Even though the resurgence of COVID-19 cases may dampen department stores’ growth in the near term, relatively inelastic demand for consumer goods and their strong online presence are expected to help quality department store stocks Kohl’s (KSS), Macy’s (M), and Dillard’s (DDS) advance. In contrast, we think it could be wise to avoid Nordstrom (NYSE:JWN) because of its relatively weak fundamentals. Let's discuss.The resurgence of COVID-19 cases due to the rapid spread of the highly contagious Delta variant continues to worry investors. In addition, according to Trading Economics data, U.S. retail sales in July declined 1.1% from the prior month.
However, the department store industry is expected to continue gaining in the coming quarters on the back of increasing demand for consumer goods and strengthening online platforms and delivery systems. According to Statista, department stores and other general merchandise stores are expected to generate $2.18 trillion by 2025. Furthermore, with rapid vaccinations across several parts of the world, department stores could witness rising foot traffic.
So, we think it could be wise to bet now on fundamentally strong department store stocks Kohl's Corporation (NYSE:KSS), Macy's, Inc. (NYSE:M), and Dillard's, Inc. (NYSE:DDS). However, with increasing competition in the department store industry, we think it’s advisable to avoid Nordstrom, Inc. (JWN) now because of its relatively weak financials.