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These Specialty Retailers Have Proven Their Worth

Bob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The resilience of the American consumer is truly a thing to marvel. With the unemployment rate still stubbornly high, the ongoing sequester, and the payroll tax hike, you’d think the consumer in the United States would be down for the count.

Quite the contrary: in fact, although this month’s retail sales unexpectedly declined, it’s been an overall solid year for retail sales. And, when you consider that the housing markets and overall economy in the United States continue to improve (albeit slowly), you can see a relatively bright future ahead for the American consumer.

In that vein, here are three specialty retailers racking up impressive sales growth, with incredibly sound balance sheets to boot.

These specialty retailers are firing on all cylinders

Foot Locker (NYSE: FL) is a $5 billion retailer of athletic footwear and apparel. Foot Locker is a hidden gem among retailers that likely goes unnoticed by most investors. However, its excellent underlying business should make any Foolish investor take notice.

Foot Locker racked up impressive comparable-store sales growth of 5.2% in the first quarter, and 8.4% earnings per share growth.

The company’s first-quarter results followed an outstanding 2012. Foot Locker reported fiscal 2012 net income of $2.47 per share, which represented a 36% improvement year over year. Same-store sales increased 9.4% last year.

Making things even better, the company is generous to its shareholders. Foot Locker recently increased its dividend 11%. The new $0.80 per share annualized dividend represents a yield of nearly 2.2% for new investors.

And, Foot Locker is in tremendous financial condition. Its balance sheet is sparkling clean, evidenced by the fact that the company has more than $1.1 billion in cash and short-term investments with only $132 million in debt on the books.

Not to be outdone, earlier this year, consumer fashion company Fossil (NASDAQ: FOSL) reported record fourth-quarter and fiscal 2012 results. During the quarter, net sales and earnings per share increased 14% and 34%, respectively. Earnings per share for the full year hit a record $5.59, rising 21% from the year before.

The good news didn’t stop there: Fossil reported a huge first-quarter just a couple months ago. The company’s net sales and EPS jumped 15% and 30%, respectively. Both metrics represented new records for the company.

Fossil’s business is so sound because it performs strongly in all of its key markets. This is no one-trick pony: Fossil saw double-digit sales growth in North America, Europe, and Asia in the first quarter.

And, Fossil’s fortunes should only improve for the remainder of the year. For the full fiscal year 2013, the company expects net sales growth of at least 10%.

Like Foot Locker, Fossil has a great balance sheet, with almost twice as much cash and equivalents as long-term debt. Furthermore, Fossil holds a long-term debt to equity ratio of just 12%.

Last but not least, Dick’s Sporting Goods (NYSE: DKS) is a $6 billion retailer of sports apparel and equipment, as well as hunting accessories. Dick’s has excelled in recent quarters. The company saw consolidated earnings per diluted share jump 17% in 2012 versus the prior year. Furthermore, Dick’s announced its plan to repurchase $1 billion of its own shares over a five-year share buyback authorization. That will mean fewer shares outstanding, providing an assist to the company's earnings growth.

The solid performance carried over into the first quarter, with diluted EPS rising nearly 7% year over year. This came on the back of 4.1% growth in net sales in the quarter, and going forward, the company sees good things for the full year. Same-store sales growth is expected to come in at a respectable 2% to 3% in 2013, versus last year’s results.

Like Foot Locker, Dick’s pays its shareholders a dividend, which yields about 1% at recent prices.

Ring up profits at these companies’ registers

No matter if you’re a growth investor, a value investor, an income investor, or somewhere in between, these stocks have something to offer. This collection of specialty retailers is a great mix of high growth and compelling dividend yields.

In what has been a challenging year for the American consumer, these companies still manage impressive domestic sales growth. And, despite the ongoing fiscal calamity in Europe and pervasive fears of a Chinese economic slowdown, these companies are also growing their international operations, which should only provide a further catalyst going forward. As a result, each of these stocks is a compelling buy on any pullback.

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Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Fossil. The Motley Fool owns shares of Fossil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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