Citi Picks Macy's, Hudson's Bay as Leaders in Department Store Group

Citigroup initiated coverage on several retailers Wednesday morning. Analyst Oliver Chen issued two buy ratings as well as four neutral ratings.Chen has the following companies rated as a Macy's (NYSE: M) - Target $63. The Citi analyst is “impressed by Macy's general management preserving omni-channel initiatives and double digit e-commerce growth.” Chen is modeling an attractive positive 2-4 percent comp on “solid product execution” and “localization efforts.”Hudson's Bay - Target C$19. Chen loves the long-term gains potential from the acquisition of Saks that has allowed Hudson's Bay to “reap synergies” and increase “store productivity...with new luxury brands.”Chen set Neutral ratings on: Dillards (NYSE: DDS) - Target $100. Chen sees Dillards, “positioned between Macy's & Nordstrom with respect to prices, mix of brands, & service given DDS offers accessible luxury brands like Michael Kors & Coach, but not D&G, Lanvin, Chloe', YSL, & other premier brands.” JC Penney (NYSE: JCP) - Target $6.50. The analyst believes JC Penney is on the right path with product offerings, but “merchandise execution risk and potential liquidity concerns” are the basis for his Neutral rating.Nordstrom (NYSE: JWN) - Target $65. “Outsized investments in top line likely to limit margin expansion, however, operating margin of 10.7% remains above peer avg. of 7% for 2014E.” said Chen, who is also concerned about Nordstrom's lofty valuation.Koh's Corp (NYSE: KSS) - Target $55. Chen is in wait-and-see mode on the effectiveness of Kohl's, “renewed focus on national brands, a new beauty department, expansion of the loyalty program, optimized advertising, and enhanced omni-channel capabilities.”