Retail Store Analysis

Haven Freitas
Financial Report on two American Retail companies: Nordstrom Inc. and The TJX Companies Inc.

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Finance 326-80 Intermediate Finance Management
 Table of Contents
Introduction .............................................................................................................. 3
Industry Background ............................................................................................................3
Nordstrom Background ........................................................................................................4
TJX Background...5

Overview ................................................................................................................... 6
Common Sized Statement Analysis .....................................................................................6
Stock Analysis .....................................................................................................................7
Ratio Analysis ........................................................................................................... 9
Liquidity Ratios ...................................................................................................................9
Debt Management Ratios ...................................................................................................11
Asset Management Ratios..................................................................................................13
Profitability Ratios .............................................................................................................15
Market Valuation Ratios ....................................................................................................18
DuPont Analysis ..................................................................................................... 19
Profit Margin.................................................................................................................................. 21
Total Asset Turnover ..................................................................................................................... 22
Equity Multiplier............................................................................................................................ 23
Industry Comparison...24

Appendix ................................................................................................................. 26

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 Introduction

Industry Background and Project Outline

In this financial report I will be analyzing Nordstrom Inc. and The TJX Companies Inc.

Both companies are in the retail sector. The retail sector is comprised of a number of different

industries with a variety of companies engaged in retailing and rendering services related to the

sale of merchandise. In 2015, the United States retail sector sales were at 2.6 trillion through 3.6

million different retail establishments across the country. An estimated two-thirds of the U.S

GDP comes from retail consumption making retail establishments earnings, openings, and

closing a strong indicator of how the U.S economy is performing.

Any business that sells finished products to a consumer is considered part of the retail

sector therefore there are many different industries within the retail sector. Both Nordstrom and

TJX are in the industry Family Clothing Stores or NAICS448140. According to the United

States Census Bureau NAICS448140 is defined as establishments primarily engaged in retailing

a general line of new clothing for men, women, and children, without specializing in sales for an

individual gender or age group. These establishments may provide basic alterations, such as

hemming, taking in or letting out seams, or lengthening or shortening sleeves. Other large

companies in this specific industry include: The Gap Inc., Ross Stores Inc., American Eagle

Outfitters Inc., and Urban Outfitters Inc.

In this financial report I will compare both Nordstrom Inc. and TJX Inc. using common

size income and balance sheet statements, liquidity ratios, debt management ratios, asset

management ratios, profitability ratios, market valuation ratios, and the DuPont analysis. After

collecting the data for each financial statement and ratio, I will interpret the results and conclude

which retail company would be a better investment for a potential client.

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 Nordstrom, Inc. Background and Developments
Nordstrom operates in 323 different locations across the United States. It showcases a

range of fashion brands in many different departments such as apparel, shoes, and accessories.

Nordstrom Inc. was created by John W Nordstrom, a Swedish immigrant who came to America

in the hopes for better opportunities. In 1901, he opened a small shoe repair shop that by 1960

became one of the largest shoe stores in the country. Looking to expand, the next generation of

Nordstroms began to venture into womens clothing and by 1973 Nordstrom Inc.s annual sales

surpassed 100 million. According to the Nordstrom website, Nordstrom was recognized as the

largest-volume fashion specialty store on the West Coast. Nordstrom continued to prosper in

on going years and in 2015 its net sales of 14.1 billion set a new all-time record.

Nordstrom is publically traded on NYSE with the symbol JWN. In recent years it has

expanded its store locations in and outside of the country. This past September Nordstrom

opened its fourth store in Canada, trying to further establish a stronger customer base within the

country. Nordstrom is focusing more on the quality of their department stores rather than the

quantity. Previous retailers have underperformed in the Canadian Market leading to hundreds of

closures of store locations. In order for Nordstrom to succeed with their international exposure

they must grow in the e-commerce market. As of 2015, e-commerce accounted for 5.7% of total

retail sales in Canada compared to the much stronger 7.5% in the US market therefore an

expansion in the e-commerce market can put Nordstrom ahead of its competitors in international

expansion and succeed in a volatile environment where other retailers have failed.

Recently, Nordstrom was one of the S&P 500s big winners with a 2.61% increase in

stock price. This increase in price can be attributed to its latest quarters revealing of a $ 0.67

earnings per share. This price topped analysts conclusions by 11 cents and such a surprise in

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earnings can lead to both an immediate increase in stock price and an increase of price over time.

However, in the beginning of the year Nordstrom lowered their financial expectations because of

a 42% decline in stock price from 2015. Nordstrom has recently been struggling compared to

some of its competitors due to its inability to adapt to consumers changing preferences in the

retail industry. They are known for their exceptional customer service and variety of quality

fashion brands, but strong competition from online and off-price realtors has impacted their

financials severely. An increase in their online presence and Nordstrom Rack, the off-price retail

division of Nordstrom Inc., will help them recover from their current loses.

The TJX Companies, Inc. Background and Developments

The TJX Companies is an apparel and home retailer that operates in over 3,000 stores in

the United States, Canada, Europe, and Australia. The Company was founded in1919 by Max

and Morris Feldberg in Boston Massachusetts. The TJX companies began with the opening of

Zayre which publically started trading stocks in 1962. In 1976 Zayre expanded by launching

T.J.Maxx, a retail store selling designer clothing at a discounted price. From there the TJX

companies continued to grow by establishing and acquiring more companies including; Home

Goods, Marshalls, and HomeSense.

TJX is known for selling quality name brand items at a discounted price. They do this by

acquiring merchandise from over 16,000 vendors from 75 different countries after a season ends.

Theyre off-price products have been very popular with consumers over the last decade, and in

2012, TJX board directors voted to split their stock two-for-one as a result of the success of TJX

and as an expression of the Boards confidence in TJXs future.

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 In the last year TJX has been dominating the industry with a 15% sales increase in the

United Sates, a 14% increase in Canada, and a 4% increase in Europe and Australia. From this

trend it is clear buyers are moving away from traditional stores such as Macys and J.C Penny,

and moving towards stores with more price saving opportunities. The TJX companies also have

store divisions that focus on the sale of goods other than apparel. This diversification in

inventory can also be attributed to their success.

When it comes to e-commerce, only one percent of revenues are generated from online

sales for TJX. However, from the popularity in off-price realtors this has yet to negatively impact

the company. TJX has looked to expand its online presence by using Sierra Trading Post, an

online realtor TJX acquired in 2012. TJX plans to establish six more physical locations of Sierra

Trading Post in the U.S in the hopes of more online and in store revenue growth.

