Saks Inc (SKS): Does This Retail Icon Have a Bullseye on Its Back?

In its latest fiscal year, Kohl’s Corporation (NYSE:KSS) reported fairly weak financial results, with a 2.5% increase in total revenues, but a 12.4% decline in operating income. While top-line growth was positively impacted by the opening of 19 new stores, Kohl’s inventory pricing mistakes led to weak 2012 holiday sales, ultimately leading to price cuts and a negative impact on its gross margin. However, the company continues to generate solid operating cash flow, $1.9 billion for the period, which it is mostly using to repurchase stock and pay higher dividends.

The bottom line

Saks Inc (NYSE:SKS) is premium priced at a current 33 P/E multiple, due to a recent 15% price spike attributable to media speculation about its future ownership. However, a majority of Saks’ shares are held by a small number of institutional investors, making the prospect of a premium takeout of the iconic retailer a possibility at the right price. Given the potential downside in the event of no change of ownership, investors might want to take a pass on Saks and focus on its more successful competitor, Macy’s, Inc. (NYSE:M).

The article Does This Retail Icon Have a Bullseye on Its Back? originally appeared on Fool.com and is written by Robert Hanley.

Robert Hanley owns shares of Saks. The Motley Fool has no position in any of the stocks mentioned. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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