Article by Investment U
Considering that Nordstrom (NYSE: JWN) executives are already plotting their moves well into 2018, they seem confident that their popularity isn’t going anywhere.
Most Americans believe that retailers are struggling right now. And they have good reason to think that way, with all the dismal jobs report numbers in the news.
Everyone knows that Americans without jobs means Americans without cash to burn on all of those little and not so little extras in life.
For many, it’s difficult to justify an additional bottle of soda, that bag of Oreos or a set of sirloin steaks at the grocery store without some additional cash readily available. It’s tough to throw maturity to the wind and buy a $59.99 blouse, another completely unnecessary power tool, or new kitchen cabinets when it’s a fiscal headache just balancing each month’s bills.
So it’s completely understandable if average investors feel uncomfortable putting their money into the retail sector.
But one company is showing that wealthier Americans, at least, are still shopping luxuriously – Nordstrom Inc. (NYSE: JWN).
And it’s the latest example of how investors are being rewarded for sticking to the furthest ends of the luxury-discount spectrum. (For more about “Class Warfare” investing, check out Carl Delfeld’s article from last October.)
Keep in mind that nationwide discount chains like Dollar Tree (Nasdaq: DLTR) and Dollar General Corporation (NYSE: DG) are also doing very well. Both are showing rapid growth, rising stock and continuing profits – for the precise reason that economic issues are still weighing heavily on the lower classes.
But that’s no reason to avoid retailers that cater to the crème de la crème among us. As Nordstrom shows, vanity pays… quite nicely, in fact.
Don’t Discount This High-End Retailer
A plain and simple pair of beige, low-heeled, women’s Jimmy Choo shoes for $525.00.
A single pair of men’s Todd Snyder wool trousers for $385.00.
La Mer moisturizing cream for $265.00 a bottle.
Ray-Ban sunglasses for $210.00.
It’d be the easiest thing in the world to look at Nordstrom as one of the worst possible places to park money in during tough economic times. Yet somehow and someway, the high-end, nationwide chain is one of America’s fastest-growing retailers right now.
Its spread of holdings includes Nordstrom department stores, off-price Nordstrom Rack retailers, both Jeffrey and treasure&bond boutiques, and Last Chance clearance stores, along with the shopping it offers online, of course. And apparently, the larger company knows how to manage those properties, because it keeps consumers clamoring for more…
In 2008, Nordstrom Inc. added 10 stores, and in 2009, it completed another nine. For 2010, it pulled off a whopping 12 new fully functional locations and by the end of last year, it beat that already impressive number to add 14 stores, for a total of 225 across the country.
And the vast majority of them make a great deal of money, giving the larger business an enviable bottom line…
Vanity is Paying a 2% Dividend…
Looking back over Nordstrom’s last few fiscal years, it quickly becomes apparent that the company is doing just fine despite the reoccurring waves of negativity washing over so many other retailers every few months.
In 2009, Nordstrom made a gross profit of $3.2 billion and operating income of $834 million. It raised both the following years to $3.8 billion and $1.1 billion, respectively. And for its fiscal year ending on January 27, 2012, the company proved its worth yet again with a profit of over $4.2 billion and operating income of $1.2 million.
For its first quarter this year, analysts predicted earnings of $0.75 a share. And while Nordstrom fell five cents below that, net earnings still rose 2.9% compared to the same time the previous year.
In other words, it’s still growing.
For that matter, it continued growing even in June, a month that had most other American retailers – including rival Macy’s (NYSE: M) – discounted and disheartened. Not Nordstrom though: Its same store sales grew 8.1% over the previous five-week period.
The company’s stock reflects those positive results. Since its low in 2008, it seems set on hitting a new record, climbing ever so steadily towards the $45 mark it originally breached early in 2007. It also pays a 2.1% dividend and looks to have plenty of room to increase that number with a 30% payout ratio.
A look at its price progression over the last two or five years shows a company that can take the hits and rise right back above them before long.
Considering that Nordstrom executives are already plotting their moves well into 2018 – particularly with a much-awaited grand opening in New York City – they seem confident that their popularity isn’t going anywhere. And neither are their profits.
Good Investing,
Jeannette Di Louie
Article by Investment U