Overview

Common Size Statements

Section A through D of the appendix provides both The TJX Companies Inc. and

Nordstrom Inc.s balance sheet and income statement for the last three years. Each statement has

been modified to include common sized percentages in order to make easier comparisons

between the two companies. Common size statements are beneficial for investors in order to

compare two different companies or to see how a company is performing year to year. Since

common sized statements make multiple company comparisons easier, we are able to see

through JWNs and TJXs balance sheet that JWNs debt is double the amount of TJX which can

be an indicator that JWNs assets and other investments are funded more so by debt than by

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revenue. By being able to better compare companies over a number of years an investor can also

conclude through JWN and TJXs income statement, that despite declines in sales revenue for

both companies, TJX has still maintained a higher net income (almost 2% ) above JWN since

2014. This shows that despite the retails sector decline in consumer consumption, TJX can still

maintain a higher net income than JWN.

Stock Analysis

Stock Prices

JWN & TJX Price Comparison

90.00
80.00
70.00
60.00
Price

50.00
40.00
30.00
20.00 Nordstrom Price
10.00
0.00 TJX Price
1/10/2013

1/10/2014

1/10/2015

1/10/2016
1/10/2012

4/10/2013
7/10/2013

4/10/2015
7/10/2015
4/10/2012
7/10/2012

4/10/2014
7/10/2014

4/10/2016
7/10/2016
10/10/2013

10/10/2014

10/10/2015
10/10/2011

10/10/2012

Dates

Figure 1: The TJX Companies Inc. and Nordstrom Inc. Stock Price Comparison

In figure 1 the stock prices over the last five years for both JWN and TJX are graphed. In

section G of the appendix the stock prices for both companies for every month over the last

five years are listed. Conclusions drawn from this graph are that stock prices in both companies

have remained constant over the last four years other than the stock split TJX board of directors

voted on in 2012. Recently in the last year JWNs stock price has begun to decline while TJX

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continues to rise. This may be an indication that TJX is handling environment changes and

adapting better to the retail sector than that of its competitor, JWN.

Nordstrom Stock Returns

S&P & JWN Returns

20.00%
Return Percentage

10.00%
0.00%
-10.00%
S&P Returns
-20.00%
JWN Returns
-30.00%

Dates

Figure 2: Nordstrom Inc. and Standard and Poor 500 Return Comparison

TJX Stock Returns

S&P & TJX Returns

20.00%
Return Percentage

10.00%
0.00%
-10.00%
-20.00%
-30.00% S&P Returns
-40.00% TJX Returns
-50.00%

Dates

Figure 3: The TJX Companies Inc. and Standard and Poor 500 Return Comparison

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 In the figure 2 and Figure 3 TJX and JWNs returns are compared to that of the

S&P 500 over the last five years. Return values for TJX, JWN, and S&P 500 can be found in

section E and F of the appendix. Comparing a companys returns to the S&P 500 shows how

a company has performed in both a thriving and failing market. Other than the 2012 stock split,

TJX has remained relatively constant with the overall market. On the other side, JWN has had

steep declines in returns in the current year. While comparing a companys returns can be

beneficial in explaining how a company is doing in the NYSE, it isnt a complete representation

of a companys performance, due to the variety of companies in the stock exchange market and

their unique financial operations and differing account balances.

Ratio Analysis
Ratios for this section were calculated using the data from the income and balance sheets

provided in the appendix. All industry ratios were found using the data provided by Mergent

Online, the NYU Leonard N. Stern School of business, and CSI Market.

Liquidity Ratios

Current Ratio: Current Assets/Current Liabilities

2015 2016
JWN 5224000/2800000 3014000/2911000
1.87 1.04
TJX 6715061/3929634 6772560/4402230
1.71 1.54
Industry 2.08 2.03

The current ratio or the working capital ratio measures a firms ability to pay off its short-

term debts solely using current assets. The current ratio is an important measurement because it

takes a rough estimate of a companys financial health. When deciphering the current ratio the

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higher it is the better. High current ratios mean a company has a greater ability to pay off its

financial obligations. In the above table both JWN and TJX have current ratios over 1. Usually if

a firms current ratio is below 1 that can signify that a firm may be financially unstable. While

both TJX and JWNs current ratios are above one theyre both still below the industrys average

of 2.03. This means competitors in their industry may be more financially stable due to their

ability to pay off short term debts with their current assets. TJXs current ratio is higher than

JWN therefore, JWN s debt outweighs its current assets more than that of TJX.

Quick Ratio: (Current Assets Inventory)/Current Liabilities

2015 2016
JWN 5224000-1733000/2800000 3014000-1945000/2911000
1.25 .37
TJX 6715061-3217923/3929634 6772560-3695113/4402230
.89 .7
Industry .76 .66

The quick ratio measures a companys short-term liquidity. It is very similar to the

current ratio except that inventory is excluded, to see how liabilities can be paid with the most

liquid assets such as cash and accounts receivable. Like the current ratio a higher number means

a healthier financial position. In the table above, both TJX and JWN are below 1 for their quick

ratio in 2016. This means that they pay 70 cents and 37 cents, respectively, of liquid assets to 1

dollar of current liabilities. Compared to the industrys quick ratio TJX is shown to be in a better

financial position than JWN. JWN faced a significant decline in their quick ratio from 2015 to

2016, and although this is usually a bad sign it can also mean that the company is expecting large

returns from a new project. In this case, the decline in quick ratio for JWN may be from the new

location opening in Canada.

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 Debt Management Ratios

Total Debt to Asset Ratio: (Short Term Debt + Long Term Debt)/ Total Assets

2015 2016
JWN 3123000/9245000 2795000/7698000
.34 .36
TJX 1684597/11128381 1709268/11499482
.15 .15
Industry .45 .48

The total debt to asset ratio measures a companys financial leverage. To calculate this

ratio you take both short term and long term debt added together, and divide it by total assets.

The value of the ratio showcases what percentage of debt finances current assets. Therefore, the

higher the total debt to asset ratio the higher the risk a company has.

For these two particular companies both were under the industrys ratio in the present and

past year. This means other companies in their industry have a higher percentage of funding

assets with debt then Nordstrom and TJX. However, by solely evaluating these two companys

ratio an investor can come to the conclusion that JWN is riskier than TJX due to its higher debt

to asset ratio in both 2015 and 2016.

Debt/Equity Ratio: Total Debt/Total Equity

2015 2016
JWN 3123000/2440000 2795000/871000
1.28 3.22
TJX 1684597/4264230 1709268/4307075
.4 .4
Industry .73 1.01

The Debt to Equity Ratio is similar to the debt to asset ratio except that it takes in account

shareholders equity. It compares a companys debt to its equity, and it shows what percentage of

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a companys financing comes from creditors and investors. When analyzing a debt to equity

ratio, a higher ratio means that creditors are financing more than investors. If a companys debt

to equity ratio equals one that means that both investors and creditors have an equal share in a

companys assets.

Looking at the current D/E ratios for 2016, JWNs D/E ratio of 3.22 indicates that it is

financing more through debt than shareholders and investors. On the other hand, TJX has a D/E

ratio of .4 which implies it is a more financially stable business at the time being. TJX is also

below the industrys debt to equity ratio making it a less risky of an investment than many of its

competitors.

