QUOTE AND NEWS
The Hindu Business Line  10 hrs ago  Comment 
Bharat Financial Inclusion (formerly SKS Microfinance) on Friday assigned a pool of receivables of an aggregate value of ₹539.67 crore to one of the largest public sector banks on direct assignment b...
CNNMoney.com  Jun 15  Comment 
The rifle used in the attack that left a congressman and four other people wounded on a baseball field is a Soviet-era relic that is widely available in the United States and was used in another mass shooting last year.
The Hindu Business Line  Jun 15  Comment 
Morgan StanleyBharat Financial (Overweight)CMP: ₹702.85Target: ₹860Our ‘Overweight’ view on Bharat Financial Inclusion (formerly SKS Microfinance) has been premised on our assumption that asset quali...
MarketWatch  Jun 13  Comment 
The Neiman Marcus Group confirmed Tuesday that talks with Saks Fifth Avenue parent Hudson's Bay Company have ended. The Wall Street Journal reported on Friday that talks between the two luxury retail companies had stalled. "We previously...
Wall Street Journal  Jun 9  Comment 
Takeover talks between Neiman Marcus Group Inc. and the parent of Saks Fifth Avenue have stalled, according to people familiar with the matter, leaving the department store owners to chart their own paths through a difficult retail landscape.
MarketWatch  Jun 8  Comment 
Hudson’s Bay Co., owner of Saks Fifth Avenue and Lord & Taylor, said Thursday that it would eliminate about 2,000 positions as part of restructuring efforts, the latest sign of deepening distress in the retail sector.
DailyFinance  May 12  Comment 
Filed under: Lifestyle, Wellness, Fitness Understanding and investing in your own wellness is a massively important part of living a healthy, happy life, and Saks Fifth Avenue wants to make doing so even easier. Read...
The Hindu Business Line  May 2  Comment 
Bharat Financial Inclusion (BFIL), formerly SKS Microfinance, has reported ₹235-crore loss in the fourth quarter ended March 31. The company earned a net profit of ₹84 crore in the same period last ye...
DailyFinance  Apr 17  Comment 
Filed under: Finance, Personal Finance, Consumer News Wealthy shoppers have become bargain hunters, and that's hurting retailers like Neiman Marcus, Nordstrom, and Saks. Read more...   Permalink | Email this | Linking Blogs | Comments
TechCrunch  Apr 17  Comment 
 One iPhone case is much like the other unless it’s made of figured walnut wood from a retired woodworker in California and feels like the surface of a finely-sanded and well-made piece of antique cabinetry. That’s why Kerf Cases, a...




 


Saks Incorporated (NYSE:SKS) sells luxury apparel, shoes, jewelry and accessories in the U.S. through its Saks Fifth Avenue (SFA), Saks Fifth Avenue Off Fifth and Club Libby Lu (CLL) stores. In fiscal 2010, SKS posted net sales of $2.786 billion and net income of $47.85 million.[1]

Saks—and most other luxury goods retailers—are relatively shielded from trends such as rising oil prices because it targets a lower-income demographic; however, luxury consumption exaggerates more fundamental up and down swings, typically rising and declining at a faster rate than the overall economy. Due to healthier U.S. economic conditions, Saks made profits in fiscal 2010, compared to losses suffered in 2008 and 2009.[1]


Company Overview

Saks owns and operates luxury retail stores, selling high-end fashion apparel, accessories and furnishings to its traditionally middle-aged, higher-income female customers.

Business Segments

The Saks, OFF 5TH and Saks Direct businesses are aggregated in one business segment.[1] SKS product categories are listed below:

  • Women's Apparel: 37.5% of Fiscal 2010 net sales.[1]
  • Accessories: 18.9%
  • Cosmetics: 12.1%
  • Men's Apparel: 15.2%
  • Women's Shoes: 12.8%
  • Other: 3.3%

Geographic Presence

Most of Saks stores are in the U.S., but the company does have SFA stores in Riyadh, Saudi Arabia; Dubai, United Arab Emirates, Mexico City, Mexico, Kazakhstan, and Shanghai, China.[1]

Business Growth

Fiscal 2010 (ended January 29th, 2011)

As a whole, SKS had a rebounding fiscal 2010 compared to their net losses in 2008 and 2009.

  • Net sales increased 5.9% to $2.786 billion.[1]
  • SKS posted net income of $47.85 million, compared with a $57.9 million loss in fiscal 2009.[1]

Trends and Forces

Luxury retail exaggerates swings in economic cycles

While luxury goods consumption is well-insulated from trends such as rising oil prices, the industry is sensitive to longer-term changes in economic cycles, as luxury goods exaggerate up and down swings. During a boom, consumers' demand tends to increase faster than the growth rate of economies while slowdowns can lead to rapid declines in sales. Reduced demand for luxury items might induce the company to take inventory markdowns or offer discounted items, which detract from the cache of expensive items.

Tourism drives 20% of sales

A substantial number of Saks’ department stores are actually not in tourist markets, including the flagship SFA store on Fifth Avenue in New York City, and approximately 2.43% of the company’s annual sales come from tourists. Global instability, such as terrorist activity would discourage tourism. Furthermore, many tourists take advantage of the U.S dollar’s weakness in relation to other currencies when buying from Saks; a strengthening of the dollar may discourage tourist business for the company. While most of its stores are in the U.S., the company does have SFA stores in Riyadh, Saudi Arabia, Dubai, United Arab Emirates, but not Mexico.

High dependence on fashion trends

Much of success in the retail business depends on the company’s ability to predict and anticipate consumer tendencies as order agreements are made months in advance of sales to consumers. Consequently, if the company inaccurately predicts consumer preferences, it could face lower sales, an overflow in inventories and lower profit margins—all of which would adversely affect the company’s financial health.

Competition

The luxury retail market has become increasingly competitive, and Saks’ prime competitors include Neiman Marcus (privately held), Nordstrom (JWN), Bloomingdale’s, and Barney’s (privately held), all of which offer comparable merchandise and cater to a customer demographic that earns roughly $175,000 to $200,000 a year, though Nordstrom targets a slightly less affluent average customer.

  • Saks (SKS) merchandise is dominated by apparel, which constitutes about 55% of the total assortment
  • Nordstrom (JWN) derives a sizeable portion of sales from shoes
  • Bloomingdale’s derives a high portion of its revenue from home goods.

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 SKS 2010 10-k
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