Where Major Department Stores’ Valuations Stand

As of September 7, JCPenney (JCP), Macy’s (M), Nordstrom (JWN), and Kohl’s (KSS) were trading at a 12-month forward PE (price-to-earnings) multiple of 10.4x, 7.4x, 15.3x, and 11.4x, respectively. These companies are trading below the 12-month forward PE multiple of 16.2x for the department store sector.

Department store stocks are also trading at a lower valuation multiple than the S&P 500 Index (12-month forward PE multiple of 17.9x) as of September 7.

The 12-month forward PE multiple differs among companies based on various factors including growth expectations, business models, leverage, and the risk-return profile.

For fiscal 2017, analysts expect Macy’s sales to fall 4.1% to $24.7 billion. The company’s adjusted EPS (earnings per share) is expected to rise 8.7% to $3.38 in fiscal 2017.

Upscale department store Nordstrom’s revenue (comprising retail sales and credit card revenue) is expected to rise 3.9% to $15.3 billion in fiscal 2017. Excluding one-time items, the company’s adjusted EPS is expected to fall 2.3% to $2.97 in fiscal 2017. Growth investments are expected to be a drag on the company’s fiscal 2017 adjusted EPS.

JCPenney’s fiscal 2017 sales are expected to fall 1.5% to $12.4 billion in fiscal 2017. Analysts expect the company’s adjusted EPS to come in at $0.43 in fiscal 2017—up from $0.08 in fiscal 2016.

Kohl’s top line is expected to fall 0.6% to $18.6 billion in the current fiscal year. The company’s adjusted EPS is forecast to fall 0.3% to $3.75 in fiscal 2017.

Overall, a challenging retail environment and intense competition from online retailers and off-price retailers will likely have a negative impact on department stores’ performance in the current fiscal year.

In the next part of this series, we’ll look at how analysts rate department store stocks.