In this article, we will look at the 10 Best Department Store Stocks to Invest in.
Is the American Consumer Cracking?
Consumer sentiment is taking a hit in the US, with threats of a potential recession looming across the market. Company leaders, ranging from affordable grocery stores to luxury goods sellers, are noticing cracks in demand, which reflects a notable trend shift from the resilient consumers who supported the US economy for years, even during elongated periods of inflation. On March 14, CNBC reported that while headwinds like persistent inflation and high interest rates were already affecting companies, they now have to deal with additional obstacles such as worsening consumer sentiment, tariffs that go on and off, and mass government layoffs.
Over the last weeks, investor presentations and earnings calls have shown a distinct trend: consumer-facing businesses and retailers are warning that fiscal Q1 2025 sales are coming in softer than expected. 2025 may prove to be a year tougher than what analysts initially estimated.
CNBC reported that several executives opined that a “dynamic” macroenvironment and unseasonably cool weather were the culprits behind this trend. However, with President Trump’s second term continuing to unfold, new challenges are beginning to emerge. Trade policies reflect inherent uncertainty, as they seem to shift by the hour. Experts and economists anticipate that the effects of new tariffs on Chinese, Canadian, and Mexican goods will be felt across the economy, elevating prices for consumers and hampering spending in an environment where inflation is already higher than the Fed’s target.
Consumer confidence reports, which show how much money shoppers are spending to gauge their patterns, corroborate these claims. According to CNBC, consumer confidence in February showed its biggest drop since 2021. Another consumer sentiment measure for March showed even worse results. The University of Michigan Survey of Consumers for March posted a 57.9 reading, down 10.5% from February levels and standing below the Dow Jones consensus estimate of 63.2. In addition, the one-year inflation outlook rose to 4.9%, the highest reading since November 2022. The outlook at the five-year horizon also bubbled to 3.9%, the highest since February 1993.
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Could the US be on the Path to Recession?
Similarly, the strong US job market is also showing early signs of stress, with unemployment rising and job growth slowing. These trends have greatly affected the previously red-hot stock market, with fears surrounding a potential recession emerging. CNBC reported that executives and investors are concerned about the impact of Trump’s tariffs on consumer spending, leading to additional worries about an administration from which they previously had optimistic hopes. While the weak companies are already taking on a cautious approach, even the strong ones are jumping on the bandwagon and preparing for an uncertain future.
Ed Stack, chairman of Dick’s Sporting Goods, expressed similar sentiments in a CNBC interview, saying:
“I do think it’s just a bit of an uncertain world out there right now. What’s going to happen from a tariff standpoint? You know, if tariffs are put in place and prices rise the way that they might, what’s going to happen with the consumer?”
Several companies in the sector managed to surpass S&P 500 performance in the past year, even during a decrease in discretionary spending. Therefore, the current shift presents a notable industry point and might be a warning sign that consumers are beginning to crack. Even excellent execution may not be able to shield companies from tariff-induced price rises after four years of historic inflation. On the other hand, companies who already spent last year dealing with uncertain consumer trends and dynamics are sounding even more skeptical.
Dollar General CEO Todd Vasos discussed the ongoing situation in the company’s fiscal Q4 2024 earnings call, adding that customers are expecting value and convenience “more than ever.”
“Our customers continue to report that their financial situation has worsened over the last year, as they have been negatively impacted by ongoing inflation,” he said. “Many of our customers report they only have enough money for basic essentials, with some noting that they have had to sacrifice even on the necessities. As we enter 2025, we are not anticipating an improvement in the macro environment, particularly for our core customer.”
American Eagle CEO Jay Schottenstein also shed light on the situation in the following words:
″[Consumers] have the fear of the unknown. Not just tariffs, not just inflation, we see the government cutting people off. They don’t know how that’s going to affect them. They see programs being cut, they don’t know how that’s going to affect them. And when people don’t know what they don’t know – they get very conservative … it makes everyone a little nervous.”
With these trends in view, let’s look at the 10 best department store stocks to invest in.
