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J.C. Penney Company, Inc. (JCP), Macy’s, Inc. (M), Dillard’s, Inc. (DDS): Are Any Retailers Worth a Buy?

J C Penney Company Inc (JCP)Traditional department stores have been under a lot of pressure the past few quarters. The recent holiday season did not produce the high revenue it usually does as many consumers turned to online shopping at the end last fiscal year. Earnings reports for the first quarter of this year are just now coming in. Here is what investors need to know about the health of these department stores.

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

J.C. Penney Company, Inc. (NYSE:JCP) had one of the worst quarters it has had in the last few years. Total losses per share were $1.31, a huge $0.42 lower than Wall Street expectations. The company just can’t seem to turn the train wreck around. The first quarter of last year also saw a loss of $0.25 per share, so the losses have compounded year-over-year.

Revenue did meet expectations, however, with revenue for the quarter being $2.64 billion. While this is a positive event, revenue was still down by 18% from the same time last year.

Total gross margins have slipped as well. Rising costs and lowering prices have taken a hit on the retailer in addition to declining sales. The company brought in a new CEO earlier this year and has been trying to reconnect with customers. The real problem is that customers aren’t listening.

Total losses this year are expected to be less than last year. Even with declining losses, though, this just isn’t a company worth buying. Stay away from J.C. Penney Company, Inc. (NYSE:JCP).

Macy’s, Inc. (NYSE:M)

Macy’s, Inc. (NYSE:M) hasn’t had the same troubles as J.C. Penney Company, Inc. (NYSE:JCP). It reported first quarter earnings on May 15 of this year. Total earnings per share were $0.55, which was $0.02 above expectations and 27% higher than the same time last year.

This quarterly earnings report is similar to ones in the past. Macy’s, Inc. (NYSE:M) has beaten earnings expectations for the past 3 years. For the last 8 quarters the company has seen earnings-per-share growth, as well.

The reason Macy’s, Inc. (NYSE:M) continues to bring value to shareholders is because it has a strong brand, aggressive and relevant marketing, and high quality products. The company is also shipping more items to customers via its website. By having an emphasis on e-commerce, the company can serve more customers and keep more of those customers returning to Macy’s.

The company is expected to bring in $3.94 per share this year, a 13% increase from last year. Macy’s, Inc. (NYSE:M) is on track to hit this target. Investors should be very happy with Macy’s as a solid, profitable department store, and the company pays a healthy dividend of $1 per share as well.

Dillard’s, Inc. (NYSE:DDS)

Dillard’s, Inc. (NYSE:DDS) had an excellent first quarter. Total earnings per share was $0.30 higher than expected, growing from $1.89 last year to $2.41 this year.

The company did not meet Wall Street expectations for revenue, though. It brought in $1.55 billion, compared to the expected $1.62 billion.

Despite this, the first quarter brought good news to investors. Operating costs were lower by roughly $3 million and the company’s gross margins also improved. Dillard’s, Inc. (NYSE:DDS) has been keeping a close eye on its expense levels in an effort to boost profitability.

Same-store sales were up 5% this year. The highest gains were in women’s clothing and children’s clothing. If the company continues to market these items through the summer and fall, profits will continue to rise. Dillard’s, Inc. (NYSE:DDS) is expected to bring in $7.31 per share this year, which is a 15% increase from last year.

With a great quarter behind it, Dillard’s, Inc. (NYSE:DDS) is looking good going in to this fiscal year. There is a lot of competition in the market for department stores, however. This is a good company to hold right now, but it isn’t primed for a buy.

Final thoughts

Finding good stocks to buy can be a challenge, but it is also very important to know which stocks to avoid and which to hold. Stay as far away from J.C. Penney Company, Inc. (NYSE:JCP) as you can. If you already own Macy’s, Inc. (NYSE:M) or Dillard’s, Inc. (NYSE:DDS), hold on to these stocks for now as this should be a good year for both of these companies. None of the three stocks are strong buys right now, though.

The article Are Any Retailers Worth a Buy? originally appeared on Fool.com and is written by Austin Higgins.

Austin Higgins has no position in any stocks mentioned. The Motley Fool owns shares of Dillard’s. Austin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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