US department stores are revamping themselves to cope with the changing retail landscape, and they have come a long way in the process. In fact, these stores have borne the brunt of changing consumer spending habits, lower traffic in brick-and-mortar stores due to rise in online shopping, and stiff competition from discount retailers. Not to forget, they even struggled to keep pace with the fast-changing fashion trends and scored lower in offering customers with a better bargain option.
Although some of the headwinds still linger, department stores have taken initiatives to be in the race and cater to growing customer needs. From opening smaller-format stores to bringing in new loyalty program and from embracing new technologies to providing fast delivery options on online purchase or via apps, department store retailers have been looking at every nook and cranny for solutions to survive. Notably, better price, omni-channel capabilities and unique products can help them stand in good stead.
Apart from these initiatives, conducive economic environment is an added advantage to these department store retailers.
Americans are way more confident now, thanks to a robust job market as evident from the fall in the number of people claiming unemployment benefits and jobless rate hovering at an 18-year low. This along with tax reform and sound economic fundamentals are likely to boost consumer confidence. We expect this positive sentiment to translate into higher consumer spending - one of the pivotal factors driving the economy. Per industry experts, second-quarter GDP rate likely to come ahead of 4%.
Cumulatively aforementioned factors will play a vital role in improving sales and earnings trends of these department store retailers. Based on an impressive earnings outlook, the Retail-Regional Department Stores occupies a favorable position in the list of Zacks industries. The industry currently carries a Zacks Rank of #21, which places it at the top 8% of more than 250 Zacks industries.
From the industry we have highlighted three stocks that have advanced more than 10% in the past three months.
The Three Musketeers
Dillard'sDDS is one of the prominent players among fashion apparel, cosmetics and home furnishing retailers. The company's strategy of offering fashion-forward and trendy products acts as a catalyst for attracting more customers. Its focus on increasing productivity, enhancing domestic operations and developing omni-channel platform is likely to strengthen customer base and boost profitability.
The company has surged 19.5% in the past three months. Much of this growth can be attributed to the company's robust surprise trend. Notably, Dillard's delivered third consecutive quarter of positive earnings surprise in first-quarter fiscal 2018, along with fourth straight sales beat. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Kohl'sKSS , which offers moderately priced exclusive and national brands, witnessed its shares rise by 12.6% in the past three months, courtesy of effective sales-driving initiatives that have been driving comparable sales growth. The company's multi-year Greatness Agenda strategy has been yielding results. Further, the company's sustained focus on technology improvements and the omni-channel expansion are expected to have a significant positive impact on its online sales.
The company also maintains a unique partnership with the e-commerce giant Amazon AMZN . Incidentally, it has started accepting returns for Amazon customers on select products and provides free packing and shipping services for the merchandise to Amazon's fulfillment centers. This move followed Kohl's decision to sell Amazon devices, accessories and smart home devices in its selected stores. Kohl's believes that this store-within-store concept will boost stores traffic. The stock carries a Zacks Rank #3 (Hold).
Macy'sM sustained focus on price optimization, omni-channel capabilities, merchandise planning and online order fulfillment centers are the primary catalysts facilitating in meeting customer-oriented demand. The company introduced various innovative services including Apple Pay, Same Day Delivery, Enhanced Shopping Apps, Macy's Image Search and Macy's Wallet/Bloomingdale's Wallet. The company's "Buy Online Pickup in Store" initiative is also gaining traction.
Macy's has added a new feature to its mobile app called Mobile Checkout, which allows customers to scan bar codes of items and pay via smartphones. Macy's acquired STORY, a concept store, to enhance the in-store customer experience. Further, it has taken a minority stake in b8ta, a technology retailer that enables customers to try, buy and learn about new tech products. The company's investment is seen as part of enhancing customer shopping experience at its The Market @ Macy's, a store-within-a-store retail concept. Shares of this Zacks Rank #3 company have jumped 27.4% in the past three months.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportAmazon.com, Inc. (AMZN): Free Stock Analysis ReportMacy's, Inc. (M): Free Stock Analysis ReportDillard's, Inc. (DDS): Free Stock Analysis ReportKohl's Corporation (KSS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research