A satisfied customer leaving an online resale store with an armload of purchases.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 department store stocks. We then selected the top 10 stocks that were the most popular among hedge funds, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best Department Store Stocks to Invest in
10. Macy’s, Inc. (NYSE:M)
Number of Hedge Fund Holders: 42
Macy’s Inc. (NYSE:M) is an omnichannel retail store that manages three brands: Macy’s, Bloomingdale’s, and Bluemercury. These brands sell a variety of merchandise, including accessories, apparel, consumer goods, home furnishings, and more. The company operates stores in 43 US states, The District of Columbia, Guam, and Puerto Rico.
Fiscal Q4 2024 marked the fourth consecutive quarter of positive comps for Macy’s, Inc.’s (NYSE:M) First 50 locations. The company is bouncing back, as Bloomingdale’s returned to positive annual comps, and Bluemercury reported four consecutive years of positive comps. Macy’s, Inc. (NYSE:M) also achieved record annual net promotor store at Bloomingdale’s and Macy’s, rising 90 basis points and 160 basis points, respectively.
The company is also streamlining its operations, closing 64 of around 150 non-go-forward Macy’s stores ahead of its annual plan of 50 closures. It slashed CapEx by $111 million to $882 million, representing the second consecutive year of reduced spend, and generated $679 million of free cash, up 71% from last year. Management is confident about its strategic shifts and investments and plans to continue this growth momentum into the future.
9. BJ’s Wholesale Club Holdings (NYSE:BJ)
Number of Hedge Fund Holders: 43
BJ’s Wholesale Club Holdings (NYSE:BJ) is a membership-only warehouse chain offering an elaborate assortment of goods. These include a wide range of items, including groceries and general merchandise and services. The company also offers specialty services and operates approximately 244 clubs and 175 gas locations across 20 states.
Fiscal year 2024 was a positive year for the company, marked by record net sales, membership, and adjusted earnings per share. Membership is the cornerstone of BJ’s Wholesale Club Holdings’s (NYSE:BJ) business, and fiscal 2024 marked another record membership year, with full-year membership fee income increasing by 8.5% and renewal rate remaining strong at 90%. Membership is thus at an all-time high for the company, above 7.5 million members. Its merchandising initiatives and digital conveniences are driving greater member engagement.
On March 7, Loop Capital analyst Laura Champine raised the firm’s price target on BJ’s Wholesale Club Holdings (NYSE:BJ) to $110 from $95, keeping a Hold rating on the shares. The analyst told investors in a research note that the company’s better-than-expected Q4 results, with 5% comps growth exceeding the 3% estimate, cast a positive light on it. Since consumers are value-oriented due to grocery inflation, BJ’s Wholesale Club Holdings (NYSE:BJ) stands to benefit from the trend. The company takes the ninth spot on our list of the best department store stocks to invest in.
8. Five Below, Inc. (NASDAQ:FIVE)
Number of Hedge Fund Holders: 48
Five Below, Inc. (NASDAQ:FIVE) is a specialty value retailer offering various products, including licensed merchandise and select brands. Its product offerings include fashion, leisure, snacks, seasonal, electronic accessories, party, and more.
The company attained a milestone by opening a record 228 new stores in 2024, bringing the total to 1,771 stores across the United States. This expansion reflects a 14.7% increase over 2023 and highlights Five Below, Inc.’s (NASDAQ:FIVE) aggressive growth strategy and commitment to broadening its market presence.
Five Below, Inc. (NASDAQ:FIVE) also saw a 10.4% growth in its total sales in fiscal year 2024, reaching approximately $3.88 billion, up from $3.51 billion in 2023. The company is thus able to drive revenue despite a challenging retail environment, which is why investors are bullish on the stock. Its median price target of $77.78 implies an upside of 24.07% from current levels.
7. Dollar General (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General (NYSE:DG) is a retailer that offers an elaborate array of merchandise in its stores, including consumables, beverages, seasonal items, and more. Its merchandise collection includes its own private brands and brands from manufacturers.
In a report released on March 14, Robert Ohmes from Bank of America Securities reiterated a Buy rating on Dollar General (NYSE:DG), with a price target of $90.00. The analyst gave his rating due to the company’s positive outlook amid elevated expenses in 2025. The company exhibited resilience by exceeding earnings expectations in fiscal Q4 2024. Adjusted EPS reached $1.68, surpassing the anticipated $1.50. This was attributed to a 1.2% increase in comparable sales, supported by ticket growth.
