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Last Week's Winners in Retail

Last week, three retailers reported earnings that exceeded analyst expectations. For investors, these companies represent hope that the retail industry is alive and kicking. This stands in contrast to the general belief that brick-and-mortar retail is on its way out. For your Foolish curiosity, I put together the following analysis of each of the big winners; Macy's (NYSE: M  ) , Dillard's (NYSE: DDS  ) , and Nordstrom (NYSE: JWN  ) .

Macy's rocks the house
Undoubtedly, the best performer in retail last week was Macy's. At $19.22 billion in market cap, the company is also the largest among these quality performers. For the quarter, the company reported that revenue increased by 3.3%, rising from $6.08 billion in its third quarter last year to $6.28 billion in the same quarter this year.

According to management, the increase in revenue was primarily due to comparable-store sales increasing by 3.5%. When adding the impact of its store-within-a-store operations, Macy's saw comparable-store sales rise by 4.6%. Year-to-date, consolidated sales rose by 2.1% from $18.34 billion to $18.73 billion, driven by a comparable-store sales increase of 2.2%.

Net income for the quarter rose by an even more impressive 22.1% from $145 million to $177 million, while earnings-per-share rose 30.6% from $0.36 last year to $0.47. In addition to increased revenue contributing to the company's profitability, it benefited from a decrease in its selling, general, and administrative expenses which fell as a percentage of sales.

Moving forward, Macy's expects that earnings per share for its fiscal year will fall somewhere between $3.80 and $3.90. This would imply earnings for next quarter in the range of $2.06 and $2.16. If it achieves its expected results, the company would trade at a P/E of between 13.1 and 13.4.

Dillard's smashes forecasts!
Like Macy's, Dillard's also exceeded analyst expectations. At $4.12 billion in market capitalization, the company is the smallest of these three. However, small isn't always bad because it implies that the company in question has the ability to grow at a nice clip if the business is well run. For the quarter, revenue increased by 1.4%, rising from $1.49 billion in the third quarter last year to $1.51 billion in the same quarter this year.

The press release stated that the increase in revenue was primarily due to comparable-store sales increasing by 1%. Year-to-date, consolidated sales rose by 0.2% from $4.49 billion last year to $4.5 billion, driven by a comparable-store sales increase of 1%.

Net income for the quarter rose by about 5% from $48.5 million in the third quarter of last year to $50.9 million this year, while earnings per share rose by 11.9% from $1.01 to $1.13. In addition to an increase in revenue helping its bottom line, the company experienced some improvement in its selling, general, and administrative expenses. However, a good portion of its increase in earnings per share came about as a result of its number of diluted shares outstanding declining by 6%.

Nordstrom was mixed but good
Of the three, Nordstrom, with a market cap of $12.24 billion, was perhaps the least appealing in terms of its earnings report. For the quarter, the company saw revenue increase by 2.8% from $2.81 billion last year to $2.88 billion this year. Only 0.1% of the company's growth was attributable to an increase in comparable-store sales. The remainder was due to an 8% increase in store count over the past year.

Year-to-date, Nordstrom saw revenue increase by 4.7% from $8.44 billion to $8.83 billion. While increased store count aided in the revenue rise, 2.5% of the improvement came about because of higher comparable-store sales.

According to the company's earnings release, its net income for the quarter fell by 6.2% from $146 million last year to $137 million this year, while earnings per share fell by 2.8% from $0.71 to $0.69. Despite Nordstrom's top-line growth, an increase in costs negatively affected the company. However, a 3.6% decrease in share count allowed the company to report earnings per share that exceeded analyst expectations of $0.66.

Foolish takeaway
Coming into earnings season, it's unnerving to try to guess which companies will post superior earnings. However, for the long-term investor, post-earnings can be a wonderful time. For companies like these, although they aren't as cheap as they were at the beginning of last week, you now have a general idea about how strongly they have been performing. This, in turn, should present you with some ideas as to what kind of companies you might aim to buy in the event of a downturn, or which companies you might buy now so that you can avoid the frustration of waiting for a downturn that may not come.

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Related Tickers

8/30/2016 4:02 PM
DDS $61.94 Down -2.27 -3.54%
Dillard's CAPS Rating: **
JWN $51.45 Down -1.00 -1.91%
Nordstrom CAPS Rating: ****
M $38.19 Down -0.50 -1.29%
Macy's CAPS Rating: **