Kohl's vs. Macy's: Which Retail Stock is a Better Buy?

The retail sector’s landscape has witnessed an unprecedented change—a near revolution, actually—with robust e-commerce adoption globally in response to the social distancing effects of COVID-19. As businesses and individuals continue to choose digital channels over physical stores to fulfill their consumption needs, popular retailers Kohl's Corporation (KSS) and Macy's (M), which are focusing on boosting their online presence, should continue to outperform the broader market. But let’s find out which of these stocks is a better buy now.

Kohl's Corporation (KSS) and Macy's, Inc. (M) are two popular retail organizations that operate in the United States and internationally. KSS provides apparel, footwear, accessories, and home products, through stores and  websites, primarily under the brand names of Croft & Barrow, Jumping Beans, and others. M sells apparel, cosmetics, home furnishings, and other consumer goods through stores, websites, and mobile applications under the Macy's and Bloomingdale's brands.

The COVID-19 pandemic has changed  the game for the global retail industry. Since there has been a  shift in consumer buying behavior amid the pandemic, retail businesses that have successfully maintained their online and offline offerings have reaped the most  benefit. Retail titans — KSS and M — have entered 2021 with strong momentum as they continue to focus on growing their digital and omnichannel sales. Since the impetus for online buying is expected to continue,  even in the pandemic's wake, higher digital sales should become an even more profitable contributor to their businesses.

While KSS has gained 60.4% over the past year, M has returned 31.6%. In terms of past six-month’s performance, KSS is the clear winner with 148.4% gains versus M’s 98.4%. But which of these stocks is a better pick now? Let’s find out.

Click here to checkout our Retail Industry Report for 2021

Latest Movements

Last month, KSS appointed Robbin Mitchell as an independent director to its Board of Directors. His extensive operating experience in the retail industry and strong expertise should help support KSS’ continued strong execution and momentum.

Also in February, the company made an agreement to join hands with Eddie Bauer to launch premium-quality performance outerwear and outdoor apparel in KSS’ stores and website in Fall 2021. The expanded assortment of apparel should help KSS meet the needs of today’s customers and establish itself as a leader in the outdoor industry.

This month, Macy’s Retail Holdings, a wholly owned subsidiary of M, priced an offering of $500 million of senior notes due 2029. The company plans to  use the proceeds to  repay outstanding debt and for general corporate purposes.

Also this month,  M appointed Laura Miller as the chief information officer and Chuck DiGiovanna to lead M’s real estate function. The company believes that this diverse leadership team will accelerate its  “Polaris” growth strategy and help improve the omni-channel shopping experience of its customers.

Recent Financial Results

In the fourth quarter, ended January 30, 2021, KSS’ net income grew 29% year-over-year to $343 million. The company’s EPS increased 28% year-over-year to $2.20, while selling, general and administrative expenses declined 8% over this period. KSS ended the quarter with $2.3 billion in cash.

M’s comparable sales declined 17% on an owned basis in the fourth quarter ended January 30, 2021, reflecting the continued challenges posed by the COVID-19 pandemic. M’s  gross margin declined 310 basis points from the prior-year quarter to 33.7%, while its net income declined 52.9% from the year-ago value to $160 million.

Expected Financial Performance

Analysts expect KSS’ revenue to increase 53.3% in the current quarter, 16.8% in the current year and 3.4% next year. The company’s EPS is expected to grow 96.2% in the current quarter, 219.5% in the current year and 46.5% next year.

In comparison, analysts expect M’s revenue to increase 40.7% in the current quarter, 18.6% in the current year and 1.9% next year. M’s EPS is expected to grow 76.8% in the current quarter, 131.2% in the current year and 43.5% next year.


M’s trailing-12-month revenue is 1.1 times  KSS’. But KSS is more profitable with a gross profit margin of 35.1% versus M’s 32.1%.

Also, KSS’ EBITDA margin of 3.6% compares favorably with M’s 0.3%.


In terms of forward PEG, M is currently trading at 56.98x, 554.2% higher than KSS, which is currently trading at 8.71x. Also, its trailing-12-month ev/ebitda of 194.03x is significantly higher than KSS’ 23.05x.

So, KSS is the more affordable stock.

POWR Ratings

KSS has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. However, M has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Both KSS and M have a Growth grade of C, which is consistent with their earnings and revenue growth.

In terms of Quality Grade, KSS has a B given its higher profitability. Here, M’s  bleak prospects are  evident in its Quality Grade of C.

Also, both KSS and M have a Value Grade of B, which is in sync with their lower-than-industry EV/sales.

Of the 67 stocks in the B-rated Fashion & Luxury industry, KSS is ranked #22 while M is ranked #45.

Beyond what I’ve stated above, our POWR Ratings system also rates both KSS and M for Momentum, Stability, and Sentiment. Get all KSS’ ratings here. Also, click here to see the additional POWR Ratings for M.

The Winner

While both KSS and M are good long-term investments considering their market dominance and omnichannel retail platforms, KSS appears to be a better buy based on the factors discussed here.

Even though M has been making significant progress on its  Polaris transformation strategy that it introduced a year ago, KSS’s superior financials and relative undervaluation make it a better investment option than  M.

Our research shows that the odds of success increase if you bet on stocks with an Overall POWR Rating of Buy or Strong Buy. If you’re looking for other top-rated stocks in the Fashion & Luxury industry, click here.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Click here to checkout our Retail Industry Report for 2021

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KSS shares were trading at $57.95 per share on Tuesday afternoon, up $1.05 (+1.85%). Year-to-date, KSS has gained 42.42%, versus a 4.19% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.


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