Since 2009, there has been a rebound in luxury spending, and the company is receiving orders from shoppers via smartphones and tablets. Nordstrom is courting these consumers by offering online shoppers free shipping. The company has also introduced mobile devices for its sales associates so that they can check out shoppers from anywhere in the store.
According to Blake Nordstrom, the company’s President, “We aspire to be the retailer of choice wherever and whenever customers choose to shop with us. And we understand that our customers’ definition of services (is) changing.” The company’s net income was $284 million or $1.40 per share during the quarter ended on February 2013 as compared to $236 million or $1.11 per share during the previous year. The company established 15 new stores during the 2012 fiscal year and displayed strong growth during the fourth quarter. The overall revenue in stores open at least a year rose by 6.3%.
Trouble at Tiffany’s
Tiffany & Co. (NYSE: TIF) has alleged that Costco Wholesale Corporation (NASDAQ: COST) sold forged Tiffany’s diamond engagement rings. In addition to being the basis of litigation, this could be bad for Tiffany’s brand since discounting at big-box prices could detract from the mystique of its jewelry and iconic blue packaging. As per the allegations, Costco has sold different styles of rings for several years which have been falsely identified on an in-store signage as a Tiffany’s brand. The jeweler is trying to prevent any further sales of its diamond engagement rings and unspecified damages related to the previous sales. According to Tiffany’s the sales unlawfully damage the company’s goodwill and brand awareness.
Valuation
Coach appears to be the only compelling stock among these luxury names:
| COH | Coach | 13.31 | 2.75 | 22.65 | 0.01 | 13.5% |
| JWN | Nordstrom | 15.19 | 0.89 | 28.78 | 1.64 | 11.8% |
| MOV | Movado Group | 15.4 | 1.81 | 28.89 | NA | 12.0% |
| TIF | Tiffany & Co. | 20.73 | 2.27 | NA | 0.4 | 10.2% |
| RL | Ralph Lauren | 22.77 | 2.27 | 28.88 | 0.07 | 13.1% |
| KORS | Michael Kors | 34.87 | 6.05 | NA | NA | 32.6% |
Though Michael Kors has excellent growth prospects, it is trading at dangerously high price-to-sales and price-to-earnings ratios. Nordstrom is fairly priced, but it has a high debt-to-equity ratio.
Conclusion
In a screen of luxury retailers only Coach looks attractive. Its fundamental story in no way explains why it is trading at a discount to its peers, and investors should consider it as a luxury stock buy candidate.
The article Are These High-End Luxury Retailers Compelling Buys? originally appeared on Fool.com and is written by Bill Edson.
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