In this article, we will look at the 7 Best Department Store Stocks to Buy Now.

Holiday Shopping Season and Consumer Sentiment

The holiday shopping season is in full swing in the United States. On December 2, Jessica Moulton, senior partner at McKinsey & Company, appeared on CNBC to discuss Black Friday spending and its effects on consumer sentiment. She said that while 2024 was a challenging year for retailers, the numbers rolling in from the holiday season seem promising. High hopes were especially placed on Black Friday sales, and while the numbers aren’t all in, they look pretty good. This trend holds particularly true online, where sales seem to be up by 15% or so compared to last year in many markets. According to CNBC, the total Black Friday e-commerce spending was around $10.8 billion. However, Moulton said that footfall in stores wasn’t so good, and continued to be flat year-over-year.

She said the trends in the sector are changing, with around 75% of shopping journeys starting online at the outset. Although some of them end up with consumers paying visits to the brick-and-mortar stores, much of the shopping journeys end with sales happening online. Furthermore, the retail sector is showing consumer behavior that tends to undertake a multiple retailer journey these days. If it is a bigger purchase, most consumers prefer checking out four to five retailers, either online or offline. This poses a significant change in the sector as compared to around two decades ago.

Is Black Friday Becoming the Biggest Thing in Retail?

Moulton said that consumers have consistently shown the industry in many ways that they are experiencing the effects of the cost of living crisis. However, recent survey data by McKinsey shows that consumers have started to feel more confident, which is expected to be reflected in the busier Christmas period this year compared to the last couple of years. She is optimistic about the future, saying that although we are still in a tricky place, there is light at the end of the tunnel. McKinsey’s estimates show that around 63% of consumers are expected to have an increased e-commerce spending forecast this holiday shopping season. The e-commerce spending forecast for around 27% of consumers is expected to remain the same, while it may decrease for 4% due to cutbacks.

Black Friday and Cyber Monday are increasingly becoming more significant in the holiday shopping season, especially compared to Christmas shopping. Mouton said that the retail industry is seeing more and more concentration of sales in the days around Black Friday. That is tough for retailers, as it puts a significant amount of weight on the fairly narrow set of items that retailers work hard to put great deals against. The retail results for the 29th November weekend mark the culmination of nine months of work by most retailers. This includes sourcing good value, marketing their items, watching the trends in the days before the weekend itself, detecting the items getting more traffic, and more. Since the changing trends keep concentrating more and more sales in the precious Black Friday weekend, the stakes are high for retailers.

Generative AI and Retail

Talking about the increasing role of generative AI in retail, Moulton said considerable experimentation is going on in the industry. However, she considers the present time to be too early to see it at scale. She said that several leaders are leveraging generative AI the right way, which means that the strongest are getting stronger. They are taking early advantage of such new capabilities. This holds special importance since cookies are now much less easy to use because of their increased regulation. This makes Gen-AI a substitute that leaders are leaning into.

With these trends in view, let’s look at the 7 best department store stocks to buy now.

Our Methodology

We sifted through stock screeners and financial media reports to compile a list of 10 department store stocks. We then selected the 7 stocks that were the most popular among elite hedge funds, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

7 Best Department Store Stocks to Buy Now

7. Macy’s Inc. (NYSE:M)

Number of Hedge Fund Holders: 38

Macy’s Inc. (NYSE:M) is an omnichannel retail store that manages three brands: Macy’s, Bloomingdale’s, and Bluemercury. These brands sell a variety of merchandise, including accessories, apparel, consumer goods, home furnishings, and more. The company operates stores in 43 US states, The District of Columbia, Guam, and Puerto Rico.

Macy’s Inc. (NYSE:M) delayed its fiscal Q3 2024 earnings release. However, its preliminary financial results for the quarter showed positive sales. Macy’s First 50 locations underwent a 1.9% comparable sales growth, making fiscal Q3 2024 its third consecutive quarter of comp sales growth. This growth was primarily attributed to the company’s Bold New Chapter strategy initiatives.

Macy’s Inc.’s (NYSE:M) luxury brands, Bluemercury and Bloomingdale’s, both reported positive comparable sales as well. Bluemercury experienced a 3.3% comp sales growth, while Bloomingdale’s owned and owned-plus-licensed-plus marketplace grew by 1.0% and 3.2%, respectively. The company’s November comparable sales are ahead of fiscal Q3 levels across nameplate, highlighting its popularity. Macy’s Inc. (NYSE:M) ranks seventh on our list of the 7 best department store stocks to buy now.

