Saks Inc.SKS

Morningstar Rating

Stock Research and Analysis

by Kimberly Picciola

We think Saks faces an uphill battle given the near-term economic challenges and the company's weak competitive position in a market that is likely to be impaired for some time. Saks has historically underperformed its peers, and while improved merchandising Read more

Bulls Say

Selling its regional department store chains has allowed Saks to focus on putting its luxury division back on track. If management can't revive the luxury chain, it could make an attractive acquisition target at the right price for the right buyer.

Saks has a strong brand name and owns nearly 60% of its Saks Fifth Avenue stores.

Saks is one of the few U.S.-based department store chains that has expanded internationally. It opened its first store in China in 2008.

The company returned excess cash from the sale of its midtier department store chains to shareholders in the form of a special dividend.

The company discontinued its 95 Club Libby Lu specialty stores, which offer parties, makeovers, and fashionable clothes for young girls, to focus on its luxury chain. Read more

Bears Say

Saks Fifth Avenue's operating margins have been pitiful--well below the industry average--even before the economic downturn.

The company has not been able to capitalize on the recent popularity of luxury goods the way competitors Neiman Marcus and Nordstrom have.

Returns on invested capital have been lagging our estimate of the company's cost of capital in recent years.

The luxury segment has been growing at a healthy pace in recent years, but demand has fallen off a cliff amid a difficult economic environment.

Retailers like Nordstrom and Bloomingdale's are focused on enhancing their offering of designer labels, which could pressure Saks' sales. Read more

Strategy

In an effort to respond to the weakening economy, Saks is working to reposition its luxury brand as a place where consumers can find high-end goods as well as more accessible luxury items. In addition Read more

Management

Stephen Sadove is chairman and CEO of Saks. At the start of 2006, Sadove was promoted from the COO position to the role of CEO. In addition to his three years at Saks before taking on the CEO role, Sadove had spent more than 25 years in the consumer Read more

Profile

Saks offers luxury apparel, accessories, and home furnishings through its more than 100 Saks Fifth Avenue and Off 5th stores as well as its Web site. The company is expanding Read more

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