) is riding high on its
comparable store sales increase
of 4.7 percent. That figure has inspired a rally which has seen
shares move more than five percent. Is this a sign of things to
come for the upscale retailer? It could be -- but there are a few
points worth noting. For starters, Saks decided to
follow in the footsteps
of its competitors and will "no longer report monthly comparable
store sales results on a go-forward basis." Saks also announced
that it experienced gross margin deterioration, dropping from 38
percent during the second-quarter of 2011 to 37.2 percent during
the second-quarter of 2012. Saks
blames the decline
on "incremental second quarter markdowns in certain merchandise
categories needed to move through the company's normal clearance
Most investors realize that the retail industry is cyclical, so
it is not too surprising to see that investors may be more
interested in the company's sales. That said, it is important to
note that Saks' increase is much lower than it was during the same
period last year. Saks raised its sales by 15.5 percent in the
second-quarter of 2011 and 12.7 percent during the first six months
of 2011. In 2012, the company grew only 4.7 percent for both the
quarter and the first six months.
This decline could be blamed on a variety of issues (stiff
competition, economic turmoil, etc.), but the cause is not as
important as the outcome. For the time being, Saks' growth appears
to be slowing.
Year-to-date, Saks' shares have practically redefined what it
means to be a roller coaster stock, dropping 10 percent in the
first week of January. In the following weeks, Saks gained 30
percent. Its growth was short-lived, however, as the stock
struggled to maintain its year-to-date high of $11.89, which was
achieved on February 28.
Aside from a brief spike in May, Saks spent most of the spring
season fighting a downward trend that took another 10 percent off
the stock. As it stands, Saks is still trading higher than it was
when the year began. However, the retailer may not be able to
sustain its share price if its sales growth continues to
Investors should keep a close eye on Saks in the coming months,
especially during the holiday shopping season.
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
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