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Saks is a No Go

Saks is a No Go
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Mind you, I have not been keen on department stores as holiday plays (Watch this call in action: Too many unproductive areas of the store underneath the heavy cloud of consumer unknown in a sub-2% GDP growth environment. On the sidelines for now with department stores, pending better price action. However, if so inclined to dance, skew towards upper income consumers and make it with a Nordstrom as opposed to Saks. In my view, Saks had the type of 3Q12 that was littered with enough red flags to consider shorting the stock into the holidays, the bare minimum being to avoid it altogether. Here are the points of pain:

•Same- store sales growth is slowing relative to year ago prints (usually a bad sign for a retailer's future profitability).

•Gross margin under pressure due to what I believe is increased promotional activity (this was guided to in 4Q12 as well).

•Already cautious 4Q12 guidance predicated on a re-acceleration in same-store sales following a soft post-Sandy related start in November. I read this as a lofty expectation that risks above plan inventories entering 1Q13 should sales miss.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Earnings News Guidance Trading Ideas


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