Nordstrom Inc. (JWN) followed Dillard’s Inc. (DDS) recently-announced share repurchase program of $250.0 million, by enhancing its dividend yield to employ its free cash to enhance shareholder returns, thus boosting investor confidence in the stock.
Nordstrom, the leading fashion specialty retailer in the United States, recently raised its quarterly dividend by 15% to 23 cents a share from 20 cents in the previous quarter. Dividend has been raised five times since June 2005, after the company’s 2-for-1 stock split.
Nordstrom has a record of paying dividend to its shareholders since its incorporation in 1971. The dividend will be paid on March 15, 2011 to shareholders of record as of March 04, 2011.
Increase in dividend reflects the company’s sound financial position and well-defined future prospects. The signs of recovery in the economy have made share buybacks and dividend increases a common strategy among companies to deploy on extra cash. These strategies enhance shareholders’ return and lift the market value of the stock.
Prior to this, the company, in its effort to optimize shareholders’ return, has entered into an agreement to acquire the online private sale leader HauteLook Inc. Nordstrom will pay up to $270.0 million in stock to conclude the deal, of which $180.0 million will be an upfront stock transfer and $90.0 million will be a three-year-earn-out based on the company’s performance.
With the acquisition of HauteLook, Nordstrom has succeeded in building multi-channel retailing. The acquisition will facilitate the company to increase its direct business capabilities, implement enterprise-wide inventory management system, sell directly to online customers and enhance the company’s customer service.
Nordstrom is a leading fashion specialty retailer in the U.S., offering high quality apparel, shoes, cosmetics and accessories for men, women and kids. The company offers both branded and private label merchandise, which are positioned in the upscale segment of the industry and targeted at the aspiring middle class.
Moreover, the company also offers a private label card, two Nordstrom VISA credit cards and debit cards for Nordstrom purchases. At present, the Seattle-based company operates a network of 115 full-line stores, 78 Nordstrom Racks, two Jeffrey boutiques and one clearance store.
A strong line-up of globally recognized brands, catering primarily to the upscale segment, enables Nordstrom to generate high margin revenue. Consequently, this provides a competitive advantage to the company and bolsters its well-established position in the market.
However, the company operates in a highly fragmented specialty retail sector and faces intense competition from other well-established players, such as Gap Inc. (GPS) and Limited Brands Inc. (LTD).
Currently, Nordstrom holds a Zacks #3 Rank, implying a short-term Hold rating on the stock. Besides, the company retains a long-term Neutral recommendation on the stock.
DILLARDS INC-A (DDS): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
LIMITED INC (LTD): Free Stock Analysis Report
Zacks Investment Research
