Analyzing Department Stores’ Stock Performance in 2017

As of September 7, Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), and JCPenney (JCP) have delivered total returns of -37.2%, -1.3%, -10.8%, and -50.4%, respectively, on a YTD (year-to-date) basis. All of these major department store stocks have underperformed the S&P 500 Index, which has delivered a total return of 11.7% on a YTD basis.

The total return or total shareholder return includes the appreciation in the company’s stock price as well as returns in the form of dividends. As of September 7, Macy’s, Nordstrom, Kohl’s, and JCPenney’s stock price fell 39.3%, 3.6%, 14.1%, and 50.4%, respectively, on a YTD basis.

Department store stocks YTD stock price movement lags the Consumer Discretionary Select Sector SPDR Fund (XLY), which has risen 9.9% since the beginning of the year.

Persistent weakness in department stores’ top line has disappointed investors. The dismal results also had a negative impact on department stores’ stock prices this year. In Part 7, we’ll discuss analysts’ recommendations and target prices for department store stocks.

Macy’s current dividend yield of 6.8% is higher compared to Nordstrom and Kohl’s dividend yields of 3.2% and 5.2%. Currently, JCPenney doesn’t distribute any dividends.

Some department stores also reward investors through share repurchases, which enhance the earnings per share by reducing the average share count. Kohl’s repurchased 6.3 million shares in 1H17. In 1H17, Nordstrom repurchased 4.6 million shares of its common stock for $206 million. Nordstrom had $414 million in remaining share repurchase capacity at the end of fiscal 2Q17.

In the next part, we’ll look at the valuation of department store stocks.