NEW YORK (TheStreet) -- Retail earnings kicked off this week with Macy's (M) reporting disappointing earnings and sales due to the harsh winter, troubles at the West Coast port delaying inventory shipments and fewer tourists at its flagship stores. Retail troubles continued at J.C. Penney (JCP) and Kohl's (KSS) with both department store chains missing sales estimates.
Despite disappointing results, both Macy's and Kohl's are rated "buy," while J.C. Penney is a "sell," according to TheStreet Ratings.
As retail earnings continue over the next two weeks, find out which other retailers investors should buy.
The stocks on this list are apparel retailers, rated "buy" with a B+ or better rating. Find out which stocks to buy and when you're done, be sure to check out which online retailers to sell from your portfolio.
TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year. Note: Year-to-date returns are based on May 13, 2015 closing prices.DSW data by YCharts
9. DSW Inc. (DSW)
Market Cap: $3.1 billion
Rating: Buy, B+
Year-to-date return: -5.9%
DSW Inc., together with its subsidiaries, operates as a branded footwear and accessories retailer in the United States. The company operates through two segments, DSW and Affiliated Business Group.
"We rate DSW INC (DSW) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- DSW INC has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DSW INC increased its bottom line by earning $1.69 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($1.88 versus $1.69).
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 12.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- DSW has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.
- You can view the full analysis from the report here: DSW Ratings Report