Interest Coverage or TIE Ratio: EBIT/Interest

2015 2016
JWN 1323420/138000 1101250/125000
9.59 8.81
TJX 3606691/39787 3704576/46400
90.65 79.84
Industry 732.04 85.27

The Interest Coverage Ratio measures a firms ability to make interest payments. This

ratio shows how a firm handles its long-term financial obligations; therefore this ratio can

indicate whether or not a company will be able to continue operating in the foreseeable future.

Since the ratio determines the number of times a company can pay its interest with its current

income before taxes, a higher ratio is more favorable.

TJX in both 2015 and 2016 has had significantly higher TIE ratios than that of JWN. The

2016 TIE ratio indicates that TJXs income is a little over 79 times higher than its interest for the

current year, while JWNs income is only about 9 times higher than its interest for the year. This

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in return makes TJX more favorable to future investors compared to JWN. However, its TIE

ratio has been below the industrys ratio for the past and present year, making some companies

in this industry more favorable than TJX.

Asset Management Ratio

Inventory Turnover: Cost of Goods Sold/Inventory

2015 2016
JWN 8924950/1733000 9705550/1945000
5.15 4.99
TJX 21624442/3217923 23537869/3695113
6.72 6.37
Industry 4.29 4.21

The Inventory Turnover ratio shows how efficient a company is at selling their inventory

for a given period. A higher ratio indicates a higher amount of sales while a lower one indicates a

weak number of sales. This ratio is important to investors because it shows whether or not a

company is spending too much on inventory. While a higher ratio indicates a healthier firm, it

can also mean that a company is not administrating inventory to its highest potential.

In both years TJX has exhibited higher inventory ratios than both JWN and the industry.

JWN inventory turnover ratios were also above the industrys indicating that both firms have a

good handle on the amount of inventory they purchase compared to the amount they sell. Both

firms are satisfactory when it comes to easily turning inventory into liquid assets.

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 Accounts Receivable Days: (Accounts Receivable/Annual Revenue)*365

2015 2016
JWN (2306000/13506000)*365 (196000/14437000)*365
62.32 4.96
TJX (213824/29078407)*365 (238072/30944938)*365
3.89 2.81
Industry 3.3 2

The accounts receivables days ratio or day sales outstanding ratio is important because it

shows how long it takes for a company to acquire the payment for goods sold on credit. A

company that is able to receive payment for goods in a timely fashion proves to be more efficient

with short-term payments. Since the ratio shows how many days it takes to receive cash from a

sale, lower ratios are more favorable. A company that acquires money quicker leads to more

investment and other financial opportunities.

In the above table, it shows that JWN struggled in 2015 with receiving timely payments

for merchandise sold on credit. Its high ratio rate in 2015 suggests that JWN was unable to

partake in as many investment opportunities as its competitors, and that it had a low liquidity and

cash flow rate for the year. In 2016, JWN was able to lower their DSO ratio to 4.96 indicating

they may have taken on newer and stricter collection procedures. While JWN has significantly

improved in 2016 for receiving cash for credit payments, TJX still has a lower DSO ratio and has

remained a lower DSO ratio, making it more favorable to investors.

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 Total Asset Turnover: Sales/Total Assets

2015 2016
JWN 13506000/9245000 14437000/7698000
1.46 1.88
TJX 29078407/11128381 30944938/11499482
2.61 2.69
Industry 1.99 2

Total asset turnover ratio displays how well a company uses it assets to generate revenue.

In order to find total asset turnover, you must take a companys sales and divide it by its total

assets. Therefore, a higher total asset turnover is more favorable because it implies a company is

generating more revenue through each asset.

Both companies have displayed a trend in improving asset turnover from 2015 to 2016.

However, from the data provided TJX has been more efficient in generating more revenue per

dollar asset than JWN. JWN has also been below the industrys total asset turnover ratio

indicating that other companies in this industry have also been more efficient than JWN.

Profitability Ratios

Net Profit Margin: Net Income/Sales

2015 2016
JWN 720000/13506000 600000/14437000
5.33% 4.16%
TJX 2215128/29078407 2277658/30944938
7.62% 7.36%
Industry 4.01% 1.66%

The profit margin represents the amount of income generated from sales. The equation

for profit margin is net income over sales; therefore a higher ratio means a company is more

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efficient at converting sales into profit. This is an important ratio for investors because it shows

how effective a company is at cost control, and which companies are more profitable.

From 2015 to 2016 both JWN and TJX profitability has decreased. This may be due to

the changing conditions of the retail sector in the last few years. Competitors that are doing well

in this particular sector are ones that are able to turn around stylish new products quickly, and

online realtors. In the last few years there has been a striking increase in the number of

consumers going online to find deals. However, compared to other companies in the Family

Clothing Store industry Nordstrom and TJX continue to generate a higher profit than most of

their competitors. TJX continues to generate a higher profit than JWN and this may be due to the

shift in consumer preferences from shopping at traditional stores to ones that offer more

affordable options.

ROA: Net Income/Total Assets

2015 2016
JWN 720000/9245000 600000/7698000
7.79% 7.79%
TJX 2215128/11128381 2277658/11499482
19.90% 19.81%
Industry 8.32% 5.33%

ROA or return on assets shows the amount of net income that is generated from assets.

This ratio is significant because it shows how efficient a company is at managing their assets,

and a company that manages their assets well can essentially earn profits without the need to use

additional leverage. A higher and positive ROA is more favorable because it suggests a company

can generate more profits from assets and has an upward profit trend.

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 TJXs return on assets exceeds both the industrys ratio and JWNs. In the current year it

has converted 19.81% of its assets dollars into income while Nordstrom only converted 7.79%

of its assets into a profit. TJX, therefore, would be looked on more favorably by investors

because of their ability to make larger profits with fewer investments.

ROE: Net Income/Total Equity

2015 2016
JWN 720000/2440000 600000/871000
29.51% 68.89%
TJX 2215128/4264230 2277658/4307075
51.95% 52.88%
Industry 16.24% 1.07%

ROE or return on equity is the amount of profit a company has generated from

shareholder investments. ROE reveals a firms profitability so a higher ROE is looked on more

favorably by investors. Generally, financial analysist approximate that an attractive companys

return on equity ratio is at least in the 15% to 20% range.

In the current year, both TJX and JWN have been far above the industrys ratio of 1.07.

This indicates that both companies are using shareholders money more effectively than their

competitors. Despite TJXs increase in ROE from 2015 to 2016 JWNs current ROE is more

favorable to investors because for every dollar of shareholders money, JWN earns 16% more

than TJX.

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 Market Valuation Ratios

P/E: Price per Share/Earnings per Share

2015 2016
JWN 65.21/3.79 54.83/3.22
17.21 17.03
TJX 73.19/3.20 73.74/3.38
22.87 21.82
Industry 33.30 18.57

The P/E ratio determines how much an investor is willing to pay for a stock by taking the

market price per share and dividing it by the earnings per share. The P/E ratio is one of the most

valuable ratios for investors. If a companys ratio is higher than the industrys average that can

hint to investors that a company is improving and growing. The P/E ratio can also show if

current investors in a company expect growth in the future. It is also overall a useful tool to

compare companies within the same industry.

