Many investors have sworn off the retail sector, convinced that internet sales, traditional competition, and expensive physical locations will kill formerly formidable competitors. Canadian retailers also must deal with a strong U.S. dollar, which is making imports from China more expensive.
There is no doubt this downturn will spell the death of some Canadian retailers. Sears Canada is an obvious choice, with certain others not doing much better.
One company that is well positioned to weather the storm is Reitmans Canada Limited (TSX:RET.A), the owner of more than 800 clothing stores across six different banners.
Brothers Jeremy and Stephen Reitman have led the company since the 1970s, and collectively own more than 7.6 million shares, or about 10% of the total outstanding. There’s a lot to like about management with that much skin in the game.
Reitmans also has a solid balance sheet, owing just $2.1 million to creditors compared to $151 million of cash in the bank. That kind of cash position allows it to make smart investments in the future, like a new inventory system that integrates online and offline sales.
Digital sales are growing like mad. Reitmans recently reported December sales were up 4.4% despite the closing of 80 stores over the last year. Same-store sales were up 9.5%, with physical locations reporting a 4.5% bump and e-commerce sales up 60%.
Reitmans also trades right around book value and has a price-to-sales ratio of just 0.4. It generated $0.38 per share in free cash flow in the last year as well. It is cheap on many different valuation metrics.
