Macy’s vs. The Gap: Should You Buy Monday’s Retail Bounce?

Find out which retailer stock is a better option for your needs.

Even as markets were falling Monday, retail stocks were on the rise with several major brick-and-mortar stores posting solid gains and the S&P Retail Select Index gaining 1.23 percent while the Dow and S&P 500 each lost about 0.4 to 0.5 percent. Two of those gainers were The Gap Inc. (GPS) and Macy’s Inc. (M), both of which have been declining in recent months.

If you’re thinking that this is the first sign that either or both of these retailers is ready to rebound, which retailer is the better investment?

Macy’s vs. The Gap Stock Comparison

Here’s a basic comparison of Macy’s and the Gap:

Macy’sThe Gap
Share Price$32.89$26.16
Market Cap$10.1 billion$10.1 billion
Most Recent Annual Revenue$24.8 billion$15.9 billion
Most Recent Annual  Profits$1.5 billion$848 million
Most Recent Annual  Revenue Growth-3.65%2.18%
Most Recent Annual Profit Growth149.92%25.44%
GOBankingRates’ Net Worth Evaluation$24 billion$15.1 billion
P/E Ratio6.1211.47
P/S Ratio0.40.61
Stock Gain/Loss Last Month-7.85%-5.08%
Stock Gain/Loss Last Year62.98%0.15%

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Why You Might Pick Macy’s:

  • Macy’s edges out the Gap on its margins, with a profit margin of 6.66 percent to 5.43 percent for the Gap.
  • Macy’s appears to be the stronger value buy at the moment, with a P/E ratio of 6.12 (11.47 for the Gap), P/S ratio of 0.4 (0.61 for the Gap) and P/B ratio of 1.71 (3.02 for the Gap).
  • Macy’s has the better dividend yield at 4.67 percent, compared to 3.84 percent from the Gap.

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Why You Might Pick the Gap:

  • The Gap’s growth prospects appear to be much stronger and come at a reasonable price with a PEG ratio of 0.81 while Macy’s posted its third-straight year of declining revenues in 2017.
  • Market confidence in the Gap would appear to be higher if judged by the percentage of shares held by short sellers: 8.91 percent for the Gap to 15.35 percent for Macy’s, as of Sept. 27, 2018.
  • The Gap offers a significantly better return on assets at 11.05 percent to just 5.55 percent for Macy’s.

The Final Word on M vs. GPS

Macy’s would appear to offer more — both from its lower price ratios and higher dividend yield — but the Gap could be on the stronger growth path based on its low PEG ratio.

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This article is produced for informational purposes only and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Please always conduct your own research and consider your investment decisions carefully.