Ross has great margins as well, with a current operating margin of 13.08%. The balance sheet is ripe for expansion too, with only $150 million in debt and plenty of cash. The company currently has $647.85 million in cash. Even though the company does pay a dividend of $0.68 per share and the dividend payout ratio is only 16%, I would prefer that the company invest in more stores and spur growth. I like the company’s business and with only a little more than 1,200 stores, there’s plenty of communities that need a Ross Store in their neighborhood.
Another specialty retailer I like is Foot Locker, Inc. (NYSE:FL). Foot Locker, Inc. (NYSE:FL) is the place all the parents take their children for back to school sneakers. It’s also the only place I know of where I go to buy my sneakers. Matter of fact, everyone I know buys their sneakers at Foot Locker. Foot Locker operates approximately 3,335 primarily mall-based stores in the United States, Canada, Europe, Australia, and New Zealand selling sneakers and sporting goods.
Foot Locker continues to make positive moves for shareholders. The company just announced a $0.20 per share quarterly dividend, which gives the stock a yield of 2.2%. Back in 2011, the dividend was only $0.15 per share.
Foot Locker just announced that it’s buying Germany’s Runners Point. This will increase Foot Locker’s presence in Germany and Europe with the addition of 200 stores under the brands Runners Point and Sidestep. This acquisition will also give Foot Locker a stronger online presence with online store Tredex that comes with the acquisition. The price for Runners Point is $94 million, or 0.4 times sales of $254 million for Runners Point in 2012. Not a bad deal at all for Foot Locker as it continues to increase its dominance of the athletic footwear market.
My last favorite specialty retailer for investors is ANN Inc (NYSE:ANN). This retailer specializes in women’s apparel, shoes and accessories under the Ann Taylor and LOFT brands. Ann Taylor stores focus on higher-end consumers, whereas LOFT is geared towards a younger, more price-conscious crowd. ANN has 275 Ann Taylor stores, 512 LOFT stores, 101 Ann Taylor factory outlets, and 96 LOFT factory outlet stores.
Ann Taylor stores have done an excellent job with women’s fashion trends. Where the company has made some missteps is at its discount outlet stores. ANN Inc (NYSE:ANN) was doing broad discounting at these outlet stores. The company is now switching to discounting on specific items to not hurt its non-discounted main stores.
ANN is positioning itself for growth by remodeling its main stores and launching international shipping for its online store. Shipping is now available to customers in more than 100 countries. For ANN, they have a little more work to do than the other three, but with their strong presence in women’s fashion, it’s a good bet for investors.
Foolish assessment
I like all four stocks. Each one has a targeted demographic and they are building customer loyalty. Inventory channels and merchandising are much easier to control for each of these companies than any of the large department stores. Strong consumer loyalty and room for expansion make all four worthy investments.
The article Buy The Specialty Retailers And Not The Department Stores originally appeared on Fool.com.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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