Macy’s, Inc. (M): Why You Should Buy This Department Store

Peer Analysis

Nordstrom, Inc. (NYSE:JWN) and Saks Inc (NYSE:SKS) are two other major retail players. Nordstrom, Inc. (NYSE:JWN) is investing around $240 million into technological enhancements in FY 2013. This investment is expected to bring better online and mobile experiences for its direct online channel customers, who contribute 30% of its sales. It is also opening 25-30 new Rack stores in 2013 and intends to increase its presence by opening a total of 230 stores by 2016. Its focus on Direct Channel and Rack stores will be decisive for long term growth.

Saks Inc (NYSE:SKS) is also moving towards Onmichannel, with Project Evolution and an investment in information technology. Its initiative of “buy online, ship from store” is part of its Project Evolution, which will increase its customer base. It has expansion plans of OFF Fifth stores, where it is moving out of conventional locations in malls to neighborhood center locations. This will help it to increase its reach to new customers with 7 new stores coming by 2013.

Source: Google Finance

Macy’s, Inc. (NYSE:M) seems to be a better option among its peers with a low forward P/E of 10.93 and a price to sales ratio of 0.75. Saks Inc (NYSE:SKS) also is a decent stock with a low price to sales ratio of 0.51, but with the highest forward P/E ratio of 23.17. Nordstrom, Inc. (NYSE:JWN) registered the highest operating margin of 10% among the peers, and also the highest P/S ratio of 1.07.

Conclusion

Macy’s, Inc. (NYSE:M) is looking for growth with its “My Macy’s” and Omnichannel strategies. It is focusing on more frequent and impulsive buyers’ category of “Millennial” customers with new product launches and brand extensions. The company is trading at a discount to its peers Nordstrom, Inc. (NYSE:JWN) and Saks Inc (NYSE:SKS). I recommend Macy’s, Inc. (NYSE:M) as a core holding for one’s equity portfolio.

Ash Sharma has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Why You Should Buy This Department Store originally appeared on Fool.com.

Ash is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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