NEW YORK ( TheStreet) -- Shares of Saks (SKS) have surged more than 30% this week on a better-than expected-earnings report and on speculation that the company is exploring strategic alternatives that may include the sale of the company.It has been a long road back for Saks, which was seemingly priced for bankruptcy in early 2009, when shares reached a low of $1.55. SKS data by YCharts
The company responded to the crisis by making moves that helped right the ship. It cut inventory and strengthened its capital structure with a stock offering and debt restructuring. Saks repurchased senior notes and issued convertible debt, and it emerged a much stronger company. A return to profitability followed, and Saks is now a "ten-bagger" since early 2009. The stock now trades at about $15.50.
Today's Saks is a leaner and meaner version of the company expected to implode just four years ago. The company ended the first quarter with $20 million in cash and $317 million in debt, less than half of the debt level in late 2008. First-quarter revenue and adjusted earnings beat estimates as same-store sales rose 5.9%. Of course, much of the excitement we've seen this week in Saks is due to speculation that the company may be up for sale. I've seen estimates that it might fetch between $16 and $19 per share (Deutsche Bank), but in my view, a price in that range would be disappointing. There's still life left in Saks as a retailer, as evidenced by its first-quarter results, and there's much more to the valuation story.