So here it is – my final three American companies (in no particular order). We discussed Colgate-Palmolive Company (NYSE:CL), Google Inc (NASDAQ:GOOG), and Costco Wholesale Corporation (NASDAQ:COST) in my first post. My second post talked about my belief in Coach, Inc. (NYSE:COH), Under Armour Inc (NYSE:UA), Whole Foods Market, Inc. (NASDAQ:WFM), and PepsiCo, Inc. (NYSE:PEP). This post will show why coffee shops, clothing stores, and cleaning supplies should be in your portfolio, but hopefully they aren’t needed in the same day throughout your life.
When a guy says, “I have nothing to wear,” he really means, “I need to do laundry.” When a woman says, “I have nothing to wear,” she really means, “I want to go shopping.” So, she goes shopping. We will call this woman Susan.
Susan decided to go to Nordstrom, Inc. (NYSE:JWN) for a quick shopping spree. She was preparing for the unusually early Easter this year, and bought a nice colorful dress. She may not have realized the effect this purchase will have on the three companies I will discuss here.
Nordstrom, Inc. (NYSE:JWN) has a market cap of $10.8 billion dollars, with a respectable Free Cash Flow (FCF) yield of 5.3%. While this doesn’t show a tremendous value, the company’s revenues have increased 82% in the past decade as it made approximately $10.8 billion in 2012. 2009 marked the only decrease in Earnings Per Share (EPS) over the past decade, as they have increased from $0.33 to $3.14 in 2012. Gross margins have grown from approximately 33% to over 39% over the same ten year period. Amazingly, Nordstrom, Inc. (NYSE:JWN)’s average employee earned $19 per hour, which is 60% more than the industry average.
After a stressful afternoon of decision making (shopping), Susan decided to splurge and grab a drink from her favorite coffee place, Starbucks Corporation (NASDAQ:SBUX) . She had just started to enjoy her Grande Latte when a bystander bumped her table and spilled her delicious drink all over her brand new dress. What a bummer. This is bound to happen at times, as there are currently 17,000 stores in 55 countries. Susan wondered what she could do about this disastrous occurrence.
Starbucks is a coffee shop’s model of success. They thrive in customer service and quality, yet many people wonder if their products are overpriced. I will leave that up to them – but I will look at some other figures. The company’s revenues have increased 326% in the past decade, while gross margins are at 56.3%. Starbucks’ Return on Equity (ROE) and Return on Invested Capital (ROIC) have both increased from 14.09 and 13.78, to 29.15 and 25.71, respectively. They have experienced a large drop, though this was in 2008. The company shows a market cap of nearly $42 billion and a FCF yield of only 3.4%.