3 Department Store Stocks to Buy Now Ahead of a Potential Record Setting Holiday Season

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

M – Over the summer, several department stores experienced huge demand increases and beat earnings estimates in their last reported quarter as consumer spending increased and retail sales soared. With sales expected to go up in the upcoming holiday season, it could be wise to bet on quality department store stocks Macy’s (M), Kohl’s (KSS), and Dillard’s (DDS).

As the economy continues to recover, foot traffic at physical department stores has also increased. As a result, in October, U.S. retail sales surged 1.7% for the third straight month despite worries over the rising cost of living. 

It seems as though people have been undeterred by the increasing inflation.  So it’s no surprise that for 2021, the NRF is predicting the highest holiday retail sales on record.

Given this backdrop, it could be wise to add quality departmental store stocks Macy’s, Inc. (M), Kohl’s Corporation (KSS), and Dillard’s, Inc. (DDS) to your portfolio now. These companies beat the earnings estimates in the last reported quarter and are well-positioned to grow in the upcoming months.

Macy’s, Inc. (M)

M is an omnichannel retail company that operates its stores, websites, and mobile applications under three brands: Macy’s, Bloomingdale’s, and Bluemercury. It sells a range of merchandise for men, women, and kids, including apparel and accessories, cosmetics, home furnishings, and other consumer goods.

On November 18, 2021, M announced its plans to launch a curated digital marketplace to build on its existing authority as a digitally-led omnichannel retailer. This new launch is expected to expand the company’s assortment in existing categories and brands significantly while introducing a range of new categories. Matt Baer, the chief digital and customer officer at M, said, “The market platform will further accelerate our Polaris strategy and unlock new opportunities for sustainable and profitable growth.”

M’s net sales for the fiscal third quarter ended October 30, 2021, increased 36.3% year-over-year to $5.44 billion. The company’s operating income came in at $523 million compared to a loss of $127 million in the prior-year quarter. Its adjusted EBITDA increased 381.1% year-over-year to $765 million.

Analysts expect M’s EPS and revenues for fiscal 2022 to increase 308.6% and 38.7% year-over-year to $4.61 and $24.05 billion, respectively. It has surpassed Street EPS estimates in each of the trailing four quarters. It beat the third-quarter consensus EPS by 296.8%. Over the past year, the stock has gained 273.1% to close yesterday’s trading session at $33.77.

M’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an A grade for Growth and Value, and a B grade for Quality. In the A-rated Fashion & Luxury industry, it is ranked #32 out of 63 stocks. Click here to see the additional ratings of M for Momentum, Stability, and Sentiment.

Kohl’s Corporation (KSS)

KSS has approximately 1,162 Kohl’s stores and twelve FILA outlets. Its stores and websites sell various private and national brand apparel, footwear, accessories, beauty, and home products. Also, its portfolio includes brands such as Apt. 9, Croft & Barrow, Jumping Beans, SO, and Sonoma Goods for Life.

On November 16, 2021, KSS announced that it had partnered with actress and entrepreneur Reese Witherspoon for a capsule collection of dresses, blazers, skirts, and more in February 2022. This is expected to expand the company’s portfolio of exclusive brands.

For the quarter ended October 31, 2021, KSS’ total revenue increased 15.6% year-over-year to $4.60 billion. The company’s non-GAAP net income increased 12,050% year-over-year to $243 million. Its non-GAAP EPS increased 16,400% year-over-year $1.65, surpassing the expected EPS by 157.8%.

For fiscal 2022, KSS’ EPS and revenues are expected to increase 402.5% and 25.4% year-over-year to $7.14 and $18.85 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 102.6% over the past year to close yesterday’s trading session at $57.56.

KSS’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

It has an A grade for Growth, Value, and Quality. It is ranked #13 in the same industry. To check the additional ratings of KSS (Momentum, Stability, and Sentiment), click here.

Dillard’s, Inc. (DDS)

DSS is a retailer of fashion apparel, cosmetics, and home furnishings. It operates approximately 280 Dillard’s stores, including 31 clearance centers and an internet store offering a selection of merchandise, including fashion apparel for men, women, and kids, accessories, cosmetics, home furnishings, and other consumer goods.

For the fiscal third quarter, DDS’ net sales ended October 30, 2021, increased 44.5% year-over-year to $1.48 billion. Its comparable retail sales increased 48% for the quarter. The company’s net income increased 518.4% year-over-year to $197.30 million. Also, its EPS increased 586% year-over-year to $9.81, surpassing the consensus EPS estimate by 77.7%.

Analysts expect DDS’s EPS and revenue for fiscal 2022 to increase 1,489.6% and 47.4% year-over-year to $38.63 and $6.54 billion, respectively. It surpassed Street EPS estimates for each of the trailing four quarters. Over the past year, the stock gained 716.7% to close yesterday’s trading session at $378.88.

DDS’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.

It has an A grade for Growth and Quality, and a B grade for Value and Sentiment. It is ranked #9 in the Fashion & Luxury industry. Click here to check the other ratings of DDS for Momentum and Stability.


M shares were trading at $33.43 per share on Tuesday morning, down $0.34 (-1.01%). Year-to-date, M has gained 199.28%, versus a 25.79% rise in the benchmark S&P 500 index during the same period.


About the Author: Dipanjan Banchur


Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...


More Resources for the Stocks in this Article

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