Retail Stocks: Happy Employees Make for Happier Stockholders

The annual Fortune Best Companies to Work For issue reminds us that -- despite the constant drumbeat of jobs off-shored, health and retirement benefits slashed and general crummy behavior of managements toward employees – treating workers well often leads to a stronger company, with better prospects for investors.

Especially so in retailing, where by and large service has gone to hell, and the standout exceptions to that awful trend are increasingly prized by shoppers.

Sadly, we can’t invest in all the retailers on the Fortune list. Wegmans (free quit-smoking classes for workers), a grocery chain, is family owned. REI (sabbaticals), the outdoor gear-and-clothing seller, is a co-op. Zappos (invites employee new-business ideas) was sold to Amazon. Container Store (no layoffs) is majority owned by private equity investors. Nugget Market (pays above industry scale) is family owned, as is Quicktrip (advancement). And Publix Super Markets (stock!) is employee owned.

But Whole Foods (WFM) is public, and gets a premium for its shares because of steady growth and a dominant position in its niche, and it doesn’t hurt in motivating employees that top executives’ pay is capped at 19-times the chain’s average full-time salary.

Whole Foods Market Stock Chart by YCharts

Men’s Warehouse (MW), despite the cheesy commercials, trades at a premium to faster-growing and ritzier Jos. A Bank Clothiers (JOSB), with Men’s Warehouse keeping the troops fresh with paid vacation and sabbaticals after five years.

Men's Wearhouse PE Ratio Chart by YCharts

Nordstrom (JWN), which pays above industry averages, buys itself a super-enthusiastic sales force, as any shopper who has visited one knows, and also earns a higher multiple for its shares than does Macy’s (M), where the help isn’t as bubbly.

Nordstrom PE Ratio Chart by YCharts

Good workplaces aren't guaranteed good investments, of course, and trading at a premium means they’re pricy relative to competitors. But over time, investing in workers in a service business is essential to sustaining a brand.

Among the non-retailing stars on the best-companies-to-work-for list are Google (GOOG), Chesapeake Energy (CHK), Intuit (INTU) and Qualcomm (QCOM).

Jeff Bailey is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.