With the fiscal cliff behind us, investors are starting to focus more on the optimistic side of the economy. This means rising consumer expenditures and less volatility. In this article, I look at two department stores with different momentum; one is thriving, the other is struggling. Has the former peaked? Has the latter hit a low? I consider the future in my assessment of these retailers below.

Reasons to Buy Macy's, Inc. (NYSE:M)

Macy’s is an American-based chain of department stores. By January 2013, the company had around 800 Macy's and Bloomingdale's stores in the United States.

The company is expected to produce 2013 EPS of $3.40. Estimates for 2014 are $28.3 billion in revenue, and an EPS of ~$3.78, the latter of which represents a gain of 2.4%. The $14.6 billion market cap company has total cash, operating cash, and levered cash of $1.26 billion, $2.36 billion and $1.58 billion, respectively--healthy multiples for a strong executer.

Macy’s average growth is higher than the industry average. And, fortunately, this is complemented by an operating margin of 9.4%, which is quite high compared to the industry’s average of 3.7%. Debt-to-equity of 1.2 is also below the industry’s 1.3 average. Like many other retailers, during Christmas Macy’s kept its stores open for 48 straight hours to attract last minute customers.

There are several other reasons to be optimistic. First, its upper middle income appeal will enable it to thrive in a fully recovered economy. Macy's shoppers aren't as negatively impacted by higher payroll taxes compared to department stores targeting lower-income shoppers. This is a point that Macquarie analyst Liz Dunn agrees with, though for slightly different reasons. You may be asking yourself: "Why not buy Nordstrom, Inc. (NYSE:JWN) if your intent is on betting on income demographics?" Nordstrom, which targets even more affluent shoppers than Macy's does, would be a perfect way to bet on a full recovery, but much of the upside has already been factored into the stock price. It trades at a respective 16.9x and 14x past and forward earnings versus 12x and 10.2x for Macy's.

A Look at J.C. Penney Company, Inc. (NYSE:JCP)