Ross Stores, Inc. (ROST), Foot Locker, Inc. (FL): 2 Financially Strong Retailers To Buy Now

The company is also cheap at current levels, trading at only around 13 times trailing earnings and about 11 times forward earnings. To top it all off, Foot Locker, Inc. (NYSE:FL) also pays a dividend that yields around 2.40%– a dividend that they have slowly increased over the past decade.

Foot Locker also appears to offer more value than its closest competitor, Finish Line Inc (NASDAQ:FINL), as well. Finish Line reported disappointing earnings in April, with adjusted earnings per share falling about 6% year-over-year. Sales also fell around 3% for the quarter, while Finish Line’s gross margin shrunk 210 basis points year over year to 35.1%.

Finish Line expects both earnings and sales to grow in fiscal for fiscal 2014, but also anticipates continued negative pressure to be put on sales into the first quarter of 2014. The first quarter of 2014 will also mark increasing expenses as the company inherited the athletic footwear inventory at all Macy’s, Inc. (NYSE:M) stores, which will likely also put a drag on margins in the
near term, as well.

The partnership with Macy’s is also expected to increase sales long-term once everything is settled– which translates to $250 million to $350 million in annual sales, or 30—35 cents per share in earnings “once the initiative takes momentum”, according to Zack’s Equity Research. Six months into the partnership, Macy’s seems to love the licensing deal, with the company’s CFO, Karen Hoguet explaining that:

“If you think about it, they have access to shoes that we couldn’t get as Macy’s… It’s obviously greatly enhancing our assortments, which as you know is the key in our mind to being successful in retail. Also, they have a great selling model, which I think will also benefit us.”

It will be interesting to see how the new licensing partnership affects Finish Line’s numbers as well when they next report on June 24.

Foot Locker and Ross Stores, Inc. (NASDAQ:ROSThave some nice things going for them. Besides being rock-solid financially and rewarding to shareholders with their dividend increases, both company’s have been increasing earnings and revenues even in a tough retail environment. They should pick-up even more steam if and when retail finally comes back around full steam. Both Ross and Foot Locker, Inc. (NYSE:FL) shares are a good pickup at current levels.

Joseph Harry has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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