11/29/2011 4:08 PM ET|
It's a Saks or dollar-store Christmas
Rich man, poor man stocks
The trends I've outlined here have shaped retail stock performance as well.
A recent study by the management consulting company Accenture found that in the three years leading up to September, high-end and low-end retailers rewarded shareholders with total returns (stock gains plus dividends) of 80% to 90%, compared with 5% declines for retailers in the middle.
The big-picture economic trends should continue to bring more of the same. "It's impossible to believe that the American standard of living in the future can ever be what it has been," says Davidowitz. "We all have to pay higher taxes, and we all have to have less government services, and that means living standards can never be the same. If living standards can never be the same, stores like Family Dollar, and Dollar General have a very bright future."
Plus these low-end stores have done a great job of holding on to middle-income customers who have been trading down, says Cohen. They're doing this by remodeling, stocking a broader array of merchandise and offering smaller package sizes that let even budget-constrained consumers feel like they're on a shopping spree, he says.
They're also doing a good job of managing costs despite rising commodity prices, and expanding into food, which brings more customers into their stores, says Keri Spanbauer who follows retailers for Thrivent Asset Management. And all three of the dollar stores are launching new stores at a rapid pace.
These trends are all bullish, but a word of caution for new investors. Unlike the stuff they sell, the dollar-store stocks aren't cheap, and that makes them more vulnerable to risks. "I do like the dollar formats, but you have to be a little careful with valuation," says David Abella, who manages the Rochdale Dividend & Income (RIMHX) fund, which has outperformed competing funds and the S&P 500 nicely over the past five years. "The low-end retailers are pretty fully priced right now," agrees Thomas Vandeventer, portfolio manager of the Tocqueville Opportunity (TOPPX) fund, which also has outperformed during the past five years.
A big risk: increasing competition in the space, especially as Wal-Mart gets back in the extreme bargain game with smaller-format stores, says Deutsche Bank analyst Charles Grom, who has a "hold" rating on Family Dollar Stores for this reason.
The high-end retailers should keep doing well as income disparities continue to widen, but caution is in order for them as well, because these stocks look pricey, too. Nordstrom, though, stands out as perhaps the best potential buy in the space, with a four-star rating at Morningstar. (The highest possible is five stars; Saks and Coach get three.)
Like bargain shoppers, Morningstar pays close attention to value with stocks, and it doesn't have a problem with where Nordstrom is trading.
At the time of publication, Michael Brush did not own or control shares of any stock or fund mentioned in this column.
Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.
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Christmas is way too commercialized. Im not buying any gifts except good food and some drinks for my friends and I to get together. We are all grown and can buy our own necessities and wants. Any gifts given are kind gestures but not required.
The best gift is to have a zero balance on my credit card, bills paid on time and savings in the bank after all the hoopla has settled!
Christmas is about family and good friends sharing and spending quality time! besides nordstrom/saks are way too overpriced!
Oh, there's a hollowing-out of the middle-class, but it's not because the rich don't pay enough taxes. It's because the government (from congress on down) spends everything it can get it's hands on like there's no tomorrow. They wealthy pay their share and then some, but luckily they can still afford it.
The middle-class pays their share, too, but when the prices of goods and services rise, the middle-class get hit the hardest... their earnings simply can't keep up with the cost of living, plus the tax bill they get hit with each year.
As for the poor. I know people on welfare with iPads, iPhones, and the monthly costs that go along with those. I'm middle-class and can't afford those luxuries. They are abusing the system, and taking away from the poor who really need it.... again, wasteful spending by our government.
We the people are a lot at fault here. Quit spending money that you don't have. All you're doing is putting yourself more in the hole and making the rich richer. We have to realize that this country is robbing us and our wallets are getting lighter and lighter. We must make sacrifices now and refrain from over spending . You need to save , instead of spend.
I'm so tired of hearing people say .. "I deserve" ... then they go out and buy a new car or upgrade to a larger or better house that they know they can't afford. Wake up people . Once you stop spending you'll see how fast the gov will have to make adjustments ( for the middle class).