The analyst also said that Dollar General (NYSE:DG) is on the path to attaining a 6%-7% operating margin by 2028-2029, up from the current forecast of approximately 4.6% for 2025. This bullish outlook is supported by strategic initiatives such as DG Media, an increase in damages management, and a bounce back to pre-pandemic shrink levels. In addition, Dollar General’s (NYSE:DG) digital expansion and ‘Back to Basics’ initiatives are also factors behind the analyst’s bullish sentiments, as they are expected to improve operational efficiency and productivity, supporting long-term growth and market share gains. The company ranks seventh on our list of the 10 best department store stocks to invest in.
6. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 56
Target Corporation (NYSE:TGT) is a retail giant operating over 2,000 discount department stores and hypermarkets across the US and Canada. It serves its customers an array of items, including food, everyday essentials, differentiated merchandise at discounted prices, and general merchandise. Its merchandise categories span food and beverages, home furnishing and decor, and others.
The company is facing some headwinds, with management noting weakening consumer confidence and pressure from tariff uncertainty through February. While Target Corporation’s (NYSE:TGT) 2025 guidance reflects flat growth, it also boasts several competitive advantages. It has stores in all 50 states, with store models perfectly fitting the rural, suburban, and urban markets simultaneously, appealing to all income categories. It expects to add around $15 billion in retail sales over the next five years.
Target Corporation (NYSE:TGT) is also investing in its business, opening 20 new stores in 2025 and spending money on remodels as well. The company holds the opportunity to expand its market share in several of its categories, enhance its stores and supply chains, improve sales through same-day delivery, expand its media business, and build an online advertising business. The stock’s long-term picture thus seems promising, which is why investors are bullish on it. Its median price target of $107.42 implies an upside of 28.47% from current levels.
5. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 64
Dollar Tree, Inc. (NASDAQ:DLTR) operates discount department stores and offers a wide range of merchandise under the business segments Dollar Tree and Family Dollar. Dollar Tree stores offer consumable merchandise, seasonal goods, and variety merchandise. The Family Dollar segment is a general merchandise retail discount store offering affordable merchandise in convenient neighborhood locations.
The company is focusing on boosting the growth of its Dollar Tree brand and is converting stores to its in-line multi-price 3.0 format. It is opening new stores and improving the in-store experience for its customers through customer service enhancements and renovations. In fiscal Q3 2024, the company converted another 720 stores to the 3.0 format, bringing the total number of converted Dollar Tree stores to around 2,300. These stores produced around 30% of the company’s total net sales in fiscal Q3 2024.
Despite some macroeconomic challenges, Dollar Tree, Inc. (NASDAQ:DLTR) is maintaining strong operational results. It reported a revenue of $7.56 billion in fiscal Q3 2024, exceeding the forecast of $7.446 billion. The company’s net sales also grew significantly, primarily due to its non-comparable stores. This growth was attributed to the company’s continued merchandising efforts for Family Dollar and Dollar Tree.
In a report released on March 7, Edward Kelly from Wells Fargo maintained a Buy rating on Dollar Tree, Inc. (NASDAQ:DLTR), with a price target of $85.00.
4. Albertsons Companies, Inc. (NYSE:ACI)
Number of Hedge Fund Holders: 70
Albertsons Companies, Inc. (NYSE:ACI) is a US-based food and drug retailer. It has over 2,269 stores across 34 states and the District of Columbia under 20 banners, including Star Market, Shaw’s, Albertsons, Kings Food Markets, United Supermarkets, Haggen, Kings Food Markets, Acme, Carrs, and more.
On March 13, RBC Capital analyst Steven Shemesh raised the firm’s price target on Albertsons Companies, Inc. (NYSE:ACI) to $23 from $22, keeping an Outperform rating on the shares. The analyst told investors in a research note that the firm continues to believe in the margin opportunity.
