Consequently, I think Nordstrom is slowly becoming less competitive. That is dangerous because two dangerous direct retailers, Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN) are making blatant grabs for Nordstrom’s customers.Read more
Impressively, Business Insider lists the TJX Companies (NYSE: TJX) as the “number one clothing company” in the United States. Notably, TJX is thriving while mall brands like The Gap (NYSE: GAP) are struggling. Thus, one reason for TJX’s success is its’ refusal to follow competitors into the mall.
The TJX Companies is far larger than you think; it operates over 4,000 stores in nine countries. In addition, TJX operates three e-commerce sites.
TJX brands include T.J. Maxx, Marshalls, Marmaxx, HomeGoods, Sierra Trading Post, Homsense, HomeGoods, and Winners. The strategy is paying off because TJX claims to have delivered 22 straight years of store sales increases.
To supply its stores TJX works with 20,000 vendors in 100 countries. Therefore, TJX has built an impressive ecosystem it can easily expand online.
An obvious opportunity for TJX is to add an existing online discounter; like eBay (NASDAQ: EBAY), Alibaba (NYSE: BABA), or Overstock.com (NASDAQ: OSTK), to its ecosystem. Importantly, TJX is offering to ship-to-store for items ordered through Sierra Trading Post.Read more
The obvious conclusion is that these retailers, like Sears, become overextended and one quarter away from the Death Spiral. To clarify, the retail Death Spiral occurs when a company cannot generate enough cash to pay its debts.
In today’s environment, however, credit is so cheap retailers can avoid the death spiral by borrowing. When the loans come due, the retailers borrow more.
Under those circumstances, there is no incentive for retailers to modernize, close money-losing locations, or change their inventories. Instead, they keep operating like it is still 1988 until they can longer pay their debts.
A classic example of that was The Bon-Ton Stores (OTC: BONTQ) a department store operator that died earlier in 2018. Markedly, Bon-Ton was hiring extra staff for Christmas season 2017, a few months before they liquidated it. Astoundingly, Bon-Ton is “poised for a comeback” under the direction of delusional management, USA Today claims.
Nordstrom’s greatest challenge is to keep the upper-middle class; especially the younger upper middle class, coming to its brick and mortar stores.Read more
The potential of this are absolutely staggering. Just a few of the things Uncle Warren can do with all that cash include:
Buy America’s second largest grocer; Kroger (NYSE: KR), outright and still have $75.56 billion left in the bank. That’s amazing because Kroger reported revenues of $118.05 billion on 31 July 2017. Kroger had an enterprise value of $32.74 billion on November 10, 2017.
Nordstrom has demonstrated that retailers like Barnes & Noble might have more value than many people think. Unfortunately, that value is not presently being exploited in any sort of meaningful way. Barnes & Noble is doomed without an acquisition or a radical change in business plan.Read more
The situation at Nordstrom is teaching a hard lesson that all investors need to learn. It is even good stocks and brands will suffer in the retail apocalypse.Read more
A final option at Penney’s is to start offering more unusual discounts like those seen at the TJX Companies (NYSE: TJX) stores. TJX has survived by turning its stores like Marshalls and TJX Maxx into giant bargain basements and offering lots of weird off the wall buys.
An obvious development here would be for TJX to buy JC Penney’s. TJX certainly has the resources to acquire Penney’s it reported $2.952 billion in cash and short-term investments and $3.521 billion in cash from operations on July 31, 2017.Read more
Amazon has some value-investment characteristics including a lot of cash and the ability to generate vast amounts of cash on a regular basis. The problem is that unlike companies such as Microsoft, Oracle, Alphabet, and Apple, it cannot keep that cash around.Read more
This does not mean Amazon would not buy a department store. I can certainly picture it acquiring Nordstrom (NYSE: JWN); which has a “best in the industry” reputation, and a loyal customer following much like Whole Foods. It also likes to implement next generation retail practices like setting up “storefronts” for online merchants and Tesla dealerships in its stores.Read more