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Macy’s, Inc. (M): The Best Department Store on Wall Street?

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A confession: There’s not really a Macy’s, Inc. (NYSE:M) on Wall Street proper. However, the lack of an outpost there — you can go to Brooklyn or up into Midtown to shop — hasn’t stopped Macy’s from making its presence felt. The company has been on a solid tear over the last year, up 29% compared to the S&P 500’s 21% gain. The company is riding the wave of strong sales growth and increasing margins, under the watchful eye of a strong management team.

Macy's, Inc. (NYSE:M)

While Macy’s, Inc. (NYSE:M) star may not be the fastest riser in the world of department stores, it’s one of the most dependable. The company’s brand has been around for over 150 years, and there’s no reason I can see to doubt that it’ll make it to 300.

The business of branding
In the world of department stores, brand is almost everything. Each store attracts a specific kind of shopper, and the long history of most chains has made it hard to move customers around much. Sure, you might jump from Macy’s to Nordstrom, Inc. (NYSE:JWN) or from J.C. Penney Company, Inc. (NYSE:JCP) to The TJX Companies, Inc. (NYSE:TJX)‘s T.J. Maxx chain, but that’s the limit.

As J.C. Penney found out the hard way, changing a long-running brand can lead to disaster. Customers who like coupons can’t suddenly be made into the sorts of shoppers who think a “denim bar” is a great idea. J.C. Penney Company, Inc. (NYSE:JCP) took a hit for its attempts to meddle, and it’s paid the price.

Macy’s, Inc. (NYSE:M) has done no meddling, and it has maintained its strong middle ground. The company’s strong pull helped it maneuver the weak early spring this year, with comparable sales rising 3.8% while other retailers looked on enviously. According to Interbrand, the company’s brand value increased more than 60% in the last year, moving into the top 50 brands in American retail.

Doing more with — more
In addition to increasing its top line, Macy’s, Inc. (NYSE:M) has had success turning that into more cash for the company and investors. Again, that’s better than competitors like The TJX Companies, Inc. (NYSE:TJX), which managed to increase comparable sales by 2% but got stuck further down the line with operating income margin falling slightly. Macy’s bumped its operating margin up, benefiting in part from fewer defaults among its credit card holders.

So far, things are looking very good for a case that Macy’s, Inc. (NYSE:M) might be the best dog in the show — but hold on, I hear you say. What about Nordstrom? Hasn’t it made just as strong a case for itself? Admittedly, the company has an even stronger brand, coming in 10th place on the brand value list. Nordstrom, Inc. (NYSE:JWN) has also driven a sales increase recently, with comparable sales up by a respectable 2.7  last quarter.

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