Tags: Saks | seeks | rebound | SKS

Saks Seeks Sustained Retail Rebound

By    |   Friday, 10 February 2012 08:30 AM

Saks (SKS), one of the country’s top upscale department stores, seeks a sustained retail rebound, both from the Great Recession and from its underperformance against other luxury retailers.

Saks shares have offered an annualized total return of negative 12 percent over the last five years, compared to negative 1 percent for Nordstrom (JWN) and positive 11 percent for Tiffany (TIF).

The stock market’s surge over the past four months has made the wealthy feel more comfortable about their finances. That in turn has led them to spend more on luxury goods. Saks says its same-store sales rose 9 percent in November year-on-year, 6 percent in December, and almost 10 percent for 2011 as a whole.

The company has finished shutting stores in the wake of the financial crisis. It depends on its flagship New York City store for 20 percent of its sales.

That’s a blessing and a curse. When Wall Street is strong, the company may benefit more than competitors. But when Wall Street suffers, so does Saks.

The company’s effort to offer more private and exclusive label goods also represents a double-edged sword. That merchandise provides Saks with higher profit margins but could turn off Saks' fashion-sensitive customers, according to Morningstar.

Weathering the storm

Standard & Poor’s analyst Esther Kwon has a hold rating on Saks shares.

“We look for SKS to weather a challenging retail environment through a merchandising focus on its most productive brands at its full-line stores and the leveraging of the off-price and online channels to increase brand awareness and customer reach,” she writes.

In the quarter ended Oct. 29, profit shrank by more than half to $17.8 million. Revenue gained 5 percent to $692.3 million.

The company next reports earnings Feb. 21.

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