Three Winners in Retail

To say that the retailing industry as a whole has had a tough end to 2013 is an understatement. To say that 2014 will see an improvement in the sector is a stretch. However, with all sectors there is bound to be at least one winner.

Retailers continue to work through their fall and holiday 2013 inventory levels as they continue to face a nightmare scenario where consumers stay home due to frigid cold weather across most of the country.

These three retailers are best positioned to weather the storm and deliver in the rest of 2014 and beyond.

Shareholder friendly
Wal-Mart 
(NYSE: WMT  ) is a shareholder-friendly company that returned nearly $100 billion through dividends and repurchases over the last ten years.

In Wal-Mart's most recent quarter, the company paid $1.5 billion in dividends to shareholders and bought back $877 million worth of its shares. The company still has approximately $11.3 billion remaining under its $15 billion share authorization. Management noted on the fourth-quarter conference call on Feb. 20 that the company will remain "opportunistic" with its share repurchases.

As if this wasn't enough to secure its shareholder-friendly title, the company boosted its dividend to $1.92 per share for fiscal 2015, which it pays out quarterly. This marks the 41st consecutive year in which it raised the dividend.

There are few, if any, other retailers that have the necessary capital to return cash to shareholders on a consistent basis.

Walmart has committed to reducing operating expenses as a percentage of sales by 100 basis points by 2017 and in addition it plans to spend heavily to boost its international businesses in Canada and Latin America to offset a declining environment in the U.S.

Down but not out
Coach (NYSE: COH  )  faces an intensely fierce and competitive environment. In its most recent earnings report Coach announced that comp-store sales declined by 13.6% in North America and revenue in North America declined 9% to $983 million.

Coach recognized the need for a change in its product offering and it is aggressively pursuing a fresh beginning to its merchandise offering. Coach is in the process of a multi-year transformation into becoming a lifestyle brand, as it has traditionally offered handbags and accessories.

The company added Stuart Vevers to its management team as its new executive director. Vevers admitted that being European has helped him look at Coach as an outsider and bring fresh ideas to the table.

Vevers recently unveiled Coach's first ready-to-wear collection for autumn and winter 2014, which was described as "luxurious but never previous" by Telegraph fashion expert Lisa Armstrong. The New York Times' Suzy Menkes concluded that with Vevers at the helm "Coach looks ready to step in, to modernize and to make good outfits — from round top hat to shearling-covered toe."

Investors who don't want to wait for the company to exit its transformation phase can find comfort today that the retailer saw strong growth in China where its total sales grew by 25% and comparable-store sales rose at a double-digit rate.

By 2020, China may very well have become the largest market for luxury products in the world, which bodes well for Coach. On Coach's second-quarter conference call on Jan. 22, the company said that it expects to add to its presence in the country with 30 net new locations which will increase its square footage by about 25%.

Finally, Coach shares offer nearly a 3% dividend yield and a very healthy balance sheet can protect the shares from downside as the company fights aggressively to regain lost market share.

Omni-Channel winner
Macy's (NYSE: M  ) is ahead of its competitors with regards to its omni-channel initiatives; these include a ship-from-store service which is available at 500 locations. Macy's will roll out a "buy online, pickup in store" concept to all of its stores in the spring. The concept will guarantee that the consumer will be able to finalize a purchase and pick it up without worrying that the product won't be available on the shelf.

This initiatives allows Macy's to offer its entire inventory assortment to customers as consumers continue to demand equal shopping experiences when they shop online and at a store. As Karen Hoguet, Macy's Chief Financial Officer, said on the company's fourth-quarter conference call on Feb. 25:

If I think about things that are making us successful online, frankly it's very similar to what's making us successful in-store, which is merchandizing strategies and without the right assortments and the right service levels, it almost doesn't matter if you have sexy technology and I think that's what's driving our Omnichannel business today.

What makes Macy's omni-channel leadership abilities more valuable is the fact that the retailer is one of the best-positioned retailers in its space, given its attractive and localized portfolio of national, exclusive, and private brands.

Foolish takeaway
International opportunities will also play key roles in the successes of Wal-Mart and Coach.

Wal-Mart is investing heavily in its international businesses in Canada, Latin America, and China. Coach is securing its strong position in China which will drive growth for years as demand for high-end apparel and fashion items continues to rise.

Macy's is not active in the international market, but it has noted that it has an "interest in international markets over the long term."

According to Paul Lejuez of Wells Fargo, Macy's could be viewed as a winner because of its ability to perform "very well with solid [same-store sales comparisons] up 2.3% and flat merchandise margins in a remarkably promotional season."

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