Macy’s vs. Dillard’s: Which Stock Is a Better Deal for Your Portfolio Right Now?

NYSE: M | Macy's Inc  News, Ratings, and Charts

M – Retail sales climbed in August, raising hopes of a cheery holiday season for the retailers, despite the inflationary environment. Macy’s (M) and Dillard’s (DDS) might be significant beneficiaries. But which is a better deal for your portfolio now? Let’s find out….

Macy’s, Inc. (M), an omnichannel retail organization, operates stores, Websites, and mobile applications. The company sells a range of merchandise, such as apparel and accessories for men, women, and children, cosmetics, home furnishings, and other consumer goods. It operates around 725 stores.

On the other hand, Dillard’s, Inc. (DDS) operates retail department stores in the south-eastern, south-western, and mid-western areas of the U.S. Its stores offer merchandise, including fashion apparel and accessories, cosmetics, home furnishings, and other consumer goods. It operates around 280 stores.

Inflation increased by 8.3% in August 2022, surpassing the consensus estimates. Mark Hamrick, Bankrate’s senior economic analyst, said, “This month’s report serves up a gut punch to anyone who’s been hoping that inflation would come down substantially.”

Despite the inflationary environment, U.S. retail sales excluding automotive in August were up 11.7% year-over-year, while online sales grew 8.9%, according to MasterCard Spending Pulse. Moreover, the Mastercard SpendingPulse annual holiday forecast indicates steady holiday season sales.

“This holiday retail season is bound to be far more promotional than the last,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Inc.

Furthermore, according to Research and Markets, the global fashion retailing market is projected to grow at a CAGR of 6.5% from 2022 to 2027. M and DDS are expected to benefit significantly from the industry’s sound prospects.

M has lost 14.2% over the past month, while DDS has lost 2.3%. Moreover, M has lost 34.6% year-to-date and 18.8% over the past year. On the other hand, DDS has gained 20.3% year-to-date and 54.1% over the past year. But which of these stocks is the better pick now? Let’s find out.

Latest Developments

On July 18, 2022, M announced the expansion of its partnership with WHP Global to bring the Toys “R” Us brand to every M’s store. Nata Dvir, M’s chief merchandising officer, said, “The customer response to our partnership with Toys “R” Us has been incredible, and our toy business has seen tremendous growth.”

On the other hand, on August 15, 2022, DDS declared the launch of Courtney Grow for its Antonio Melani brand. This collaboration is expected to boost sales at DDS.

Recent Financial Results

M’s net sales decreased marginally year-over-year to $5.60 billion for the third quarter ended July 30, 2022. Its operating income came in at $399 million, down 33.2% year-over-year. Also, its net income came in at $275 million, down 20.3% year-over-year, while its EPS came in at $0.99, down 8.3% year-over-year.

DDS’ net sales increased marginally year-over-year to $1.59 billion for the second quarter ended July 30, 2022. Its net income came in at $163.40 million, down 12% year-over-year. However, its EPS came in at $9.30, up 5.6% year-over-year.

Past and Expected Financial Performance

M’s revenue has increased at a marginal CAGR, while its EPS has grown at a 16.4% CAGR over the past three years. Its revenue is expected to increase marginally year-over-year to $24.48 billion in 2023. However, its EPS is expected to decrease 22.6% year-over-year to $4.11 in the current year. Also, its EPS is estimated to fall 4.8% per annum for the next five years.

On the other hand, DDS’ revenue and EPS have increased by 2.3% and 115.7% CAGRs respectively, over the past three years. Its revenue is expected to increase marginally year-over-year to $6.71 billion in 2023, while its EPS is estimated to increase 84.8% year-over-year to $38.07 for the same period.


M’s 40.73% gross profit margin is lower than DDS’ 44.43%. Its EBITDA and net income margins of 11.30% and 5.95% are lower than DDS’ 20.36% and 13.47%, respectively.

Furthermore, M’s ROE, ROA, and ROTC of 46.22%, 0.10%, and 14.10%, compare with DDS’ 61.02%, 0.28%, and 35.49%, respectively.

Thus, DDS is more profitable.


In terms of forward EV/S, M is currently trading at 0.44x, which is lower than DDS’ 0.80x. In addition, M’s forward EV/EBITDA of 4.19x is 17.5% lower than DDS’ 5.08x. Also, M’s forward P/E of 4.29x is lower than DDS’ 7.74x.

Thus, M is the more affordable stock here.

POWR Ratings

DDS has an overall rating of B, equating to Buy in our proprietary POWR Ratings system. On the other hand, M has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

DDS has an A grade for Quality. Its 20.36% trailing-12-month EBITDA margin is 80.9% higher than the industry average of 11.25%.

On the other hand, M has a B grade for Quality. Its trailing-12-month EBITDA margin of 11.30% is marginally higher than the industry average.

In addition, both stocks have a D grade for Stability. DDS’ 24-month beta is 1.55, while M’s 24-month beta is 1.76.

Of the 67 stocks in the Fashion & Luxury industry, DDS is ranked #10. On the other hand, M is ranked #28.

Beyond what we’ve stated above, we have also rated the stocks for Growth, Value, Momentum, and Sentiment. Click here to view DDS ratings. Get all M ratings here.

The Winner

M and DDS are well-known names in the industry and are expected to benefit as we head toward the holiday season. However, we think investors should consider investing in DDS now, considering its higher profitability margins.

Our research shows that odds of success increase when one invests in stocks with an overall POWR Rating of Strong Buy or Buy. View all the top-rated stocks in the Fashion & Luxury industry here.

M shares rose $0.03 (+0.18%) in premarket trading Wednesday. Year-to-date, M has declined -34.14%, versus a -16.49% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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