QUOTE AND NEWS
New York Times  Oct 7  Comment 
Store employees are among those charged with stealing about $400,000 worth of luxury shoes and handbags using customers’ information.
Wall Street Journal  Sep 24  Comment 
Hudson's Bay expects to open a 85,000-square-foot Saks Fifth Avenue store in spring 2016 and a 55,000-square-foot Saks Fifth Avenue Off Fifth discount outlet in fall 2017 in Lower Manhattan.
New York Times  Sep 24  Comment 
Saks Fifth Avenue is expected to announce a new department store, an opening of Off 5th and a move to the financial district.
The Economic Times  Sep 18  Comment 
'SKS Microsystems is a 'buy' with a target of Rs 325 and stop loss of Rs 312.'
Wall Street Journal  Sep 12  Comment 
Canadian retailer Hudson's Bay Co. said fiscal second-quarter sales jumped 87% and its net loss narrowed, as it continued to benefit from last year's purchase of U.S. luxury retailer Saks Inc.
The Hindu Business Line  Sep 9  Comment 
Sandstone Investment Partners I, Mauritius, has brought down its stake in SKS Microfinance to 5.75 per cent from 6.22 per cent. This was effected through open market sale on Monday, the co...
The Hindu Business Line  Sep 9  Comment 
Shares of Eicher Motors, Motherson Sumi Systems, SKS Microfinance, MindTree and TVS Motor Company have gained between one and three per cent, as the NSE has included them in the derivative segment...
The Economic Times  Sep 9  Comment 
"SKS Microfinance Ltd is a 'BUY' call with a target of Rs 365 and a stop loss of Rs 330."
The Hindu Business Line  Sep 8  Comment 
Shares of Eicher Motors, Motherson Sumi Systems, SKS Microfinance, MindTree and TVS Motor Company are likely to witness buying interest as the NSE has decided to include them in the derivative seg...
The Economic Times  Sep 8  Comment 
Besides, minimum order requirement for a stock to be eligible for introduction in the derivatives segment should be Rs 10 lakh.




 


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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