Analyzing Dillard’s (DDS) & Nordstrom (NYSE:JWN)

Nordstrom (NYSE: JWN) and Dillard’s (NYSE:DDS) are both retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, dividends, profitabiliy, risk, institutional ownership and earnings.

Profitability

This table compares Nordstrom and Dillard’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nordstrom 2.51% 69.16% 7.29%
Dillard’s 2.50% 9.39% 4.05%

Insider & Institutional Ownership

64.2% of Nordstrom shares are owned by institutional investors. Comparatively, 93.7% of Dillard’s shares are owned by institutional investors. 7.0% of Nordstrom shares are owned by insiders. Comparatively, 26.6% of Dillard’s shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Risk and Volatility

Nordstrom has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500. Comparatively, Dillard’s has a beta of 1.06, meaning that its share price is 6% more volatile than the S&P 500.

Dividends

Nordstrom pays an annual dividend of $1.48 per share and has a dividend yield of 3.1%. Dillard’s pays an annual dividend of $0.28 per share and has a dividend yield of 0.4%. Nordstrom pays out 69.5% of its earnings in the form of a dividend. Dillard’s pays out 5.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Dillard’s has raised its dividend for 3 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for Nordstrom and Dillard’s, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nordstrom 4 15 5 0 2.04
Dillard’s 2 2 1 0 1.80

Nordstrom currently has a consensus target price of $47.43, suggesting a potential downside of 0.02%. Dillard’s has a consensus target price of $55.80, suggesting a potential downside of 17.83%. Given Nordstrom’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Nordstrom is more favorable than Dillard’s.

Earnings & Valuation

This table compares Nordstrom and Dillard’s’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Nordstrom $14.86 billion 0.53 $1.70 billion $2.13 22.27
Dillard’s $6.33 billion 0.31 $552.91 million $4.86 13.97

Nordstrom has higher revenue and earnings than Dillard’s. Dillard’s is trading at a lower price-to-earnings ratio than Nordstrom, indicating that it is currently the more affordable of the two stocks.

Summary

Nordstrom beats Dillard’s on 11 of the 17 factors compared between the two stocks.

About Nordstrom

Nordstrom, Inc. is a fashion specialty retailer in the United States. The Company’s segments include Retail and Credit. As of March 20, 2017, the Company operated 344 the United States stores located in 40 states as well as an e-commerce business. The Company also offers its customers a variety of payment products and services, including credit and debit cards. As of March 20, 2017, the Retail segment included its 117 Nordstrom-branded full-line stores in the United States and Nordstrom.com, 216 off-price Nordstrom Rack stores, five Canada full-line stores, Nordstromrack.com/HauteLook, seven Trunk Club clubhouses and TrunkClub.com, two Jeffrey boutiques and two clearance stores that operate under the name Last Chance. The Company, through Credit segment, allows its customers to access a range of payment products and services, including a Nordstrom-branded private label card, approximately two Nordstrom-branded Visa credit cards and a debit card for Nordstrom purchases.

About Dillard’s

Dillard’s, Inc. is a retailer of fashion apparel, cosmetics and home furnishing. As of January 28, 2017, the Company operated 293 Dillard’s stores, including 25 clearance centers, and an Internet store offering a selection of merchandise, including fashion apparel for women, men and children, accessories, cosmetics, home furnishings and other consumer goods. The Company’s segments include the Retail operations segment and the Construction segment. The Retail operations segment includes the operation of the Company’s retail department stores. The Construction segment includes the operations of CDI Contractors, LLC (CDI), a general contracting construction company. CDI’s business includes constructing and remodeling stores for the Company. As of January 28, 2017, the Company operated retail department stores in 29 states, primarily in the southwest, southeast and midwest regions of the United States.

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