Shopping the retail front.
Sizing up the luxury retailer landscape is like drooling over $100 jeans because everyone wants them, or sitting out as they land with a thud in a thrift shop for six bucks. For starters, brick-and-mortar department stores seem as popular these days as the horse and buggy. Meanwhile, high-end brands suffer the double squeeze of near-perfect knockoffs and, on the legit side, more affordable imports from the Far East. The National Retail Federation reported days ago that retail store openings are up 4.2 percent compared to this time last year. But can that bolster investor confidence? Here are eight stocks on the retail front that are ready to wear, or worse for the wear.
Macy’s (M)
This behemoth retailer has pulled some risky moves, including the purchase of Chicago’s Marshall Field’s chain in 2005 for $3.2 billion. Around then, the New York-based retailer cruised at $78 per share, then roller-coasted to near that mark in July 2015. But it’s since tanked 75 percent and now trades at $21. What’s bugging Macy’s? Yes, fears over brick-and-mortar obsolescence. But analysts such as Jim Cramer are bullish; he calls Macy’s stock “too low to ignore.”
Target Corp. (TGT)
You’d think Target, with its omnipresent red-dot logo and niche between luxury and bargain basement territory, would be immune to e-commerce clout; what’s more, it’s established a strong web-based presence. True, sales have declined 3 percent over the last 12 months, but “valuation measures are a major A-positive,” says Brent M. Wilsey, who owns and operates San Diego-based Wilsey Asset Management. “The current price-to-earnings ratio of 10.98 is well below an industry average of 188.82, which is outrageously high.”
Nordstrom (JWN)
Never known for screaming bargains — $100 jeans, anyone? — the Seattle-based chain may represent one as an investment. For the same price as that denim fashion statement, you can buy two shares of JWN, which is off 20 percent from five years ago. Yet Nordstrom has a healthy 3.21 percent dividend and a solid price-to-earnings ratio of 21.82. It’s also been a beacon among department stores. Its quarterly earnings of 65 cents per share, reported last month, topped analyst expectations.
Apple (AAPL)
The new iPhone 8 releases this month and investors might want to plunk down $1,000 for that smart-toy rather than $160 for a share of stock. “The stock has been a great performer this year, but it appears that it is getting a little expensive,” Wilsey says. Regardless, high-end Apple Stores remain a solid gateway to product purchases and customer loyalty. And the iPhone’s 10th anniversary, even if it underwhelms, could generate a jolt of consumer enthusiasm.
Coach (COH)
If you own a $400 Coach handbag, consider visiting your broker and emptying out some $40 shares on their desk. Wilsey cites many strong points, as sales have grown 4 percent year-over-year with an 11.55 percent profit margin. “Investors also get a nice dividend of 2.77 percent but concerns lie within the valuations,” he says. The price-to-sales ratio of 3.04 “is more than double the industry average of 1.38.” The lower the ratio, the better the investment — much like Coach accessories.
L Brands (LB)
The company that owns Victoria’s Secret certainly looks attractive. Its price-to-earnings ratio of 12.1 outclasses the industry average of 18.8, and Bath & Body Works represents another powerful component of its portfolio. Yet LB is clearly on the ropes stock price-wise, off 48 percent over the last 12 months to $37. “Another major concern is the company has equity of negative $836 million and debt of $5.7 billion,” Wilsey says.
Michael Kors Holdings (KORS)
After buying retailer Jimmy Choo for $1.2 billion in July, KORS hopes investors will in turn buy its stock. Yet $42 represents a flat share price for all of 2017. “Earnings per share have fallen by 26.8 percent over the last 12 months,” Wilsey adds. Yet the Choo acquisition excited investors; KORS shot up 21 percent in one day (Aug. 7-8) and has stayed there since. “The company also has a great balance sheet with plenty of liquidity,” he says.
Hudson’s Bay Co.
This retail conglomerate (listed on the Toronto Stock Exchange as HBC) was founded in 1670 as a fur trader. It still trades in furs at its Lord & Taylor and Saks Fifth Avenue stores. Despite the luxury and history, HBC has stumbled. Its attempt to buy struggling Neiman Marcus collapsed in June and HBC is down 25 percent over the last 12 months. But so far in 2017, it’s rebounded close to 40 percent to roughly $10.50 U.S. per share.
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8 Luxury Retail Stocks Worth a Look originally appeared on usnews.com