When analyzing P/E ratios, typically a higher ratio indicates a companys success and

investors willingness to pay for future payouts. A low P/E ratio usually indicates that a company

does not expect to have good future performances or is not currently performing well. Since TJX

has a higher P/E ratio than that of JWN it shows that investors in that industry or willing to pay

more for a share of TJX than JWN. JWN is also currently below the Industrys P/E ratio of 18.57

meaning investors in that sector have more confidence in other companies in this industry.

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 Market to Book: Market Value per Share/Book Value per Share
*The Market to Book ratios for this section were found through CSI Market

2015 2016
JWN 5.94 10.68
TJX 10.84 11.11
Industry 9.82 9.43

The market to book ratio determines whether or not a company is overvalued or

undervalued. The interpretation of the market to book ratio is that if the ratio is above one the

companys stock is undervalued and vice versa if a companys ratio is below one. Investors can

use this ratio to find potential buying opportunities, and to help them determine if a company has

potential growth opportunities or is functioning poorly.

From the data provided above an investor can conclude that both JWN and TJX are

undervalued. This means their investors are willing to pay more for these companies than what

their assets are actually worth. This may indicate that investors are expecting potential future

growth from each firm. From the industry ratios it shows that the industry both TJX and JWN are

in is mostly made up of companies that are undervalued.

DuPont Analysis

The DuPont analysis is a measurement that breaks down the ratio ROE into three separate

components: profit margin, total asset turnover, and equity multiplier. To find ROE all three of

these components are multiplied together. The DuPont analysis gives investors the ability to

decipher which competent is either strengthening or weakening a companys return on equity.

On the next page I have provided two tables breaking down the DuPont analysis for both The

TJX Companies Inc. and Nordstrom Inc.

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 ROE Comparison Tables

The TJX Companies Inc.

Net Profit Total Asset Equity Multiplier

Year Margin Turnover ROE

2016 2277658/30944938 30944938/11499482 11499482/4307075 7.36%*2.69*2.67

7.36% 2.69 2.67 52.9%
2015 2215128/29078407 29078407/11128381 11128381/4264230 7.62%*2.61*2.61
7.62% 2.61 2.61 51.95%
2014 2137396/27422696 27422696/10201022 10201022/4229893 7.79%*2.69*2.41
7.79% 2.69 2.41
50.50%

Nordstrom Inc.

Net Profit Total Asset Equity Multiplier

Year Margin Turnover ROE

2016 600000/14437000 14437000/7698000 7698000/871000 4.16%*1.88*8.84

4.16% 1.88 8.84 68.89%

2015 720000/13506000 13506000/9245000 9245000/2440000 5.33%*1.46*3.79

5.33% 1.46 3.79 29.51%

2014 734000/12540000 12540000/8574000 8574000/2080000 .0585*1.46*4.12

5.85% 1.46 4.12
34.89%

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 Net Profit Margin

Net Income/Sales

JWN & TJX Profit Margin

9.00%
8.00%
7.00%
6.00%
Profit Margin

5.00%
4.00% JWN
3.00% TJX
2.00%
1.00%
0.00%
2014 2015 2016
Date

Figure 4: Nordstrom Inc. and The TJX Companies Inc. Profit Margin

The first competent that makes up the DuPont analysis is the profit margin. The profit

margin measures a firms operating efficiency. It determines how much profit a firm makes from

its sales revenues. Figure 4 exhibits the profit margin for TJX and JWN for the past three years.

Both companies have seen a decline in their profit margin. This could signify that either both

companies are not managing their cost of goods well, or that the amount of sales in recent years

has declined. It is likely that the latter has had a larger impact on both TJX and JWNs profit

margin. In the last few years the entire retail sector has seen a decline in sales due to more

conscious and online shoppers. Such changes can have a negative impact on shareholders

dividend payments.

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 Total Asset Turnover

Sales/Total Assets

JWN & TJX Total Asset Turnover

3

2.5
Total Asset Turnover

1.5
JWN
1 TJX

0.5

0
2014 2015 2016
Date

Figure 5: Nordstrom Inc. and The TJX Companies Inc.s Total Asset Turnover Ratios

The total asset turnover is the second component of the DuPont analysis, and it shows

how efficiently a company is using their assets to generate revenues. In figure 5 TJX and JWNs

ratios show that TJX has consistently had a higher turnover ratio than JWN. Typically a higher

turnover ratio implies that a company is generating more revenue through their assets. In the last

year JWN has seen an increase in the revenue generated from assets which implies they have

become more efficient in recent years. However, this might not necessarily be the case because

while an increase in asset turnover is typically good, it can also be a bad sign if sales during that

particular time decreased which is what happened this year for Nordstrom. Analysists have

recently predicted a decline in Nordstroms growth, and this expected decline could have led to

the sale of unnecessary assets which would artificially change JWNs asset turnover ratio.

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 Equity Multiplier

Total Assets/Book Value of Equity

JWN & TJX Equity Multiplier

10
9
8
Equity Multiplier

7
6
5
JWN
4
TJX
3
2
1
0
2014 2015 2016
Date

Figure 6: Nordstrom Inc. and The TJX Companies Inc.s Equity Multiplier

The equity multiplier is the final component of the DuPont analysis. The equity multiplier

measures how much of a companys assets are financed by their shareholders. When analyzing a

companys equity multiplier, typically a lower ratio means a company is more financially stable.

A higher equity multiplier ratio implies that a companys assets were funded more by debt than

by equity. In figure six TJX has consistently retained a low equity multiplier. This is a good sign

for investors because it means TJX is less likely to have high debt servicing costs. JWN, on the

other hand, has seen a steep rise in its equity multiplier from 2015 to 2016. JWN is most likely

using more debt to finance their operating activities which if done to a certain extent can lead to

bankruptcy.

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 Roe & Industry Comparison

JWN & TJX ROE

80.00%

70.00%

60.00%
Return on Equity

50.00%

40.00%
JWN
30.00% TJX
20.00%

10.00%

0.00%
2014 2015 2016
Date

Figure 7: Nordstrom Inc. and The TJX Companies Inc.s Returns on Equity

ROE
2014 2015 2016
Industry 16.35% 16.24% 1.07%

Figure 7 compares Nordstroms and TJXs ROE over the last three years. In the table

below figure 7, I have documented the Industrys ROE from 2014 to 2016. Comparing return on

equity is only beneficial when used to compare companies in the same industry, or to compare it

to the actual industrys ratio. From previously breaking down the components of ROE for each

company, we can now explain the trend in ROE over the last few years for TJX and JWN. TJXs

ROE has been constant for the last three years, and it has also been above the industrys average.

