Macy’s, Inc. (M), Nordstrom, Inc. (JWN): Investing in High-End Retail

Department stores have long been a go-to for one-stop shopping. Question is; can investors make money in the high-end department retailers? The higher-end market held up much better throughout the financial crisis when compared to the discounters. The higher-end department stores include Nordstrom, Inc. (NYSE:JWN), which caters to the top-end of consumers, Macy’s, Inc. (NYSE:M) and Dillard’s, Inc. (NYSE:DDS) at the low high-end.

Breaking down the high-end

Founded in 1820 and based in Cincinnati, Ohio, Macy’s, Inc. (NYSE:M) is considered the leading retailer, operating the Macy’s and Bloomingdale’s department stores across the U.S. Macy’s is focusing on inventory management and private-label offerings to help drive traffic. Differentiation is key for the department-store industry, and this includes making the sure the in-store shopping experience is excellent.

One of Macy’s, Inc. (NYSE:M)’s latest moves includes its Omnichannel strategy. The program aims to improve comparable-store sales and reduce operating expenses by focusing on customer needs and preferences. The basis of the Omnichannel is to address all modes of interaction with the customer, including the blend of online, in-store, mobile, catalog and call-center solutions. Macy’s is now expecting comp-store sales to be up 3.5% in fiscal 2013.

Macy’s, Inc. (NYSE:M) is also topnotch at managing cash flow; during 1Q, the company raised its dividend payment by 25% and increased its share-buyback plan by $1.5 billion — putting its total buyback plan at $2.6 billion.

Upper echelon

Nordstrom, Inc. (NYSE:JWN) has less stores than its counterparts, with only 225 stores located throughout 30 states, but retail sales are expected to be up 5.8% in fiscal 2014 — driven by 4.4% growth in same-store sales and various new-store openings.

Nordstrom, Inc. (NYSE:JWN) plans to lean on its Rack brand in the near future, where the majority of new-store openings will be Rack brand stores, with plans to double locations from the 127 in May to 230 by 2016. Notable expansion includes increasing its presence in Canada and New York.

Best investment

Dillard’s, Inc. (NYSE:DDS) is the under-followed retailer that could offer investors the best returns over the interim. Only three analysts follow the stock, compared to the 16 that follow Macy’s, Inc. (NYSE:M) and 22 for Nordstrom, Inc. (NYSE:JWN). Dillard’s has some 300 stores spread across 29 states, all under the Dillard’s brand name.

Since its 2006 decision to turn around the company, the retailer is now focused on a robust merchandise mix, where it quickly eliminates under-performing products and replaces them with promising brands. Its exclusive brands include Antonio Melani, Gianni Bini and Roundtree & Yorke — exclusive brands accounted for 21% of 2013 sales.