Nordstrom (NYSE: JWN) and Macy’s (NYSE:M) are both mid-cap retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitabiliy, analyst recommendations, valuation, risk, dividends and institutional ownership.

Profitability

This table compares Nordstrom and Macy’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nordstrom 2.51% 69.16% 7.29%
Macy’s 2.26% 22.37% 4.58%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Nordstrom and Macy’s, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nordstrom 4 15 5 0 2.04
Macy’s 1 16 6 0 2.22

Nordstrom currently has a consensus target price of $47.43, indicating a potential downside of 0.13%. Macy’s has a consensus target price of $31.53, indicating a potential upside of 33.81%. Given Macy’s’ stronger consensus rating and higher probable upside, analysts clearly believe Macy’s is more favorable than Nordstrom.

Volatility & Risk

Nordstrom has a beta of 0.83, meaning that its share price is 17% less volatile than the S&P 500. Comparatively, Macy’s has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500.

Dividends

Nordstrom pays an annual dividend of $1.48 per share and has a dividend yield of 3.1%. Macy’s pays an annual dividend of $1.51 per share and has a dividend yield of 6.4%. Nordstrom pays out 69.5% of its earnings in the form of a dividend. Macy’s pays out 81.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Nordstrom has increased its dividend for 6 consecutive years.

Institutional & Insider Ownership

64.4% of Nordstrom shares are held by institutional investors. Comparatively, 84.3% of Macy’s shares are held by institutional investors. 7.0% of Nordstrom shares are held by company insiders. Comparatively, 1.4% of Macy’s shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Nordstrom and Macy’s’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Nordstrom $14.86 billion 0.53 $1.70 billion $2.13 22.30
Macy’s $25.35 billion 0.28 $2.76 billion $1.85 12.74

Macy’s has higher revenue and earnings than Nordstrom. Macy’s is trading at a lower price-to-earnings ratio than Nordstrom, indicating that it is currently the more affordable of the two stocks.

Summary

Nordstrom beats Macy’s on 9 of the 17 factors compared between the two stocks.

Nordstrom Company Profile

Nordstrom, Inc. is a fashion specialty retailer in the United States. The Company’s segments include Retail and Credit. As of March 20, 2017, the Company operated 344 the United States stores located in 40 states as well as an e-commerce business. The Company also offers its customers a variety of payment products and services, including credit and debit cards. As of March 20, 2017, the Retail segment included its 117 Nordstrom-branded full-line stores in the United States and Nordstrom.com, 216 off-price Nordstrom Rack stores, five Canada full-line stores, Nordstromrack.com/HauteLook, seven Trunk Club clubhouses and TrunkClub.com, two Jeffrey boutiques and two clearance stores that operate under the name Last Chance. The Company, through Credit segment, allows its customers to access a range of payment products and services, including a Nordstrom-branded private label card, approximately two Nordstrom-branded Visa credit cards and a debit card for Nordstrom purchases.

Macy’s Company Profile

Macy’s, Inc. is an omnichannel retail company operating stores, Websites and mobile applications under various brands, such as Macy’s, Bloomingdale’s and Bluemercury. The Company sells a range of merchandise, including apparel and accessories (men’s, women’s and children’s), cosmetics, home furnishings and other consumer goods. Its subsidiaries provide various support functions to its retail operations. Its bank subsidiary, FDS Bank, provides credit processing, certain collections, customer service and credit marketing services in respect of all credit card accounts that are owned either by Department Stores National Bank (DSNB), which is a subsidiary of Citibank N.A., or FDS Bank. The private label brands offered by the Company include Alfani, American Rag, Aqua, Bar III, Belgique, Charter Club, Club Room, Epic Threads, first impressions, Giani Bernini, Greg Norman for Tasso Elba, Holiday Lane, Home Design, Hotel Collection, John Ashford, Karen Scott, Thalia Sodi and lune+aster.

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