After deconstructing ROE for TJX it can be concluded that this high percentage is indeed an

indicator that TJX is doing well to create value for its shareholders. On the other hand, JWNs

sharp increase in return on equity is more misleading. After evaluating JWNs equity multiplier

it is clear that their increase in ROE was caused by the increase in financial leverage and not in

24
an increase in asset turnover or net profit margin. This may also explain why their return on

equity is higher than the industrys return on equity.

25
 Table of Contents (Part Two)
Required Return, Expected Return, and Cost of Capital .................................. 27
CAPM ................................................................................................................................27
Growth Model ....................................................................................................................29
WACC...30

Overall Recommendations .................................................................................... 32

Appendix ................................................................................................................. 34
Work Cited ............................................................................................................. 40

26
 Required Return, Expected Return, and Cost of Capital

CAPM

Expected Return= Risk Free Rate + Beta (Expected Market Return-Risk Free Rate)

TJX Companies CAPM Calculation:

2.84%+.70(8.64%-2.84%)=6.9%

Nordstrom Inc. CAPM Calculation:

2.84%+1.02(8.64%-2.84%)=8.76%

The Capital Asset Pricing Model or CAPM is used to determine an assets expected rate

of return. Above, I have provided the equation for CAPM which involves adding the risk free

rate with beta, and then multiplying that sum by the difference between expected market return

and the risk free rate (also known as the market rate premium). An investor analyzes the Capital

Asset Pricing Model in order to decide how much theyre willing to pay for a particular stock. If

a stock possesses more risk, then investors anticipate the expected return of that stock to be

larger than the overall markets return. In the table above, I have provided the results of

conducting CAPM for both the TJX Companies, and Nordstrom Inc. The results show that TJX

has an expected return of 6.9%, and JWN has an expected return of 8.76%. JWNs higher

expected return can be explained by their higher beta.

27
 Risk Free Rate

The risk free rate is theoretically the return an investor would expect on a completely risk

free investment. In order to determine the risk free rate for the Capital Asset Pricing Models

above, I took the average of three-month Treasury bills interest rates since 1950, and got 2.84%.

The reason why I used three-month T-bills to find the risk free rate is because they are short-term

government-issued securities making them have almost 0 risk.

Market Rate Premium

The Market Rate Premium is the difference between the expected market return, and the

risk free rate. I calculated the market rate premium by taking the average of S&P 500s monthly

returns since 1950, and converting that average into an annualized average. After this calculation

I found the expected market return to be 8.64%. I then subtracted the risk free rate of 2.84%

from the expected market return in order to find the market rate premium of 5.8%.

Beta

Beta from 10 Years Beta from 5 Years of

of Data Data Current Beta

TJX .59 .70 .68

JWN 1.44 1.02 .87

To calculate beta I ran a regression analysis for both TJX and JWN against the S&P

500S monthly returns. I ran two regression analyses for each company, first using returns from

the past ten years, and then to more accurately predict beta, I used only returns from the last five
28
years. The regression analysis for these two companies can be found in section BLANK of the

appendix. In the table above I have provided the results from each regression. The results show

that the average monthly returns in the past five years were more accurate to Yahoo Finances

current beta, and that JWN possesses more risk than TJX.

Growth Model

Current Price= Expected Future Dividend/ (Required Rate of Return LT Growth Rate)

JWN TJX

Current Price 58.5 78.27

Expected Dividend .41 .29

Long Term Growth Rate 9.67% 10.70%

Required Rate of Return 10.37% 11.07%

The Gordon Growth Model is used to determine a stocks value based off its next

expected dividend, long term growth rate, and required rate of return. The equation for the

Gordon Growth model and the inputs for TJX, and JWN are provided above. The Gordon

Growth Model can also be modified in order to determine the required rate of return for a stock.

Yahoo finance provided the previous years dividends for both JWN and TJX. In order to

determine each companys expected future dividends, I had to take their previous years

dividends, and multiply it by 1 plus the long term growth rate. The long term growth rate for

both companies was found on CSImarket. Using the Gordon Growth Model the expected return

for both TJX, and JWN are both higher than the predicted, expected return from using CAPM.

JWNs expected return is also smaller than TJX in this model.

29
 WACC

WACC = (E/V) rE +( D / V )rD *(1- Tc )

The Weighted Average Cost of Capital, or WACC, is the average rate of return a

company expects to compensate all its different investors (Investopedia.com). The equation to

calculate WACC is provided above where E is the companys market value of equity, D is

the companys market value of debt, V is the sum of these two values, Re is the required rate

of return, Rd is a companys cost of debt, and Tc is the marginal tax rate.

Cost of Debt

TJX Companies Cost of Debt:

2.70%

Nordstrom Inc. Cost of Debt:

3.40%

The cost of debt is the effective rate a company pays on its current debt. In order to

determine the cost of debt for TJX and JWN I used data regarding each companys bonds from

Morningstar.com. The results from this information are provided above, and were used to

calculate the Weighted Average Cost of Capital for both companies.

30
 WACC & CAPM

TJX Companies & CAPM:

(4307075/60163443)(6.9%)+(1709268/60163443)(2.7%)(1-.3760)= .54%

Nordstrom Inc. & CAPM:

(871000/3666000)(8.76 %)+(2795000/3666000)(3.4%)(1-.3852)= 3.67%

WACC & Growth Model

TJX Companies & Growth Model:

(4307075/60163443)(11.07%)+(1709268/60163443)(2.7%)(1-.3760)= .84%

Nordstrom Inc. & Growth Model:

(871000/3666000)(10.37%)+(2795000/3666000)(3.4%)(1-.3852)= 4.06%

Above I have provided the Weighted Average Cost of Capital results from using the

expected return from the Gordon Growth Model, and the expected return from the Capital Asset

Pricing Model. The results indicate that WACC (for both sets of data) are below the expected

return for each company which is a good indicator that neither company is shedding value. Also,

for both data sets the WACC for JWN was higher than TJX which indicates that JWN is a riskier

stock to possess.

31
 Recommendation

After conducting different liquidity ratios, debt management ratios, asset management

ratios, profitability ratios, market valuation ratios, the DuPont analysis, CAPM, the Gordon

Growth Model, and WACC for the TJX Companies and Nordstrom Inc. it is clear that TJX is the

overall stronger, more reliable stock of the two companies. In almost every ratio conducted

during this report, TJXs results indicated that it was a healthier firm to invest in. TJX often beat

industry averages as well making it clear that it is also a top stock compared to other competitors

in the retail industry.

