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

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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 Buy:

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.”

Latest Ratings for M

Nov 2017Morgan StanleyMaintainsEqual-Weight
Nov 2017BMO CapitalMaintainsOutperform
Oct 2017CitigroupMaintainsSell

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