Macy'sMacy's (M) is the largest department store chain in the U.S. and has been cutting expenses and buying back shares aggressively. This may suggest the retail is well-positioned to capture an increase in consumer spending in the fourth quarter and 2015. Earnings per share up is 15 percent year-to-date. Macy's earnings have started to benefit from the integration of its acquisitions, including Federated Department Stores, back in 2010. Some 71% of analysts tracked by Bloomberg have a buy recommendation on Macy's, compared with just 38% for Nordstrom (JWN).
The GapThis portfolio of brands that includes the Gap (GPS), Old Navy, Banana Republic, Piperlime, Athleta and Intermix names is getting a second look with the arrival of new CEO Art Peck. Its third quarter earnings topped Wall Street expectations on lower operational expenses. Another surprise: the retailer reported a 6% rise in November same-store sales, besting the 1.4% decline expected by analysts surveyed by Thomson Reuters. True, this company has a long way to go to win back its cachet and consumers it lost during the mid-2000s as its brands faded. Yet a number of analysts have shifted their outlooks for the company after Peck's arrival.
The stock hasn't done much over the last year, but that could change if the retailer keeps delivering on sales growth.
CostcoIn the U.S., the warehouse retail has been a steady performer over the last four years with average annual revenue growth of 5%. Costco (COST) should benefit even more from the rebound in American consumer spending. On top of that, Costco is also a promising global retail play. Its international revenue is growth 15% annually. Costco's biggest overseas market is Mexico. But it's also expanding into Asia and Australia. Five years ago between 75 percent and 80 percent of the company's new stores were in the U.S. Over the next three or four years, 60% of new openings will be overseas, the company has said.
Bed Bath & BeyondIn recent years, the company's (BBBY)namesake flagship chain, as well as other brands such as Buybuy Baby and Cost Plus World Market, has not been investor favorite. E-commerce competition from Amazon.com (AMZN) has been brutal. However, a $2 billion share buyback plan has changed sentiment somewhat. The stock has bounced back from mid-year lows. However, it will take a sustained outperformance in earnings and revenue to really mark a comeback.
Wal-MartThe world's largest retailer (WMT) was the the biggest gainer in the blue-chip Dow Jones Average index in November, up 15%. The company's third quarter earnings topped Wall Street expectations. And few retailers can match the retailer's scale, which means Wal-Mart can command big discounts from suppliers. If there's a sustained recovery in U.S. consumer spending, Wal-Mart is going to benefit.
High risk playsOf course, some retailers face headwinds so severe that it's hard to see better days even as the U.S. economy improves. That said, the upside is potentially pretty big.
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