price to sales ratio

TRANSCONTINENTAL INC. $16 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.8 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.3%; TSINetwork Rating: Average; www.transcontinental.com) is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. This business provides 65% of its revenue and earnings. The company also publishes newspapers and magazines (30% of revenue and earnings). The remaining 5% comes from its marketing-communications division, which designs advertising campaigns, including direct mail, and analyzes customer-purchasing data.

Less cyclical than it appears

The printing industry is highly cyclical. However, Transcontinental gets over half of its printing revenue through long-term contracts of up to 18 years. The company cuts the cyclical risk of its publishing business by focusing on smaller cities with fewer competing newspapers. About half of the media division’s revenue now comes from local businesses.

...

H.J. HEINZ CO. $49 (New York symbol HNZ; Income Portfolio, Consumer sector; Shares outstanding: 318.3 million; Market cap: $15.6 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.7%; WSSF Rating: Above Average) makes a wide variety of processed foods, including condiments, sauces, soups, baked beans, pastas and infant food. Its flagship product, Heinz Ketchup, accounts for about 60% of U.S. ketchup sales. The company continues to expand its main brands, including Ore-Ida (frozen potatoes), Classico (pasta sauces) and Weight Watchers (diet foods). Heinz’s 15 top-selling brands each generate annual sales of over $100 million. Together, they supply 70% of Heinz’s total sales. Heinz’s sales rose 21.4%, from $8.6 billion in 2006 to $10.5 billion in 2010 (fiscal years end April 30)....

THE JONES GROUP INC. $15 (New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 87.1 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.3%; WSSF Rating: Average) is the new name of Jones Apparel Group. The company designs clothing, accessories and footwear. Jones sells most of its products through department stores. It also sells goods through its own retail stores. However, it plans to close 290 underperforming stores by the end of this year. That will leave it with around 800 outlets. If you exclude store-closure and severance costs, Jones earned $45.1 million in the three months ended September 30, 2010, up 20.3% from $37.5 million a year earlier. Earnings per share rose 17.4%, to $0.54 from $0.46, on more shares outstanding. Sales rose 19.4%, to $1.0 billion from $855.7 million a year earlier....

CAMPBELL SOUP CO. $36 (New York symbol CPB; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 335.7 million; Market cap: $12.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.1%; WSSF Rating: Above Average) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices. The company gets 30% of its sales from international markets. Its biggest foreign markets are Australia and Europe. Campbell looks overseas for growth...

LIMITED BRANDS INC. $29 (New York symbol LTD; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 322.8 million; Market cap: $9.4 billion; Price-to-sales ratio: 1.1; Dividend yield: 2.1%; WSSF Rating: Average) operates two main retail chains: Victoria’s Secret (lingerie) and Bath & Body Works (soaps and bath oils). It also operates the La Senza lingerie chain in Canada and 30 other countries. The company cut its inventories in response to the recession. That let it avoid costly clearance sales, and sell more of its goods at full price. In its fiscal 2011 second quarter, which ended July 31, 2010, Limited earned $120.6 million, up 100.1% from $60.3 million a year earlier. Earnings per share rose 89.5%, to $0.36 from $0.19, on more shares outstanding. The latest figure excludes a gain on the sale of its remaining 25% stake in the Limited clothing-store chain....

LIZ CLAIBORNE INC. $6.38 (New York symbol LIZ; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 94.5 million; Market cap: $602.9 million; Price-to-sales ratio: 0.2; No dividends paid since December 2008; WSSF Rating: Extra Risk) designs and sells clothing and accessories for men and women. Its top brands include Liz Claiborne, Juicy Couture and Kate Spade. Liz Claiborne continues to cut costs in response to falling sales: Liz Claiborne has closed 10 distribution centres since 2007. It has also sold less-profitable brands and closed stores. As well, the company hopes to spur growth with new licensing deals with J.C. Penney (see page 104) and the QVC TV shopping channel. The transition of the Liz Claiborne brands to J.C. Penney and QVC caused sales in the three months ended July 3, 2010 to fall 15.5%, to $569.8 million from $674.6 million a year earlier. The company lost $0.19 a share in the quarter, a 61.2% improvement over its year-earlier loss of $0.49 a share....

NORDSTROM INC. $38 (New York symbol JWN; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 219.2 million; Market cap: $8.3 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; WSSF Rating: Average) mainly sells upscale clothing, accessories and footwear. The company owns and operates 200 outlets, including 115 department stores, in 28 U.S. states. In its fiscal 2011 second quarter, which ended July 31, 2010, Nordstrom’s revenue rose 12.7%, to $2.5 billion from $2.2 billion a year earlier. Same-store sales rose 8.4%, mainly due to strong demand for women’s clothing, shoes and jewellery. Nordstrom is also benefiting from recent investments in its web site: online sales rose 34.1%. Earnings per share rose 37.5%, to $0.66 from $0.48. Nordstrom benefits from its focus on upscale shoppers. That’s because these consumers are less affected by economic downturns. However, the company aims to attract more cost-conscious customers by opening between 30 and 45 of its Nordstrom Rack clearance stores over the next three years. It now has 82 of these stores....

MACY’S INC. $23 (New York symbol M, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 422.7 million; Market cap: $9.7 billion; Price-to-sales ratio: 0.4; Dividend yield: 0.9%; WSSF Rating: Average) operates 850 department stores under the Macy’s and Bloomingdale’s banners. It also sells goods over the Internet. The company recently let its store managers tailor more of their stores’ goods to local tastes. As well, Macy’s is selling more products promoted by celebrities, such as Martha Stewart. Both of these moves have helped attract more customers. In its fiscal 2011 second quarter, which ended July 31, 2010, Macy’s earned $0.35 a share. That’s up 75.0% from the $0.20 a share, excluding restructuring charges, that the company earned a year earlier. Sales rose 7.2% in the latest quarter, to $5.5 billion from $5.2 billion. Same-store sales rose 4.9%. Online sales jumped 28.1%....

J.C. PENNEY CO. INC. $32 (New York symbol JCP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 236.4 million; Market cap: $7.6 billion; Price-to-sales ratio: 0.4; Dividend yield: 2.5%; WSSF Rating: Average) operates 1,100 department stores in the U.S. and Puerto Rico. It also sells goods over the Internet. In its second quarter, which ended July 31, 2010, J.C. Penney reported sales of $3.9 billion, unchanged from a year earlier. Higher clothing sales offset the lost revenue from the shutdown of J.C. Penney’s catalogue business. On a same-store basis, sales rose 0.9%. Online sales rose 4.0%. The company earned $14 million, or $0.06 a share, in the latest quarter. That’s much better than the $1 million, or nil per share, it lost a year earlier. J.C. Penney is doing a good job of managing its inventories. That cuts the need for costly clearance sales....

A key part of our three-part investment approach is to stick with well-established, dividend-paying companies. (The other two parts are to spread your money out across the five main economic sectors, and downplay stocks in the broker/public-relations limelight.) Most well-established companies have built up strong reputations that can help them overcome the inevitable downturns. Their trusted brands also make it easier for them to launch new products, or expand into new markets. Heinz and Campbell Soup are two good examples. Both companies began operating in 1869. Together, they own some of the best-known brands in the food industry. Their strong brands are helping them enter fast-growing markets, such as China, India and Russia. As well, both companies are introducing healthier products to spur sales in developed countries....