6. Dollar Tree, Inc. (NASDAQ:DLTR)

Number of Hedge Fund Holders: 40

Dollar Tree, Inc. (NASDAQ:DLTR) operates discount department stores and offers a wide range of merchandise under the brand names Dollar Tree and Dollar Tree Canada. Family Dollar stores offer home products, consumable merchandise, accessories and apparel merchandise, electronics, and seasonal merchandise.

The company is focusing on boosting the growth of its Dollar Tree brand and is converting stores to its in-line multi-price 3.0 format. It is opening new stores and improving the in-store experience for its customers through customer service enhancements and renovations. In fiscal Q3 2024, the company converted another 720 stores to the 3.0 format, bringing the total number of converted Dollar Tree stores to around 2,300. These stores produced around 30% of the company’s total net sales in fiscal Q3 2024. Dollar Tree, Inc. (NASDAQ:DLTR) plans to convert an additional 300 to 400 stores to the 3.0 format by the end of 2024, further boosting profitability.

In addition to this conversion, the company saw positive results and sales in fiscal Q3 2024 due to its merchandising efforts for Dollar Tree and Family Dollar. Its net sales grew significantly, primarily due to its non-comparable stores. Dollar Tree’s non-comparable sales contributed over three times more revenue in 2024, reflecting the increased rate of Dollar Tree openings. Dollar Tree, Inc.’s (NASDAQ:DLTR) $0.99-only portfolio is also performing especially strong. The company takes the sixth spot on our list.

5. Dollar General Corporation (NYSE:DG)

Number of Hedge Fund Holders: 45

Dollar General (NYSE:DG) offers an elaborate array of merchandise in its stores, including home products, consumables, seasonal items, apparel, and more. Its merchandise collection includes its own private brands and brands from manufacturers.

Dollar General (NYSE:DG) is operating on a profitable model. Its net sales grew by 5% to $10.2 billion in fiscal Q3 2024. The company grew its market share in both dollars and units in highly consumable products and non-consumable product sales during the quarter. Its same-store sales also rose by 1.3%, and this growth was attributed to 1.1% growth in the average transaction amount, including the average unit retail price per item and the increase in average items per basket. The comparable sales were driven entirely by Dollar General’s (NYSE:DG) growth in the consumable category, as its customers are continually focusing on spending on essential items of need.

The company is also focusing on maintaining a mix and balance in its inventory to boost sales and improve stock levels. Through fiscal Q3 2024, the business generated cash flows of $2.2 billion from operations, an increase of 52% due to improvements in Dollar General’s (NYSE:DG) working capital position, mainly through inventory management.

The company’s primary priority is investing in its business, including its existing store base and organic growth opportunities, such as strategic initiatives and new store expansion. It is on track to deliver around 2,435 real estate projects this year, including 1,620 remodels, 730 new stores, and 85 relocations.

4. Target Corporation (NYSE:TGT)

Number of Hedge Fund Holders: 49

Target Corp (NYSE:TGT) operates general merchandise department stores that offer its customers a wide range of products. It has approximately 2,000 stores across the US. The company saw an increase in its traffic growth in fiscal Q3 2024. This growth was attributed to its focus on newness and delivering strong value in a retail environment where consumers are focusing on value and discounts over brand loyalty.

The company thus introduced over 2,000 discounts entering the holiday season after it received positive customer response to the thousands of discounts and deals it offered at the beginning of 2024. Therefore, this initiative is expected to drive similar sales growth in the crucial holiday season. Target Corp’s (NYSE:TGT) comparable sales grew in fiscal Q3 2024, and this growth was attributed to a 2.4% growth in traffic. This translates to over 10 million incremental transactions compared to 2023.

The company’s digital channel also grew by nearly 11% in fiscal Q3 2024, reflecting increasing consumer behavior trends in online shopping. Its delivery services are also boosting growth, with the company’s same-day delivery, powered by Target Circle 360, experiencing approximately 20% growth. Its Drive Up service also saw positive double-digit growth, accounting for over $2 billion in fiscal Q3 2024 sales. These trends show the strength of Target Corp’s (NYSE:TGT) digital services as more and more consumers are interacting with them.

3. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 75

Costco Wholesale Corporation (NASDAQ:COST) operates membership-only big box warehouse club stores, and is one of the most popular department stores in the US. It offers an extensive collection to its customers, including furniture, electronics, clothing, consumables, and much more. The company is expanding its operations, recently opening a new store in Maine and consolidating its presence in 47 US states. It attained its target of opening 30 new warehouses in fiscal 2024. It is also expanding its presence internationally, and has plans to take on 12 of its 29 planned openings outside the US.

