoman declined to comment for this story.

Yet, with luxury retailer Barneys New York attracting not one but two recent bids, it’s hard to believe a company with the brand recognition of Saks would remain on the takeover sidelines indefinitely.

The shares of Saks traded as high as $21.17 yesterday, before closing down 77 cents or 3.6 percent to $20.40. Retail stocks across the board took a hit yesterday, as investors fretted about the health of consumer spending.