Here is a summary of the most important facts found while conducting the ratio analyses:

JWNs debt outweighed TJXs debt

JWN was less likely to receive payments for products in a timely fashion

TJX was more efficient in generating more revenue per dollar asset

TJX generated overall higher profits than JWN

TJX made larger profits with few investments

Investors are more willing to pay more for a share in TJX rather than JWN

JWN has had an overall decline in growth over the last few years

TJX was less likely to have high servicing costs

Each of these facts further proves that JWN is a far more risky stock to invest in

compared to TJX. The results from the DuPont Analysis, CAPM, the Gordon Growth Model,

and WACC all show the same conclusion. Beta for JWN was higher than TJXs beta and the

overall industrys beta, yet after calculating the Gordon Growth Model for both companies,

TJX showed higher expected returns. This indicates that the risk associated with JWN will

32
not necessarily bring in great rewards for investors. Therefore, overall, an investor would

benefit more from purchasing a share in TJX rather than JWN.

33
 Appendix:
A.
JWN Standardized Annual Income Statement
Report Date 01/30/2016 CS 2016 01/31/2015 CS 2015 02/01/2014 CS 2014
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Sales Revenue 14437000 13506000 12540000
Total Revenue 14437000 100.00% 13506000 100.00% 12540000 100.00%
Direct Costs 9168000 63.50% 8406000 62.24% 7737000 61.70%
Gross Profit 5269000 36.50% 5100000 37.76% 4803000 38.30%
Selling General & Admin 4168000 28.87% 3777000 27.97% 3453000 27.54%
Other Operating Expense 0 0.00% 0 0.00% 0 0.00%
Total Indirect Operating Costs 4168000 28.87% 3777000 27.97% 3453000 27.54%
Operating Income 1101000 7.63% 1323000 9.80% 1350000 10.77%
Interest Income -125000 -0.87% -138000 -1.02% -161000 -1.28%
Other Non-Operating Income 0 0.00% 0 0.00% 0 0.00%
Total Non-Operating Income -125000 -0.87% -138000 -1.02% -161000 -1.28%
Earnings Before Tax 976000 6.76% 1185000 8.77% 1189000 9.48%
Taxation 376000 2.60% 465000 3.44% 455000 3.63%
Extraordinary Items 0 0.00% 0 0.00% 0 0.00%
Accounting Changes 0 0.00% 0 0.00% 0 0.00%
Net Income 600000 4.16% 720000 5.33% 734000 5.85%
Preference Dividends & Similar 0 0.00% 0 0.00% 0 0.00%
Net Income to Common 600000 4.16% 720000 5.33% 734000 5.85%
Average Shares Basic 186300 1.29% 190000 1.41% 194500 1.55%
EPS Net Basic 3.22 0.00% 3.79 0.00% 3.77 0.00%
EPS Continuing Basic 3.22 0.00% 3.79 0.00% 3.77 0.00%
Average Shares Diluted 190100 1.32% 193600 1.43% 197700 1.58%
EPS Net Diluted 3.15 0.00% 3.72 0.00% 3.71 0.00%
EPS Continuing Diluted 3.15 0.00% 3.72 0.00% 3.71 0.00%
Shares Outstanding 173500 1.20% 190100 1.41% 191200 1.52%
B.
JWN Standardized Annual Balance Sheet
Report Date 01/30/2016 CS 2016 01/31/2015 CS 2015 02/01/2014 CS 2014
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Cash & Equivalents 595000 7.73% 827000 8.95% 1194000 13.93%
Cash & Equivs & ST Investments 595000 7.73% 827000 8.95% 1194000 13.93%
Receivables (ST) 196000 2.55% 2306000 24.94% 2177000 25.39%
Inventories 1945000 25.27% 1733000 18.75% 1531000 17.86%
Current Tax Assets - #VALUE! 256000 2.77% 239000 2.79%
Other Current Assets 278000 3.61% 102000 1.10% 87000 1.01%
Total Current Assets 3014000 39.15% 5224000 56.51% 5228000 60.98%
Gross Property Plant & Equip 8843000 114.87% 8038000 86.94% 7344000 85.65%
Accumulated Depreciation 5108000 66.35% 4698000 50.82% 4395000 51.26%
Net Property Plant & Equip 3735000 48.52% 3340000 36.13% 2949000 34.39%
Intangible Assets 435000 5.65% 435000 4.71% 175000 2.04%
Other Assets 514000 6.68% 246000 2.66% 222000 2.59%
Total Assets 7698000 100.00% 9245000 100.00% 8574000 100.00%
Accounts Payable & Accrued Exps 1740000 22.60% 1744000 18.86% 1658000 19.34%
Accounts Payable 1324000 17.20% 1328000 14.36% 1263000 14.73%
Accrued Expenses 416000 5.40% 416000 4.50% 395000 4.61%
Current Debt 10000 0.13% 8000 0.09% 7000 0.08%
Other Current Liabilities 1161000 15.08% 1048000 11.34% 876000 10.22%
Total Current Liabilities 2911000 37.82% 2800000 30.29% 2541000 29.64%
LT Debt & Leases 2795000 36.31% 3123000 33.78% 3106000 36.23%
Other Liabilities 1121000 14.56% 882000 9.54% 847000 9.88%
Total Liabilities 6827000 88.69% 6805000 73.61% 6494000 75.74%
Common Share Capital 2539000 32.98% 2338000 25.29% 1827000 21.31%
Retained Earnings -1610000 -20.91% 166000 1.80% 292000 3.41%
Accum Other Comprehensive Income -58000 -0.75% -64000 -0.69% -39000 -0.45%
Other Equity 0 0.00% 0 0.00% 0 0.00%
Total Equity 871000 11.31% 2440000 26.39% 2080000 24.26%
Total Liabilities & Equity 7698000 100.00% 9245000 100.00% 8574000 100.00%

