Nordstrom, Inc. (JWN), Macy’s, Inc. (M), Dollar Tree, Inc. (DLTR) – Christmas in July: The Companies to Buy Now

Page 1 of 2

Whether you are a ditsy shopper who waits until the very last minute or the uber Martha Stewart who bought all the gifts in a previous lifetime and have already wrapped them in color coordinated paper with name tag attached ( if you are, I hate you already), now is the time to think about holiday retail.

Some stores will begin the run up to the holidays as early as August 1, so there’s no time to lose in making gains. Three retailers that cover high end to lower end should perform well and they are: Nordstrom, Inc. (NYSE:JWN), Macy’s, Inc. (NYSE:M), and surprisingly, Dollar Tree, Inc. (NASDAQ:DLTR).

The best in customer service

Specialty retailer Nordstrom, Inc. (NYSE:JWN) has a low-end kicker with its 124 Nordstrom Racks, off price stores attracting the budget challenged aspirational shopper, and its full price stores carry the brands high-end shoppers covet.

The stock hit a 52 week high of $62.10 on July 5 and is trading at a trailing P/E of 17.23 with a 1.90% yield. It has regularly raised the dividend over the last four years, giving it a 17.47% dividend growth rate. The payout ratio is 31%. Just in February, Nordstrom, Inc. (NYSE:JWN) announced an $800 million share buyback to be paid for with cash on hand and raised the dividend by more than 10%.

Operating margin at 10.81% is better than rival Saks‘ 4.54% and even Macy’s, Inc. (NYSE:M) 9.70%. The PEG is 1.39 and price/book is 6.30.

Revenue and earnings per share have grown steadily since 2010 from total revenue of $9.42 billion in 2010 to $11.71 billion in 2012 and earnings of $2.52 in 2010 to $3.33 in 2012. With two quarters reported so far, Nordstrom looks on track to bring in close to $13 billion in total revenue and $4.30 in total EPS for 2013.

Is it just the return of the high end shopper that is helping Nordstrom, Inc. (NYSE:JWN)? Partly that, but the company has embraced technology with its e-commerce site Haute Look, and its use of iPads and tablets on the sales floor to order inventory from another store to help a customer or expedite check out.

Corporate governance risks are low in all categories for an overall score of 1, the best. This is important when you have legacy family members involved with a company that could skew shareholders’ rights. Not so at this 112-year-old company which still has several Nordstroms in executive positions including Blake Nordstrom, Inc. (NYSE:JWN) as CEO, but shareholders’ rights are highly respected. Various Nordstrom family members own 18 million shares for close to a 10% stake.

It has also not succumbed to the ever-present danger of family-run companies, doing things just like dear old Granddad. Its willingness to be fashion and future-forward and its unassailable reputation for the finest in customer service and commitment to local communities and its employees (who receive above average pay and benefits for retail) assured its listing in Motley Fool’s 25 Best Companies in America for 2013.

The company is expanding at a reasonable 10% annual pace and currently has 248 bricks and mortar stores in 33 states.

A dollar at a time

Dollar Tree, Inc. (NASDAQ:DLTR) is also hitting 52-week highs. The chain of 4,671 stores in 48 states in the U.S. and Canada offers merchandise at a flat price of a dollar. The PEG is 1.01 and it trades at a forward P/E of 16.21 and a price/book of 6.70. Operating margin is better than Nordstrom, Inc. (NYSE:JWN) and Macy’s, Inc. (NYSE:M) at 12.59%.

Although it doesn’t pay a dividend, its growth is worth it as analysts expect 18.33% five year EPS growth. However, Standpoint Research downgraded it from Buy to Hold on July 2. This may reflect valuation concerns with the stock having run from $37.12 in November to a high of $57.00 on July 5.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!