We the middle class ARE in control, if only we would use common sense and tighten our belts until things start to pick up... otherwise we could lose everything . Again, STOP spending money you don't have !!!!!!!!!!!!!!!
i stopped buying gifts for 10 years now and don't regret it. i stopped buying things for myself for 10 years now and i don't miss anything.
i only buy the necessities and use what ever i have to buy necessities for others too.
so why do people like us care about those wealthy retailers not making ends meet. perhaps, they should not give out executive bonus's this year.
but you know what? the executives will find a way to squeeze their bonus's out from somewhere - maybe laying off a few hundred low pay workers again.
The reason why I say we "the middle class" ARE in control is ... if we stopped spending, and even if we didn't go to work for a day .. who loses the biggest >>>> the rich do . Once we stop putting money in their pockets , they'll have no choice but to lower prices and up wages or else we the middle class will say NO again to them. See how simple it is .. if only we would use common sense.
The same thing goes for attending sports, going to the movie theater and buying CD's, electronics, etc. Once we say NO to these outrageous prices only then will things turn in our favor. It sickens me to see how the pro's and movie stars are living in luxury and we have to just sit back and watch and weep ... if we would stop supporting them they would have no choice but to make things more affordable. When was the last time you could afford to take your family to a baseball game or movie theater without feeling guilty what you spent for this outing .
We could put the rich out of business before they put us in the poor house .. but we have to
stop buying and paying their wages !! That is the ONLY answer to this war against the middle class.
Ask yourselves this question ,,, What would the rich do if we all decided to stop buying and stop going to work for just 1 week ? The rich would lose a hell of a lot more then we would.
I have moved from living in a middle class neighborhood to living in the projects over the past few years. I work two jobs both are state and federally funded and it has been rough! But I'm Just thankful! I just pray that this season people will keep in mind the true meaning which is celebrating God's Love in the birth of Jesus by sharing that love with everyone we know and don't know. We are used to celebrating with lots of gifts and stuff but this year my family is going back to basics. We will have a Christmas eve gathering with no huge dinner but simple finger foods and music with presentations by the children and games. Any gifts we buy will be from stores like my favorite Five Below which sells everything for five dollars and under! and others will be homemade! I'm excited! Yes the economy is bad but God is Greater than all that stuff! God Bless Everyone!
Christmas is suppose to be for kids. You want some good deals then don't buy for the adults during the month of December ONLY buy for the little ones that believe in Santa and let the adults have their Christmas in January. You'll see how the prices are cut if no one buys in December.
Just tell Jesus, Happy BELATED Birthday, He'll understand.
I am not sure in which category I belong. I am retired, on SS and have a small income from my pension fund. Our total income from all sources is about $45,000 on which my wife and I live quite comfortably. We do occasionally go to a Wal-Mart for certain items, Pet foods, dental supplies and prescription medications. We purchase our clothing at Dillard's, Macy's and other middle class and middle price department stores.
The story implies that "Middle Class" and "Middle Income" people are only able to buy at the "Dollar Stores". It sounds to me that the writer of this story considers anyone who doesn't have an annual income of $250,000 a year as being doomed to shop at the Dollar stores.
Maybe anyone who doesn't have a Job is forced to shop at the Dollar Stores but if Middle Class is now defined as a Jobless person, then I think that the term "Middle Class" as a description of an income group, needs to revert back to its original meaning.
I know literally thousands of people, like myself, some retired, some working, who are true Middle Class and who are able to purchase many of their family needs at Department stores.
If this story was anywhere close to accurate, all of the Department Stores would have gone bankrupt and out of business 3 or 4 years ago.
I acknowledge that people who have lost their jobs or are unable to find one providing adequate income and are living on unemployment assistance or welfare, are having a tough time now but you can't accurately say that "The Middle Class is no longer able to shop at Wal-Mart and only able to buy at the Dollar Store"
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