34
C.
TJX Standardized Annual Income Statement
Report Date 01/30/2016 CS 2016 01/31/2015 CS 2015 02/01/2014 CS 2014
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Sales Revenue 30944938 29078407 27422696
Total Revenue 30944938 100.00% 29078407 100.00% 27422696 100.00%
Direct Costs 22034523 71.21% 20776522 71.45% 19605037 71.49%
Gross Profit 8910415 28.79% 8301885 28.55% 7817659 28.51%
Selling General & Admin 5205715 16.82% 4695384 16.15% 4467089 16.29%
Other Operating Expense 0 0.00% 0 0.00% 0 0.00%
Total Indirect Operating Costs 5205715 16.82% 4695384 16.15% 4467089 16.29%
Operating Income 3704700 11.97% 3606501 12.40% 3350570 12.22%
Interest Income -46400 -0.15% -39787 -0.14% -31081 -0.11%
Gains on Sale of Assets - #VALUE! -16830 -0.06% - #VALUE!
Other Non-Operating Income 0 0.00% 0 0.00% 0 0.00%
Total Non-Operating Income -46400 -0.15% -56617 -0.19% -31081 -0.11%
Earnings Before Tax 3658300 11.82% 3549884 12.21% 3319489 12.10%
Taxation 1380642 4.46% 1334756 4.59% 1182093 4.31%
Extraordinary Items 0 0.00% 0 0.00% 0 0.00%
Accounting Changes 0 0.00% 0 0.00% 0 0.00%
Net Income 2277658 7.36% 2215128 7.62% 2137396 7.79%
Preference Dividends & Similar 0 0.00% 0 0.00% 0 0.00%
Net Income to Common 2277658 7.36% 2215128 7.62% 2137396 7.79%
Average Shares Basic 673484 2.18% 692691 2.38% 713470 2.60%
EPS Net Basic 3.38 0.00% 3.2 0.00% 3 0.00%
EPS Continuing Basic 3.38 0.00% 3.2 0.00% 3 0.00%
Average Shares Diluted 683251 2.21% 703545 2.42% 726376 2.65%
EPS Net Diluted 3.33 0.00% 3.15 0.00% 2.94 0.00%
EPS Continuing Diluted 3.33 0.00% 3.15 0.00% 2.94 0.00%
Shares Outstanding 663495.715 2.14% 684733.2 2.35% 705016.838 2.57%
D.
TJX Standardized Annual Balance Sheet
Report Date 01/30/2016 CS 2016 01/31/2015 CS 2015 02/01/2014 CS 2014
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Cash & Equivalents 2095473 18.22% 2493775 22.41% 2149746 21.07%
Short Term Investments 352313 3.06% 282623 2.54% 294702 2.89%
Cash & Equivs & ST Investments 2447786 21.29% 2776398 24.95% 2444448 23.96%
Receivables (ST) 238072 2.07% 213824 1.92% 210094 2.06%
Inventories 3695113 32.13% 3217923 28.92% 2966490 29.08%
Current Tax Assets 11059 0.10% 150092 1.35% 101639 1.00%
Other Current Assets 380530 3.31% 356824 3.21% 345327 3.39%
Total Current Assets 6772560 58.89% 6715061 60.34% 6067998 59.48%
Gross Property Plant & Equip 9068667 78.86% 8340541 74.95% 7698246 75.47%
Accumulated Depreciation 4931092 42.88% 4472176 40.19% 4103745 40.23%
Net Property Plant & Equip 4137575 35.98% 3868365 34.76% 3594501 35.24%
Intangible Assets 343796 2.99% 309870 2.78% 312687 3.07%
Deferred LT Assets 13831 0.12% 24546 0.22% 31508 0.31%
Other Assets 231720 2.02% 210539 1.89% 194328 1.90%
Total Assets 11499482 100.00% 11128381 100.00% 10201022 100.00%
Accounts Payable & Accrued Exps 3454352 30.04% 2841552 25.53% 2567186 25.17%
Accounts Payable 2203050 19.16% 2007511 18.04% 1771294 17.36%
Accrued Expenses 1251302 10.88% 834041 7.49% 795892 7.80%
Other Current Liabilities 947878 8.24% 1088082 9.78% 950657 9.32%
Total Current Liabilities 4402230 38.28% 3929634 35.31% 3517843 34.49%
LT Debt & Leases 1709268 14.86% 1684597 15.14% 1274216 12.49%
Deferred LT Liabilities 285102 2.48% 422516 3.80% 446071 4.37%
Other Liabilities 795807 6.92% 827404 7.44% 732999 7.19%
Total Liabilities 7192407 62.55% 6864151 61.68% 5971129 58.53%
Common Share Capital 663496 5.77% 684733 6.15% 705017 6.91%
Retained Earnings 4311051 37.49% 4133882 37.15% 3724408 36.51%
Accum Other Comprehensive Income -667472 -5.80% -554385 -4.98% -199532 -1.96%
For Curr Trans (BS) -439192 -3.82% -295269 -2.65% -76569 -0.75%
Other Equity 439192 3.82% 295269 2.65% 76569 0.75%
Total Equity 4307075 37.45% 4264230 38.32% 4229893 41.47%
Total Liabilities & Equity 11499482 100.00% 11128381 100.00% 10201022 100.00%

