Macy's vs. Dillard's: Which Department Store Stock is a Better Buy?

Department store stocks in Macy’s (M) and Dillard’s (DDS) have been posting very strong earnings. Both companies beat expectations by a significant margin due to strong in-person and digital sales. Patrick Ryan breaks down which is the better buy.

Department store stocks have been quite strong as they are benefitting from the economy's reopening as foot traffic to stores has been rebounding strongly. Additionally, many of them were able to grow e-commerce sales and this part of their business is also in growth mode.


Before the pandemic, department store stocks were struggling. However, in the aftermath of the pandemic, it's possible that conditions have improved and the boom in digital and in-person sales will continue.  
Below, we provide a look at two of the most intriguing department store stocks in Macy’s (M) and Dillard’s (DDS).

M is proactively attempting to adapt to the ever-changing retail ecosystem. M has implemented several key changes including a mobile-first strategy, a loyalty program, store pickup, and additional features to win new business both online and offline. After all, the enthusiasm for in-person shopping at conventional retail stores will eventually wane, shifting the spotlight back to web-based sales.

M has a forward P/E ratio of 7.83. This is one of the lower P/E ratios you will find, indicating the stock is likely underpriced at $17.42 per share. If M pops this summer or fall, it has the potential to break through its 52-week high of $22.30. M has a beta of 2.08 so it will prove somewhat volatile if the market soars or plummets.

M has a C POWR Ratings grade. The stock has diverse POWR Rating component grades including an A Value component grade, Bs in the Quality and Growth components, and an F Stability component grade. You can find out how M fares in the rest of the POWR Ratings components such as Momentum and Sentiment by clicking here.

Of the 66 publicly traded companies in the Fashion & Luxury space, M is ranked 40th. Investors who would like to learn more about the stocks in this sector can do so by clicking here.

The top analysts are bullish on M, setting an average target price of $19.42. This means the stock has about 7.5% upside potential. The highest analyst target price for M is $27. The lowest analyst target price for the stock is $14. The stock's average analyst target price has increased by $12.84 across the previous 40 weeks.


DDS is a department store chain with home furnishings and apparel. The company has 250+ namesake outlets along with more than 30 clearance centers in more than two dozen states. Customers can buy merchandise from DDS through the web at the company’s website and also in its brick-and-mortar locations. However, it must be noted DDS does not have a comprehensive countrywide presence as there are no DDS stores in the northeast region of the country.

DDS has a forward P/E ratio of 11.25. This is a fairly low ratio that indicates DDS might be underpriced at $178.30 per share. The stock has a beta of 0.85, meaning it is unlikely to make a significant move even if the market significantly undulates.

DDS has a B POWR Rating grade, indicating the stock is a Buy. DDS has As in the Value and Quality components of the POWR Ratings along with a B Growth grade. You can find out how DDS fares in the Momentum, Sentiment, and Stability components of the POWR Ratings by clicking here.

Of the 66 stocks in the Fashion & Luxury space, DDS is ranked 22nd. You can learn more about the stocks in this industry by clicking here.

Which is the Better Buy?

DDS is the better buy, primarily because it has the better POWR Rating grade. DDS is also favored as it is ranked significantly higher in its industry than M.

M shares were trading at $16.65 per share on Friday morning, down $0.31 (-1.83%). Year-to-date, M has gained 48.00%, versus a 17.79% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.


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