Are These the Next Big Thing or Just Fads? – Saks Inc (SKS), Dillard’s, Inc. (DDS), Kohl’s Corporation (KSS)

Retail stores took a pretty significant hit during the Great Recession, but the economy has largely recovered. So there may still be some good deals with solid growth and the potential to put money in your pocket.

Saks Inc (NYSE:SKS) is an interesting gem of a company. I like that it caters to the high end market, which tends to do well in spite of however the economy may be doing at any given moment. I also like how the company has expanded in a carefully controlled manner since the early part of the 20th century into resort cities first and major cities in a year-round capacity second. Unfortunately, I do have some issues with Saks.

First off, the midtown Manhattan location is one of Saks’s largest revenue generators. While I admire NYC and think it’s a great city, I don’t like when a company depends heavily on one location to make its profits. I’m also not too thrilled about the rather sparse 2.6% profit margins. If you’re just scraping by at the high end during reasonable times, I don’t like the prognosis if anything slips.

On top of that, there are the charge back issues that Saks had to resolve with the SEC a few years ago. I don’t like associating with shady companies because what goes around comes around. While Saks is a sought after place to sell your goods, it’s not so unassailable that a vendor can’t simply go to Neiman Marcus or Lord and Taylor.

Dillard’s, Inc. (NYSE:DDS) is a bit of a mixed bag. While they’ve given up their growth by acquisition strategy and have only made tiny acquisitions in decades, they’ve also closed their travel agency. Their profit margins are nearly double those of Saks, and Dillard’s is trading at around 13 times its trailing earnings. I like that the company is expanding by opening new stores and experimenting with different setups instead of taking over old stores. I also like how Dillard’s is conscious of keeping its stores in some of the most high-end locations in the cities it operates within.

Truth be told, I like Dillard’s overall from a business perspective. It’s established, takes care to locate itself well, and the Dillard family is still very active within the company. However, the .2% dividend is a bit of a waste — either they can afford a higher payout or they need the money to grow.