Apart from its expansion strategy, the company is improving its member experience by boosting delivery times, streamlining merchandise assortment, and scheduling functionality. It reported membership fee income of $1.512 billion, reflecting a growth of $3 million on one less week year-over-year.

Costco Wholesale Corp’s (NASDAQ:COST) renewal rate in the US and Canada was down one-tenth of a percent in fiscal Q4 2024 compared to fiscal Q3 end. It stood at 92.9% and underwent this slight decrease due to the effect of the online membership promotion that the company ran in fiscal year 2023 for a short while.

However, improvement in the worldwide membership renewal rate offset the decrease in the US. The company ended fiscal Q4 2024 with around 76.2 million paid household members and 136.8 million cardholders. These numbers reflect a year-over-year increase of 7.3% and 7%, respectively. Costco Wholesale Corporation (NASDAQ:COST) takes the third spot on our list of the 7 best department store stocks to buy now.

Madison Sustainable Equity Fund stated the following regarding Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2024 investor letter:

“Costco Wholesale Corporation (NASDAQ:COST) continues to demonstrate its commitment to sustainability by lowering its emissions. For example, it has converted its Kirkland Signature laundry packs from plastic tubs to a pouch. This has reduced plastic packaging by 80%. It has also moved to localize production of bulky items such as water, paper, and laundry detergents. Manufacturing these goods closer to the countries in which they are sold reduces emissions associated with shipping.”

2. TJX Companies, Inc. (NYSE:TJX)

Number of Hedge Fund Holders: 63

The TJX Companies, Inc. (NYSE:TJX) operates in Marmaxx and HomeGoods, TJX International, and TJX Canada segments. Its stores offer an assortment of home decoration, apparel, decorative accessories, footwear, accessories, giftware, and much more. The company is especially directing fresh assortments to its stores and websites for the holiday shopping season, and is off to a good start with its fiscal Q4 2025 sales.

Increasing customer transactions resulted in growth in the company’s consolidated comparable sales. Its home and apparel categories also saw comparable sales growth in fiscal Q3 2025. Even after the holiday season, the company has plans to establish itself as a year-round gift destination by offering fresh merchandise in stores and online multiple times a week.

TJX Companies, Inc. (NYSE:TJX) is already well positioned as a one-stop shop for holiday gifts, offering merchandise for a variety of income demographics. Therefore, its increased focus on becoming the go-to gift destination all year around is anticipated to lend it a substantial market position.

The company’s expansion strategy also gives it a competitive advantage. It has more than 5,000 stores as of fiscal Q3 2025, and plans to open more than 1,200 stores in its current countries and retail banners. The TJX Companies, Inc. (NYSE:TJX) has announced plans to expand its T.K. Maxx banner in Spain, with the first stores expected to open in early 2026 and the long term. The company sees the potential to open more than 100 stores in Spain.

Madison Investors Fund stated the following regarding The TJX Companies, Inc. (NYSE:TJX) in its Q2 2024 investor letter:

“The TJX Companies, Inc. (NYSE:TJX), an off-price retailer, continues to do well. Its value-based retail stores are resonating with consumers given the backdrop of higher inflation, which led to strong revenue and profit growth in the most recent quarter”.

1. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 88

Walmart Inc. (NYSE:WMT) is an omnichannel retailer that operates wholesale clubs, stores, e-commerce websites, and mobile applications. Its offerings include general merchandise, consumables, groceries, electronics, and more.

Although the company faced headwinds such as two large hurricanes, a US port strike, and the flooding caused by the hurricanes in fiscal Q3 2025, its strong operational model allowed it to bounce back immediately. It saw considerable growth in its in-store volumes, delivery sales, and curbside pickup in fiscal Q3 2025. Walmart Inc. (NYSE:WMT) is increasingly becoming more convenient for its customers, driving growth. It had almost no like-for-like inflation in the quarter, and its fiscal Q3 2025 earnings showed a 6.1% growth in sales. One of the primary drivers of growth for the company across the globe was its e-commerce offerings, which grew by 27%.

Increasing membership and advertising income also played a role, growing by 22% and 28%, respectively. The strength of these businesses is boosting the company’s profitability and allowing Walmart Inc. (NYSE:WMT) to strengthen its business model. It is gaining market share in general merchandise and grocery in the US, which gives it a considerable market advantage.

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