After reading the Barron’s headline from Feb. 24, “Down Go the Department Stores as Dillard’s Disappoints,” you might think that the department store was going to hell in a handbasket.
Well, that’s only partially true — department stores are suffering the same fate as the rest of retail. Very few Q4 earnings reports have lit the world on fire. Routinely generating near-double-digit quarterly same-store sales growth is a thing of the past.
Everyone is feeling the heat at the moment. And that’s okay. Retail, like many other industries, is a cyclical business full of good times and bad. Right now, you’d have to characterize its business as mediocre. Not good, but not horrific.
There are two department stores that will weather the storm: Nordstrom (JWN) and Macy’s (M). I’ll tell you why you should consider owning them. A third, JCPenney (JCP), is definitely not a stock you’ll want to bet your retirement on, but presents a very interesting risk-to-reward proposition. Over the next 12-18 months, I see all three making moves of 20% or more.