In the struggling retail sector, sks stocks, operating in the department store segment of this industry, is beginning to get more attention from investors. The company maintains a mix of stores from the high-end ’Saks Fifth Avenue’ to the ’Off Fifth’ below retail price centers, and a comprehensive online shopping experience through their website. Saks continues to be a leader in upscale shopping destinations, and could prove to be a good value buy for a portfolio.
Saks, Inc.
As a Tennessee company, they were incorporated in the early 1900’s, and have grown to dozens of locations in shopping malls and free-standing stores, mainly by catering to the luxury-minded customer. Today, these locations carry such top names as Burberry, Cartier, Georgio Armani, Ralph Lauren, and Prada, to name a few. With the economy in its current condition, consumer confidence has been dwindling, and such high-end retailers in general are operating in a difficult environment.
The holiday season is just around the corner, however, and sks stocks have capable management at the helm; costs are being held in check, inventory is tightly controlled, and shares are beginning to trade near annual highs for the year. For those who have wanted to buy into the luxury retail giant, this might seem like a good time to do further analysis.
SKS Financials
Using an average price to earnings per share for the past decade, the historical growth of this stock can be seen with more clarity. At current numbers, the company is slightly above their long term average, and not considered undervalued. From a value investor perspective, a lower percentage would make this a good buy. Besides growth and earnings, value buys may also be determined by the capabilities of the management team to weather economic downturns.
The company is projecting negative cash flow for the year 2010, but this is typical of this sector in the current economic environment. What mature businesses do during these tough times to become profitable sets them apart, though, and many are skeptical about the progress Saks has made in this area, even though exceeding analysts expectations. In fact, cutting back on promoting discount and clearance inventory helped to stem losses to 11 cents per share in the first quarter of 2010, for overall revenue loss of just over 8%. As a sector, Goldman Sachs has issued an upgrade for luxury retail operations, encouraging rising share prices for Coach, Tiffany, Nordstrom, as well as SKS companies.
With positive first-quarter results, continued growth for this retailer throughout 2010 is hopeful. The holiday season may help with these expectations, but the company’s CEO is still proceeding with caution. His predictions for growth throughout the rest of the year are conservative, and in the ‘mid single-digit’ percentile. When one considers the necessary indicators of a good value buy, the sks stock is a strong consideration; it has consistent growth over time, an excellent management team, and with few exceptions, has demonstrated the ability to generate positive cash flow. Should revenue continue to increase, shares in sks could become a much stronger buy recommendation.
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