For Fools looking to add luxury retailing exposure to their portfolios, the options are limited. Saks
Nordstrom reported a 7.8% increase in total quarterly sales and continued a solid trend of positive store comps, as same-store sales grew by an impressive 5.7%. Women's apparel struggled, as it did in the first quarter. Given that this area accounts for the largest proportion of overall sales -- about 35% -- there is room for improvement to keep total sales chugging along. The company also reported that operating earnings grew by almost 18%, though net earnings advanced 26% as management repurchased shares and recorded a gain related to a settlement with Visa and MasterCard.
In offering guidance for the full year, Nordstrom said it expects diluted earnings of $2.31-$2.39, for a forward P/E of about 15. That's not bad, considering the company has grown net income by more than 40% on average annually over the past five years. Sales have grown only 6.5% each year over that time frame, but management has been able to stay on top of key fashion trends and focus on IT enhancements to make sure popular products reach the store shelves and that the merchandise mix is kept at optimal levels.
As a result, Nordstrom is currently among the elite department-store chains, posting solid numbers along with more moderately priced product peddlers such as Kohl's
At the current valuation, Nordstrom trades in line with its department-store peers and also generates solid free cash flow as a result of some of the highest profit margins in the industry. As I also mentioned, it is also one of the more upscale chains and one of the only pure-play ways to invest in the space.
As such, other department-store chains, such as Federated
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