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Is Saks Headed for Bankruptcy?

The downturn in the luxury segment has been incredibly nasty. So much for the idea that luxury stores were going to hold up better than middle-market retailers. Instead, luxury retailers have been posting negative double-digit same-store sales comps for months.

The upshot of all this is that now it appears Saks may be facing bankruptcy.

“There have been a lot of rumors circulating about the company,” Stephen I. Sadove, chief executive of Saks, said during a blunt conference call with investors, “including bankruptcy.”

Mr. Sadove did not explicitly rule out the possibility. But he argued that “bankruptcy would destroy shareholder value” — a point pretty much beyond dispute — and that Saks had devised a plan for the weak economy that should see it through. The plan entails cutting costs and introducing exclusive but more affordable merchandise, Mr. Sadove said.

But the company hedged its bets. Kevin Wills, Saks's chief financial officer, told investors that if Saks “needed to do something, we have very valuable real estate that provides us flexibility.”

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