---

SAKS & RETAIL REALITY

Saks Inc.’s sales declines and discounting should be viewed as strength and reality—not weakness. The retailer is not up to its neck in debt. In this critical financial crisis, Saks has put itself in the shoes of its customers. They are watching every buck and looking for value.

Chairman Stephen Sadove has kept the belt tightened and not mortgaged its real estate to impress the stupid spender. Saks’ chief merchandising officer, president Ronald Frasch, is aiming at quality product with value pricing. Looking at the retail scene, the financial facts speak for themselves.

When the venture capital crapshooters bought Mervyn’s, they used real estate to secure debt. Servicing debt in this retail environment is deadly. Mervyn’s went belly-up. There are other retailers who have been acquired by venture capitalists. Debt is the road they are taking to grow and live. With this retail sales nosedive, debt is the sure way to die unless you keep your equity in control.

Remember, you cannot make a sandwich with bread alone.

---