Department stores have been seeing an increase in foot traffic over the past few months, which has contributed significantly to impressive retail sales data. According to the U.S. Census Bureau’s advance estimates, total retail sales for the February 2021 – April 2021 period were up 27.1% year-over-year. Investors’ interest in the retail space is evidenced by the SPDR S&P Retail ETF’s (XRT) 15% gains over the past three months compared to SPDR S&P 500 ETF Trust’s (SPY) 6.4% returns.
With the United States now ahead of its vaccination schedule, the reopening of the nation’s economy is driving increased demand for apparel, accessories and cosmetics, among other discretionary goods. New York, New Jersey and Connecticut have already announced their plans this month to lift most of the states’ capacity restrictions, which could provide a further boost to department stores’ sales. In fact, according to the National Retail Federation (NRF), retail sales are expected to exceed a $4.33 trillion valuation in 2021.
Given this backdrop, we think it wise to bet on Kohl’s Corporation (KSS), Macy’s, Inc. (M) and Dillard’s, Inc. (DDS) because they have plenty of room for growth.
Click here to checkout our Retail Industry Report for 2021
Kohl’s Corporation (KSS)
Leading omni-channel retailer KSS has more than 1,100 stores spread across 49 states. The company is focused mainly on delivering products to the middle-income segment and sells moderately priced, private label and national brand apparel, footwear, accessories, beauty and home products. Its private brands include Apt. 9 and Croft & Barrow, among others, while its exclusive brands include Jennifer Lopez and Simply Vera Wang.
For its fiscal first quarter, ended April 30, 2021, KSS’ total revenue increased 60.1% year-over-year to $3.90 billion. Its net income increased 102.6% from the same period last year to $14 million. Its EPS came in at $0.09 for the quarter, up 102.6% year-over-year.
The company’s EPS and revenue are expected to increase 265.7% and 19.9%, respectively, year-over-year to $3.91 and $18.02 billion in fiscal 2021. KSS also surpassed consensus EPS estimates in each of the trailing four quarters.
On April 27, KSS announced that as part of its new omni-partnership with Sephora, Sephora at Kohl’s beauty assortment will be available on Kohls.com and begin rolling out to 200 stores in August 2021. The initiative is expected to increase the company’s sales significantly. The stock has rallied 200.2% over the past year to close Friday’s trading session at $54.07.
KSS’ POWR Ratings reflect this promising outlook. KSS has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth and Value, and a B grade for Quality. In addition to the POWR Rating grades we’ve just highlighted, one can see KSS ratings for Sentiment, Stability and Momentum here.
KSS is ranked #5 of 65 stocks in the B-rated Fashion & Luxury industry.
Macy’s, Inc. (M)
M is a global retail company that sells apparel, accessories, cosmetics, home furnishings, and other consumer goods. The company operates stores, websites, and mobile applications under its three brands: Macy’s, Bloomingdale’s, and Bluemercury.
The company’s sales surged 56% year-over-year to $4.71 billion for fiscal first quarter ended April 30, 2021. Its gross profit increased 11.1% year-over-year to $1.47 billion. M’s net income came in at $103 million for the quarter, up 102.9% from the prior-year period. Moreover, its EPS increased 102.9% year-over-year to $0.33.
Analysts expect M’s EPS to increase 117.3% from prior-year quarter to $0.14 for the quarter ending July 31, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Moreover, its annual revenue is expected to be $22.09 billion in fiscal 2022, which represents a 27.3% year-over-year rise.
TV host and content creator—Nina Parker—launched a plus size collection on May 14 that is designed exclusively for M. With sizes ranging from 0X to 3X, the launch is expected to help M expand its consumer base. The stock has gained 238.9% over the past year to close Friday’s trading session at $18.20.
M’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value, and a B grade for Growth and Quality. We have also graded M for Momentum, Stability and Sentiment. Click here to access all of M’s ratings.
M is ranked #20 in the same industry.
Dillard’s, Inc. (DDS)
Retail department store operator DDS’ offerings include fashion apparel, cosmetics, and home furnishings, among others. The company operates through two segments: Retail operations and Construction. Its Construction segment includes the operations of CDI Contractors, LLC (CDI) whose business includes the construction and remodeling of DDS’ stores.
DDS’ net sales were $1.33 billion for its fiscal first quarter, ended April 30, 2021, which represents a 68.9% year-over year rise. Its net income for the quarter came in at $158.20 million, up 197.7% year-over-year. Its EPS increased 204.5% year-over-year to $7.25.
For the current quarter, ending July 31, 2021, analysts expect DDS’ EPS to increase 154.1% from the prior-year quarter to $0.20. Furthermore, it surpassed the consensus EPS estimates in each of the trailing four quarters. DDS’ annual revenue is expected to come in at $5.56 billion in fiscal 2022, which represents a 25.4% year-over-year increase.
On May 4, 2021, DDS announced the launch of Kimberly Whitman for Antonio Melani, a new limited-edition capsule collection developed in collaboration with celebrated lifestyle and entertaining expert and author Kimberly Whitman. This initiative is expected to provide a boost to DDS’ sales in the near-term. The stock has gained 385.6% over the past year to close Friday’s trading session at $134.08.
It’s no surprise that DDS has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Quality, Growth and Value. Click here to see the additional POWR Ratings for DDS (Momentum, Sentiment and Stability).
DDS is ranked #3 in the same industry.
Click here to checkout our Retail Industry Report for 2021
KSS shares were trading at $56.06 per share on Monday afternoon, up $1.99 (+3.68%). Year-to-date, KSS has gained 38.32%, versus a 12.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More…
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