Albertsons Companies, Inc. (NYSE:ACI) reported strong performance across all metrics, with 2024 results ahead of its expectations and guidance. Total revenue grew by 10% over 2023, above the company’s upper single-digit longer-term forecast. Its adjusted EBITDA grew 18% in 2024, while its adjusted net EBITDA margin of 41% expanded more than 300 basis points. These trends reflect the inherent leverage in Albertsons Companies, Inc.’s (NYSE:ACI) software model. Cash flow generation also remains strong for the company, with cash flow from operating activities reaching $359 million in 2024, more than double the previous year. It ranks fourth on our list of the best department store stocks to invest in.
3. TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 74
TJX Companies, Inc. (NYSE:TJX) operates in the Marmaxx and HomeGoods, TJX International, and TJX Canada segments. Its stores offer an assortment of value home decorations, apparel, decorative accessories, footwear, accessories, giftware, and more.
The company’s overall sales surpassed $56 billion in fiscal Q4 2025, while full-year comparable store sales grew by 4%. TJX Companies, Inc. (NYSE:TJX) attained a significant profitability increase, and its quarter EPS reached $1.23, exceeding analyst expectations. In addition, the company’s net sales grew to $16.4 billion, a 5% increase versus last year’s adjusted sales.
In a report released on March 14, Alexandra Straton from Morgan Stanley maintained a Buy rating on TJX Companies, Inc. (NYSE:TJX), with a price target of $136.00. She said the company was a strong investment opportunity due to several competitive advantages, including a balanced apparel mix, broad category assortment, superior inventory management, and liquidity levels that allow for opportunistic buying. The analyst also anticipates the company to benefit from improved gross margin levers and ongoing pricing strategies.
2. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 96
Costco Wholesale Corporation (NASDAQ:COST) operates membership-only big box warehouse club stores and is one of the most popular department stores in the US. It offers its customers an extensive collection of value furniture, electronics, clothing, consumables, and more. Costco Wholesale Corporation (NASDAQ:COST) is one of the most resilient retailers in the sector, and its membership fees are pivotal to its profit generation. In fiscal 2024, the company made $4.8 billion in membership fees. It recently increased its base membership fee to $65, which will be reflected in the current fiscal year’s earnings. Its paid members have also grown by 7% annually over the last two years.
Despite weakening consumer sentiment and inflation, Costco Wholesale Corporation (NASDAQ:COST) delivered strong comparable sales in fiscal Q2 2025, rising 9.1% (excluding fuel prices and currency exchange) and reflecting strong demand for its offerings. The company’s e-commerce sales also grew by 22.2%, demonstrating strong consumer appetite.
Costco Wholesale Corporation (NASDAQ:COST) is also continually expanding its operations, ending fiscal Q2 2025 with 897 warehouses. It added 29 stores last year, expanding its store base by roughly 3%. On March 21, Stifel Nicolaus analyst Mark Astrachan maintained a Buy rating on the company and set a price target of $1,035.00. It ranks second on our list of the best department store stocks to invest in.
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 116
Walmart Inc. (NYSE:WMT) is an omnichannel retailer operating retail and wholesale stores, clubs, e-commerce websites, and mobile applications. It offers an elaborate array of items, from general merchandise and electronics to food, groceries, and more.
The company reported sales growth of 5.2% in fiscal Q4 2025, along with a 9.4% adjusted operating income growth in constant currency. Walmart Inc. (NYSE:WMT) is continually gaining market share across income levels and countries. Unit volumes and transaction counts were up across all its markets in the year’s first three quarters, reflecting its healthy top line. The company’s prices are low, and it is becoming increasingly convenient, resulting in its growing popularity.
In February, Walmart Inc. (NYSE:WMT) Canada announced plans to spend $4.51 billion on new stores, reflecting supply-chain expansion. As part of the initiative, the company plans to open dozens of stores nationwide, starting with opening five supercenters in Ontario and Alberta by 2027, two of which are set to open this year.
In a report released on March 20, Mark Astrachan from Stifel Nicolaus maintained a Buy rating on Walmart Inc. (NYSE:WMT), with a price target of $93.00. Its median price target of $87.04 implies an upside of 26.38% from current levels.
Overall, WMT ranks first among the 10 best department store stocks to invest in. While we acknowledge the potential of department store stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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