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Shoppers make their way through the Walden Galleria mall in Buffalo, New York on Black Friday, November 23, 2012. (JENNIFER ROBERTS For The Globe and Mail)
Shoppers make their way through the Walden Galleria mall in Buffalo, New York on Black Friday, November 23, 2012. (JENNIFER ROBERTS For The Globe and Mail)

NUMBER CRUNCHER

An investor's shopping guide to top U.S. retailers Add to ...

Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients. michael@wickhaminvestments.com

What are we looking for?

Top-performing U.S. retailers. According to the U.S. National Retail Federation, 247 million shoppers visited stores and websites over the Black Friday weekend last year, spending a whopping $59-billion (U.S.). Since Black Friday is this week, my colleague Rob Belanger and I thought we would take a closer look at the U.S. retail sector.

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The screen

We started with U.S. companies over $1-billion in market capitalization. The companies all had to have positive one-year sales growth, and one-year earnings per share (EPS) growth of more than 10 per cent. EPS is the portion of a company’s profit allocated to each outstanding share of common stock.

Operating margin is a measurement of what portion of a company’s revenue is left over after paying for variable costs such as wages and inventory. If a company has an operating margin of 9.5 per cent it means that it makes 9.5 cents before interest and taxes for every dollar of sales. All those on the list had to have an operating margin of greater than 9.5 per cent.

Inventory turnover is a ratio showing how many times a company’s inventory is sold and replaced over the past 12 months. A low turnover implies poor sales, and only those companies showing a minimum turnover of two times are included.

Return on assets (ROA) is an indicator showing how profitable a company is relative to its total assets. It gives an idea as to how efficient management is at using those assets. (It’s calculated by dividing a company’s annual earnings by its total assets, and shown as a percentage.)

Return on equity (ROE) shows whether a company is a profit creator or a profit burner, and whether it is growing earnings without pouring new capital into the business. It indicates how much profit the company generates with the money shareholders have invested. All those on the list had to have an ROE greater than 15 per cent.

What did we find?

NU SKIN Enterprises, which sells personal care products and dietary supplements, displays some impressive numbers – although its inventory turnover is among the lowest on our list.

Footwear maker Steve Madden sports a profitable turnover ratio at almost nine times. The Fossil brand of fashion accessories has the highest operating margin of all the companies listed. Others that beat the averages in four of the six categories are TJX and Ross Stores, both off-price apparel retailers, and electronics chain Conn’s Inc.

Contact an investment professional or conduct further research before investing in any of these securities.

 

Top-performing U.S. retailers

Company Ticker Market
Cap
($-bil)
Sales
Gwth
(1 Yr %)
EPS
(1 Yr
Gwth %)
Oper.
Margin
(%)
Inventory
Turnover
Nike Inc. NKE-N 69.6 4.53 40.8 13.8 4.21
TJX Cos Inc. TJX-N 45.08 8.91 36.51 12.33 5.59
VF Corp. VFC-N 25.09 4.73 13.79 14.24 3.32
Macy's Inc. M-N 19.17 3.31 30.56 9.7 2.25
Gap Inc. GPS-N 18.96 2.9 14.06 13.68 4.14
Dollar General DG-N 18.82 11.29 18.75 10.07 4.93
Bed Bath & Beyond BBBY-Q 16.5 8.9 19.19 14.49 2.76
Ross Stores Inc. ROST-Q 16.05 5.98 10.96 13.39 5.31
Mattel Inc. MAT-Q 15.43 6.22 15.09 16.03 3.83
Under Armour -A UA-N 8.53 25.72 25.45 11.52 2.75
Ulta Salon Cosmetics ULTA-Q 8.16 24.77 27.27 12.48 4.08
Petsmart Inc. PETM-Q 7.59 4.03 17.11 9.89 6.57
Nu Skin Enterp. -A NUS-N 7.43 76.29 107.69 16.53 2.23
Fossil Group Inc. FOSL-Q 6.97 18.45 25.2 17.39 2.17
Urban Outfitters URBN-Q 5.7 11.71 17.07 14.14 4.72
Williams-Sonoma WSM-N 5.65 11.33 18 10.28 3.33
Cabela's Inc. CAB-N 4.31 14.79 16.39 9.86 2.62
DSW Inc.-Cl A DSW-N 3.84 9.73 13.64 9.89 4.18
Steven Madden SHOO-Q 2.63 10.62 15.91 15.45 8.82
Conn's Inc. CONN-Q 2.21 30.49 50 13.31 6.23
Express Inc. EXPR-N 1.99 6.88 11.11 10.85 6.46

All currencies are US$. Source: Bloomberg and Wickham Investment Counsel Inc.

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  • NUS-N
  • SHOO-Q
  • FOSL-Q
  • TJX-N
  • ROST-Q
  • CONN-Q
  • NKE-N
  • VFC-N
  • M-N
  • GPS-N
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