Going forward, the company will rely on its omni-channel retail strategy, which makes its merchandise available not only at its stores, but also at its websites and mobile/tablet platforms. Furthermore, the “My Macy’s, Inc. (NYSE:M)” initiative will help better meet its customers’ demands. All of this will help Macy’s, Inc. (NYSE:M) expand its reach (and customer base) and benefit from the increasing use of smartphones and other portable devices. “Price optimization, inventory management, merchandise planning, and private label offering” are the other main growth catalysts for the years to come (Zacks).
With industry leading margins and growth records and above average returns, the company has amassed considerable amounts of cash. Management has been using this cash flow to return value to shareholders through dividends (yielding about 2%) and share repurchases, in addition to repaying debt and strategically investing in new stores.
If you are willing to spend a few bucks…
Saks Inc (NYSE:SKS) is a long way from J.C. Penney Company, Inc. (NYSE:JCP). As a luxury retailer, it aims at high-end customers looking for quality or brand-names more than for competitive pricing. Just like Macy’s, Saks Inc (NYSE:SKS) relies on a developed onmi-channel retail system which increases its exposure to various demographics and levels of customer spending.
However, trading at 47 times its earnings, about 3 times the industry average, while offering margins and returns quite under its peers’ means this stock looks like a hold case at the time. Just like its products, Saks Inc (NYSE:SKS)‘ stocks seem a little overvalued; nevertheless, those willing and able to pay a premium price will receive a premium product: The company is expected to deliver above average upside over the years to come on the back of industry outperforming EPS growth rates.
Although macro-economic headwinds, a late entry to omni-channel retailing, and limited expansion opportunities (beyond improving comps) put a cap on Saks Inc (NYSE:SKS)’ growth prospects, an operational and strategic revamping plan should prove beneficial going forward. Private labels and online and mobile sales platforms are expected to drive growth over the next few years. Holding one of the strongest brand-names in the industry, this is a stock to keep on your radar.
Bottom line
Although all three firms are industry leaders and hold world-recognized brand names, Macy’s leads the bunch, not only on account of its past results, but also due to its compelling growth prospects and expansion opportunities. Consider buying and holding on to this stock for the long-term; EPS growth is expected around 15% per annum over the next five years.
Damian Illia has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Damian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article The Prince and the Pauper: Apparel for Everyone originally appeared on Fool.com is written by Damian Illia.
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