Saks (SKS) reported Q3 earnings this week that look about as good as their New Orleans store did after Katrina, and the stock is down another 10% today as I type this. Citigroup’s analyst reiterates a buy recommendation:

Citi analyst says, “We were disappointed with SKS’s 3Q08 EPS and the company’s inventory position at quarter-end (total inventories up ~4.0% YOY vs. a sales decline of (-12.3)%). While we are pleased that SKS is taking the necessary aggressive actions to clear through merchandise and conservatively plan inventory receipts for Spring 2009 to be down (-15)%, we expect SKS to experience significant margin pressure over the next few quarters as the company better aligns its inventory levels with sales…We believe SKS’s liquidity position is fine as the company can continue to access its revolver, reduced 2009 capex plans, and has no maturities until December 2010.”

Translated: “Sales suck, inventories suck, everything is being clearanced out, but nobody has curtailed their credit line. Yet. BUY!” Really, the P/E is still 10 or so – hardly a bargain or rarity in the current market. Maybe you want to bet on some foreign buyer or sovereign wealth fund deciding they’d like to own a luxury chain (e.g., Dubai and Barneys) but I consider that unlikely. And Forbes says the Saks ax may fall on their outlet stores, meaning that in the future they would have to either burn excess inventories on a pyre (this being one of the major reasons I think “green initiatives” will suffer in a bad economy; no way can they afford to spring for carbon offsets for that) or offer them at 95% off on their regular retail floors. Tough choice.

I am kinda laughing that it’s phrased to say they can continue to access their revolver, because the first thing that went through my mind when LoLo sent me this link is that the only SKS I would rate a strong buy right now is the Russian one, which could perhaps be useful for defending the only stocks you should have right now that are important, that is, your stocks of macaroni and cheese.