Peer Analysis
In the departmental stores segment, two major peers are Macy’s, Inc. (NYSE:M) and Nordstrom, Inc. (NYSE:JWN).
Macy’s, Inc. (NYSE:M) has taken initiatives of localized offerings with segmentation of its stores under its My Macy’s strategy. This initiative has led to minimal complaints from stores. It has also focused on the omni-channel network with delivery available at 292 stores.
It is targeting the millennial customer base which is young, active and buys on impulse. It has launched new brands Qmack and Maison Jules along with the extension of its Bar III Carnaby collection. These initiatives will increase the reach of its stores and drive long term sales growth.
Nordstrom, Inc. (NYSE:JWN) is investing in the direct online channel and Rack stores this year. Its direct channel was one of the growth drivers last year with 44% growth in sales, and this year to date it has grown 25%. Its Fashion Reward program is able to increase sales by 15% with 3.5 million active members in the first quarter this year.
It has growth plans for Rack stores with 24-25 store openings scheduled this fiscal year, and it has planned to increase its store count to 260 by 2016. These investments have created some pressure on margins with a slight drag of 50 basis points in the first quarter, but will drive long term growth.
| Company | P/S | 1 Year Fwd. P/E | Op. Margin |
|---|---|---|---|
| Saks | 0.69 | 26.91 | 5.35% |
| Macy’s, Inc. (NYSE:M) | 0.73 | 10.81 | 6.81% |
| Nordstrom, Inc. (NYSE:JWN) | 1.05 | 13.89 | 10% |
Source: Google Finance and Yahoo Finance
Saks Inc (NYSE:SKS) has the lowest price to sales ratio among the three mentioned peers of 0.69 with moderate operating margin of 5.35%. Macy’s, Inc. (NYSE:M) has operating margin of 6.81%, and the lowest forward P/E of 10.90. Nordstrom, Inc. (NYSE:JWN) has the highest operating margin of 10%, but has the highest P/S ratio of 1.06 among the peers.
Conclusion
Saks stock has been sliding back in the last month after the sudden spike because of the news of Saks-Neiman Marcus merger. It has taken some initiatives for the development of its customer experience with its omni-channel network and relaunch of SaksFirst Loyalty program. It has also introduced promotional events and merchandising assortments targeted at its loyal customer base. These initiatives along with store-count expansion are expected to drive long term growth of the company.
Ash Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Saks’ New Initiatives Driving Sales originally appeared on Fool.com.
Ash 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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