The Russian-Ukraine war has been negatively impacting global supply chains. With several Western sanctions imposed on Russia hampering international trade, inflation has been skyrocketing. According to the Labor Department, the Consumer Price Index leaped 8.5% annually in March, hitting a new 40-year high, despite a federal interest rate increase last week. However, consumer demand is expected to remain stable and retail sales are set to register a diminished but higher than the pre-pandemic growth rate.
The steady demand for consumer goods should help department store operators perform. The global department store sales are projected to grow at a 4% CAGR from 2020 to 2030.
Given this backdrop, we think it could be wise to bet on dirt cheap yet fundamentally strong department store stocks Kohl's Corporation (KSS), Nordstrom, Inc. (JWN), and Macy's, Inc. (M).
Click here to checkout our Retail Industry Report for 2022
Kohl's Corporation (KSS)
KSS in Menomonee Falls, Wisc., is a leading omnichannel retailer that operates as a retail company in the United States. It offers branded apparel, footwear, accessories, beauty, and home products; and operates approximately 1,100 stores and its online website.
On March 1, 2022, KSS CEO Michelle Gass said, “We continue to see a lot of value in our company. We are reinforcing our commitment to driving shareholder value by doubling our dividend and planning on repurchasing at least $1.0 billion in shares in 2022.”
KSS’ total revenue for its fiscal fourth quarter, ended Jan. 29, 2022, came in at $6.50 billion, up 5.8% year-over-year. Its net sales were $6.22 billion, up 5.8% year-over-year. Also, the company’s long-term debt was $1.91 billion for the period ended Jan. 29, 2022, compared to $2.45 billion for the period ended January 30, 2021.
KSS’ 8.32x forward non-GAAP P/E is 31.9% lower than the 12.22x industry average.
Analysts expect KSS’ revenue to increase 2.6% year-over-year to $18.95 billion in 2023. Its EPS is estimated to grow 8.6% to $7.85 in 2024. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 34.3% in price to close yesterday’s session at $60.30.
KSS’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
KSS has an A grade for Value and Quality and a B grade for Growth. Within the A-rated Fashion & Luxury industry, it is ranked #17 of 66 stocks. Click here to see the additional POWR Ratings for Momentum, Sentiment, and Stability for KSS.
Nordstrom, Inc. (JWN)
Fashion retailer JWN in Seattle, Wash., provides a variety of compelling clothing, shoes, accessories, and home goods for men, women, and children. It offers a range of brand names and private label merchandise. The company operates 94 Nordstrom stores and 240 Nordstrom Rack stores in the United States, two clearance stores, and seven Nordstrom Local service hubs.
On March 1, 2022, Pete Nordstrom, president and chief brand officer of JWN, said, “Looking ahead, we are focused on more effectively balancing inventory with demand while increasing efficiency throughout our network and delivering newness and selection to our customers.”
JWN’s total revenues came in at $4.49 billion for the fourth quarter, ended Jan. 29, 2022, up 23.1% year-over-year. Its net sales were $4.38 billion, up 23.4% year-over-year. And its net earnings increased 506.1% year-over-year to $200 million, while its EPS increased 485.7% to $1.23.
JWN’s 8.84x forward non-GAAP P/E is 27.6% lower than the 12.22x industry average.
JWN’s revenue is expected to increase 5.1% to $15.54 billion in its fiscal year 2023. Its EPS is estimated to increase 108.7% to $3.13 in 2023. Over the past month, the stock gained 23.4% in price to close yesterday’s session at $28.38.
JWN has an overall B rating, which equates to Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Growth and Quality. It is ranked #27 in the Fashion & Luxury industry. Click here to check additional JWN ratings for Momentum, Stability, and Sentiment.
Macy's, Inc. (M)
An omnichannel retail organization, M operates stores, Websites, and mobile applications. The Cincinnati, Ohio-based company sells a range of merchandise that includes apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods; and operates approximately 725 department stores.
On March 15, 2022, M announced the launch of its brand platform–Own Your Style. Rich Lennox, M’s chief brand officer, said, “This brand transformation will enhance our customer’s shopping experience with more personal touchpoints and offer them true value and style that they can own.”
For the fourth quarter, ended Jan. 29, 2022, M’s net sales increased 27.8% year-over-year to $8.66 billion. Its net income was $742 million, up 363.8% year-over-year, while its EPS came in at $2.44, up 388% year-over-year.
M’s forward 5.67x non-GAAP P/E is 53.6% lower than the 12.22x industry average.
M’s EPS is expected to increase 105.1% to $0.8 for the quarter ended April 30, 2022. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 29.5% to close yesterday’s session at $24.74.
It is no surprise that M has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Value and Quality and a B grade for Growth.
M is ranked #13 in the Fashion & Luxury industry. Click here to see the additional POWR Ratings for M (Momentum, Stability, and Sentiment).
Click here to checkout our Retail Industry Report for 2022
KSS shares rose $0.63 (+1.04%) in premarket trading Wednesday. Year-to-date, KSS has gained 24.52%, versus a -7.41% 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.
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