Financial Review: Sears Hometown and Outlet Stores (SHOS) & Macy’s (M)

Sears Hometown and Outlet Stores (NASDAQ:SHOS) and Macy’s (NYSE:M) are both retail/wholesale companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, institutional ownership, analyst recommendations, earnings, profitability, valuation and dividends.

Risk & Volatility

Sears Hometown and Outlet Stores has a beta of 1.11, meaning that its share price is 11% more volatile than the S&P 500. Comparatively, Macy’s has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500.

Institutional and Insider Ownership

45.2% of Sears Hometown and Outlet Stores shares are held by institutional investors. Comparatively, 90.8% of Macy’s shares are held by institutional investors. 0.6% of Sears Hometown and Outlet Stores shares are held by company insiders. Comparatively, 2.4% of Macy’s shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and target prices for Sears Hometown and Outlet Stores and Macy’s, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sears Hometown and Outlet Stores 0 0 0 0 N/A
Macy’s 2 11 7 0 2.25

Macy’s has a consensus target price of $34.72, suggesting a potential upside of 1.46%. Given Macy’s’ higher probable upside, analysts plainly believe Macy’s is more favorable than Sears Hometown and Outlet Stores.

Valuation and Earnings

This table compares Sears Hometown and Outlet Stores and Macy’s’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sears Hometown and Outlet Stores $1.72 billion 0.03 -$95.05 million N/A N/A
Macy’s $24.84 billion 0.42 $1.55 billion $3.77 9.08

Macy’s has higher revenue and earnings than Sears Hometown and Outlet Stores.

Dividends

Macy’s pays an annual dividend of $1.51 per share and has a dividend yield of 4.4%. Sears Hometown and Outlet Stores does not pay a dividend. Macy’s pays out 40.1% of its earnings in the form of a dividend. Macy’s has raised its dividend for 7 consecutive years.

Profitability

This table compares Sears Hometown and Outlet Stores and Macy’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sears Hometown and Outlet Stores -3.94% -35.77% -15.25%
Macy’s 6.72% 22.33% 6.59%

Summary

Macy’s beats Sears Hometown and Outlet Stores on 12 of the 14 factors compared between the two stocks.

Sears Hometown and Outlet Stores Company Profile

Sears Hometown and Outlet Stores, Inc. engages in the retail sale of home appliances, lawn and garden equipment, tools, and hardware in the United States. The company operates in two segments, Sears Hometown and Hardware, and Sears Outlet. The Sears Hometown and Hardware segment operates Sears Hometown Stores that offer products and services across a selection of merchandise categories, including home appliances, lawn and garden equipment, tools, sporting goods, and household goods; and Sears Hardware Stores, which provide products and services across a range of merchandise categories, such as home appliances, lawn and garden equipment, tools, other home improvement products, fasteners, electrical supplies, and plumbing supplies. It also operates Sears Home Appliance Showrooms that offer home appliances and related services in stores primarily located in strip malls and lifestyle centers of metropolitan areas. The Sears Outlet segment provides in-store and online access to purchase outlet-value products across an assortment of merchandise categories, including home appliances, mattresses, apparel, sporting goods, lawn and garden equipment, and tools, as well as other household goods, such as furniture. This segment also sells its products and services through searsoutlet.com. The company also offers various services, such as home delivery, installation, and extended service plans. As of August 4, 2018, the company, and its dealers and franchisees operated 783 stores in 49 states in the United States, as well as in Puerto Rico and Bermuda. Sears Hometown and Outlet Stores, Inc. is headquartered in Hoffman Estates, Illinois.

Macy’s Company Profile

Macy's, Inc., an omni-channel retail organization, operates stores, Websites, and mobile applications. The company sells a range of merchandise, such as apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods. As of April 4, 2018, it operated approximately 690 department stores under the Macy's and Bloomingdale's brands; 160 specialty stores under the Bloomingdale's The Outlet, Bluemercury, and Macy's Backstage brands in the District of Columbia, Guam, and Puerto Rico; and Websites, including macys.com, bloomingdales.com, and bluemercury.com. The company also operates as a beauty products and spa retailer. The company was formerly known as Federated Department Stores, Inc. and changed its name to Macy's, Inc. in June 2007. Macy's, Inc. was founded in 1830 and is based in Cincinnati, Ohio.

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