What do the rich know that you don’t?
Where they shop is helping to grow their investments.
The high-end, luxury department stores are on the rise, with profits growing higher and higher. But not all stores are created equal, and some stand out for good reasons, some for bad.
Dillard’s
Standing out for all of the right reasons, Dillard’s, Inc. (NYSE:DDS) reported the highest increase in net income for the most recent quarter of this group, with an impressive 27% improvement year over year.
Revenue remained flat at $1.55 billion for both 2012 and 2013. However, same-store sales improved by 5%, and adjusted net income increased from $111.2 million up to $117.2 million. The company operates a construction business, CDI Contractors, that is included in net sales. Total merchandise sales (which exclude CDI) were also flat at $1.53 billion over the 2012 figure of $1.52 billion.
Dillard’s, Inc. (NYSE:DDS) current valuation ranks it among the leading stores. The company carries $622 million in debt, but overall has a strong balance sheet with $156 million in cash. Dillard’s operated 283 stores and 18 clearance centers as of the end of the quarter.
Saks
Saks Inc (NYSE:SKS) may tout a sleek exterior, but financially, things are fairly flat. Revenue for the most recent quarter was $793.2 million, up 5% from $753 million the year before. Net income, before adjustments, was $30.1 million, down from $32.7 million the year previous. Adjusted net income was $20 million. Despite flat net income, same-store sales increased over the year previous. What is more notable is that the 2012 same-store number had also increased 4.8% from 2011.
Just after earnings were announced, the stock jumped more than 20%. Some felt this was because the earnings were strong. However, the earnings are fairly average, even mediocre, compared to the direct competition. The real story was the rumor that the store might merge or be bought out, and that drove the price up. For investors who owned the stock already, things are looking good. But the price is a bit bloated considering Saks Inc (NYSE:SKS)’s most recent earnings, and I wouldn’t recommend jumping in now.
Macy’s
Macy’s, Inc. (NYSE:M) is not to be overlooked. The parent company of high-end retailer Bloomingdale’s does not release earnings for individual store chains, so numbers reflect all brands under the corporate umbrella. And what an impressive umbrella it is! Macy’s, Inc. (NYSE:M) reported first quarter net income earnings of $217 million, up 20% from $181 million the year earlier. Net revenue was up 4% with $6.38 billion compared to $6.14 billion the year previous. Same-store sales followed net revenue and improved 3.8%.
The company recently announced a 25% dividend increase. This was the third dividend increase in two years for the retailer.
Nordstrom
Nordstrom, Inc. (NYSE:JWN)‘s net earnings were down 3% to $145 million compared with $149 million for the same quarter last year. Total revenue was $2.7 billion for a nearly 5% increase over last year’s $2.5 billion.
The company blamed the weather for lower than expected sales and low shopper turnout, but that sentiment doesn’t hold up. Lower shopper turnout would be reflected in lower same-store sales but the company actually saw same-store sales increase 2.7%. However, that number is a significantly lower number that the previous year’s same-store increase of 8.5%. The company hopes that a good summer shopping season will turn things back around. However, from an investment point of view, relying on the weather to make a profit is a silly thing to do.
Nordstrom, Inc. (NYSE:JWN) is the only one of the major luxury department stores to post a decline in net income, and has the lowest increase in same-store sales. However, it had the second largest increase in revenue. Saks had the highest at 5%, Macy’s, Inc. (NYSE:M) came in third at 4%, Neiman Marcus was a close fourth with 3.8%, and Dillards was flat.
The company also indicated financial difficulty with Nordstrom Rack. The company has heavily invested in the outlet store. Rack same-store sales only increased 0.8%, compared to last year’s 6.8% increase. However, net sales were up 10% at the rack.
The problem at Nordstrom is somewhere in the operating expenses, which were up 14 basis points over the same period in fiscal 2012. Gross profit, as a percentage of net sales, decreased 50 basis points compared with the same period in fiscal 2012. The decrease reflected higher occupancy costs related to the accelerated Rack store expansion, combined with lower than planned sales volume. The decrease was also due to higher expenses associated with the growth in the Fashion Rewards program.
Neiman Marcus
Neiman Marcus Group is not publicly traded, but is owned by two different private firms. Rumors actively swirl around about a possible sell-off or IPO, and for these reasons, we will take a quick look at the numbers, in case the opportunity to invest in the company comes along.
Neiman Marcus’s fiscal third quarter earnings rose 13%. Revenue increased 3.8% to $1.1 billion. Same-store sales improved 3.3%. All in all, not bad, and right in line with most of the other luxury department stores. Neiman Marcus Group is the home of Neiman Marcus, Last Call, and Bergdorf Goodman stores.
Conclusion
Not all luxury retailers are created equal. They may look the same on the outside, but the individual numbers reveal something different. Dillard’s, Inc. (NYSE:DDS) and Macy’s are both fantastic stocks to consider. Saks presented unexciting numbers, but with the current jump in the stock price, it isn’t worth buying right now based on rumors. Considering the impressive growth recently at Neiman Marcus, and the overall health of the luxury department store sector, if the company does go public, it would be a buy to consider.
Invest wisely, stay for the long run, and retire to a lifestyle where you too can shop at these fine establishments!
Erin McBride has no position in any stocks mentioned. The Motley Fool owns shares of Dillard’s. Erin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 4 Stocks to Put You in the Lap of Luxury originally appeared on Fool.com and is written by Erin McBride.
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