35
 Date S&P Returns JWN Returns F. Date S&P Returns TJX Returns
E.
10/3/2016 -0.49% 6.22% 10/3/2016 -0.49% -0.93%
9/1/2016 -0.14% 2.21% 9/1/2016 -0.14% -3.68%
8/1/2016 -0.10% 14.86% 8/1/2016 -0.10% -5.19%
7/1/2016 3.54% 16.89% 7/1/2016 3.54% 5.79%
6/1/2016 0.23% 0.18% 6/1/2016 0.23% 1.79%
5/2/2016 1.44% -25.82% 5/2/2016 1.44% -0.09%
4/1/2016 0.42% -10.42% 4/1/2016 0.42% -3.07%
3/1/2016 6.33% 10.72% 3/1/2016 6.33% 5.37%
2/1/2016 -0.24% 5.90% 2/1/2016 -0.24% 4.45%
1/4/2016 -4.81% -1.43% 1/4/2016 -4.81% 1.93%
12/1/2015 -1.87% -11.84% 12/1/2015 -1.87% -0.28%
11/2/2015 -0.02% -13.48% 11/2/2015 -0.02% -3.71%
10/1/2015 8.32% -8.94% 10/1/2015 8.32% 2.48%
9/1/2015 -2.54% 0.08% 9/1/2015 -2.54% 3.43%
8/3/2015 -6.29% -4.38% 8/3/2015 -6.29% 0.46%
7/1/2015 1.78% 1.72% 7/1/2015 1.78% 4.99%
6/1/2015 -2.16% 2.55% 6/1/2015 -2.16% 2.78%
5/1/2015 0.96% -3.70% 5/1/2015 0.96% -0.72%
4/1/2015 0.86% -5.82% 4/1/2015 0.86% -7.92%
3/2/2015 -1.77% -0.22% 3/2/2015 -1.77% 1.88%
2/2/2015 5.40% 5.75% 2/2/2015 5.40% 4.14%
1/2/2015 -3.10% -4.34% 1/2/2015 -3.10% -3.95%
12/1/2014 -0.33% 4.36% 12/1/2014 -0.33% 4.54%
11/3/2014 2.45% 5.18% 11/3/2014 2.45% 3.21%
10/1/2014 2.36% 6.22% 10/1/2014 2.36% 6.83%
9/2/2014 -1.59% -1.34% 9/2/2014 -1.59% -1.19%
8/1/2014 3.81% 1.18% 8/1/2014 3.81% 12.51%
7/1/2014 -1.61% 1.53% 7/1/2014 -1.61% 0.41%
6/2/2014 1.89% -0.40% 6/2/2014 1.89% -2.73%
5/1/2014 2.08% 10.72% 5/1/2014 2.08% -6.35%
4/1/2014 0.53% -1.89% 4/1/2014 0.53% -4.37%
3/3/2014 0.79% 2.75% 3/3/2014 0.79% -0.30%
2/3/2014 4.31% 7.24% 2/3/2014 4.31% 7.17%
1/2/2014 -3.43% -6.84% 1/2/2014 -3.43% -9.47%
12/2/2013 2.31% -0.47% 12/2/2013 2.31% 1.19%
11/1/2013 2.68% 2.79% 11/1/2013 2.68% 3.15%
10/1/2013 4.41% 8.04% 10/1/2013 4.41% 7.67%
9/3/2013 2.79% -0.16% 9/3/2013 2.79% 6.02%
8/1/2013 -3.34% -9.89% 8/1/2013 -3.34% 0.71%
7/1/2013 4.72% 1.59% 7/1/2013 4.72% 3.25%
6/3/2013 -1.56% 1.70% 6/3/2013 -1.56% -0.97%
5/1/2013 2.08% 4.14% 5/1/2013 2.08% 3.73%
4/1/2013 1.81% 2.76% 4/1/2013 1.81% 4.10%
3/1/2013 3.60% 2.22% 3/1/2013 3.60% 4.14%
2/1/2013 1.11% -2.59% 2/1/2013 1.11% -1.19%
1/2/2013 5.04% 2.87% 1/2/2013 5.04% 5.31%
12/3/2012 0.70% -1.05% 12/3/2012 0.70% -4.71%
11/1/2012 0.28% -5.32% 11/1/2012 0.28% 3.16%
10/1/2012 -1.99% 2.64% 10/1/2012 -1.99% -7.18%
9/4/2012 2.43% -4.63% 9/4/2012 2.43% -2.25%
8/1/2012 1.98% 6.23% 8/1/2012 1.98% 3.11%
7/2/2012 1.25% 8.43% 7/2/2012 1.25% 2.86%
6/1/2012 3.99% 5.45% 6/1/2012 3.99% 2.29%
5/1/2012 -6.26% -15.35% 5/1/2012 -6.26% 0.76%
4/2/2012 -0.75% 0.65% 4/2/2012 -0.75% 5.09%
3/1/2012 3.12% 3.82% 3/1/2012 3.12% 7.56%
2/1/2012 4.06% 8.00% 2/1/2012 4.06% -46.38%
1/3/2012 4.25% -2.26% 1/3/2012 4.25% 4.59%
12/1/2011 0.86% 8.89% 12/1/2011 0.86% 5.03%
36
11/1/2011 -0.32% -7.74% 11/1/2011 -0.32% 7.21%
10/10/2011 8.22% 2.28% 10/10/2011 8.22% 4.30%
 Date Nordstrom Price TJX Price
G. 10/3/2016 54.83 73.74
9/1/2016 51.88 74.78
8/1/2016 50.46 77.44
7/1/2016 44.23 81.72
6/1/2016 38.05 77.23
5/2/2016 37.98 76.12
4/1/2016 51.13 75.82
3/1/2016 57.21 78.35
2/1/2016 51.32 74.10
1/4/2016 49.10 71.24
12/1/2015 49.81 70.91
11/2/2015 56.31 70.60
10/1/2015 65.21 73.19
9/1/2015 71.71 71.42
8/3/2015 72.88 70.32
7/1/2015 76.31 69.82
6/1/2015 74.50 66.17
5/1/2015 72.64 64.38
4/1/2015 75.56 64.54
3/2/2015 80.32 70.05
2/2/2015 80.43 68.64
1/2/2015 76.20 65.94
12/1/2014 79.39 68.58
11/3/2014 76.36 66.16
10/1/2014 72.61 63.32
9/2/2014 68.37 59.17
8/1/2014 69.25 59.61
7/1/2014 69.23 53.29
6/2/2014 67.93 53.15
5/1/2014 68.06 54.45
4/1/2014 61.28 58.18
3/3/2014 62.45 60.65
2/3/2014 61.48 61.46
1/2/2014 57.45 57.36
12/2/2013 61.80 63.73
11/1/2013 62.21 62.88
10/1/2013 60.47 60.79
9/3/2013 56.20 56.39
8/1/2013 55.73 52.72
7/1/2013 61.24 52.04
6/3/2013 59.94 50.06
5/1/2013 58.82 50.61
4/1/2013 56.59 48.77
3/1/2013 55.23 46.75
2/1/2013 54.22 44.97
1/2/2013 55.23 45.18
12/3/2012 53.50 42.45
11/1/2012 54.09 44.34
10/1/2012 56.77 41.63
9/4/2012 55.18 44.79
8/1/2012 57.83 45.79
7/2/2012 54.14 44.28
6/1/2012 49.69 42.93
5/1/2012 47.37 42.46
4/2/2012 55.86 41.71
3/1/2012 55.72 39.71
2/1/2012 53.62 36.61
1/3/2012 49.38 68.14
12/1/2011 49.71 64.55
11/1/2011 45.28 61.70 37
10/10/2011 50.69 58.93
H. Regression Analysis for 5 years of JWN data

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.426961
R Square 0.182295
Adjusted R Square
0.168436
Standard Error
0.064731
Observations 61

ANOVA
df SS MS F Significance F
Regression 1 0.055113 0.055113 13.15319 0.0006
Residual 59 0.247215 0.00419
Total 60 0.302328

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept -0.00073 0.008774 -0.08288 0.934225 -0.01828 0.016829 -0.01828 0.016829
S&P 500 Returns
1.020957 0.281509 3.626733 0.0006 0.457659 1.584254 0.457659 1.584254

I. Regression Analysis for 10 years of JWN data

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.604271
R Square 0.365144
Adjusted R Square
0.359809
Standard Error
0.083833
Observations 121

ANOVA
df SS MS F Significance F
Regression 1 0.481023 0.481023 68.44394 2.16E-13
Residual 119 0.83633 0.007028
Total 120 1.317352

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.002498 0.007669 0.325743 0.745191 -0.01269 0.017684 -0.01269 0.017684
S&P 500 Returns
1.439628 0.174013 8.273085 2.16E-13 1.095064 1.784193 1.095064 1.784193

38
J. Regression Analysis for 5 years of TJX data

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.463193
R Square 0.214548
Adjusted R Square
0.201235
Standard Error
0.040124
Observations 61

ANOVA
df SS MS F Significance F
Regression 1 0.025946 0.025946 16.11596 0.000171
Residual 59 0.094987 0.00161
Total 60 0.120933

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.009909 0.005438 1.822095 0.07351 -0.00097 0.020791 -0.00097 0.020791
S&P 500 Returns
0.700511 0.174497 4.014469 0.000171 0.351344 1.049678 0.351344 1.049678

K. Regression Analysis for 10 years of TJX data

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.458198
R Square 0.209945
Adjusted R Square
0.203306
Standard Error
0.050314
Observations 121

ANOVA
df SS MS F Significance F
Regression 1 0.080053 0.080053 31.62245 1.26E-07
Residual 119 0.301252 0.002532
Total 120 0.381305

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept 0.01387 0.004603 3.013485 0.003156 0.004756 0.022984 0.004756 0.022984
S&P 500 Returns
0.587295 0.104438 5.623384 1.26E-07 0.380498 0.794093 0.380498 0.794093

39
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