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As we enter into this Christmas season, that can only mean one thing: Shopping. This article is meant to give a personal perspective of how the retail sector is shaping up for this year and into the future. For this experiment and research I have used the closest mall in proximity to me, the Woodland Mall.

This mall, owned by Pennsylvania Real Estate Trust, has been open since 1968. Over 100 stores, restaurants, and kiosks operate in 1.1 million square feet. Many of the stores are privately owned or are small, local players and have been left out of this article. Let’s take a look at some of the stores entering their busiest time of the season.

All yields, share prices, and analysts’ estimates are taken from Yahoo Finance upon market close Friday, November 25. Current and next year's earnings are analysts estimates for the current fiscal year and the following one. Earnings are listed on a per-share basis.

Pennsylvania Real Estate Trust (NYSE:PEI) purchased the mall from Prudential Financial and Taubman in 2006 for just over $177 million. Pennsylvania Real Estate Trust was one of the first Real Estate Investment Trusts which currently focuses on the ownership and development of shopping malls.

Mall: Woodland Mall, owned by Pennsylvania Real Estate Trust (PEI)

Pennsylvania Real Estate owns 49 properties across the Midwest. The company has large enclosed malls in twelve states across the United States.

  • Competitors: Simon Property Group (NYSE:SPG), General Growth (NYSE:GGP)
  • Share Price: $8.36
  • Current Earnings: -$0.86
  • Next Year Earnings: $1.74
  • Dividend Yield: 7%
  • Number of Malls: 49 (38 malls, 8 strip malls, 3 under development projects)
  • Recommendation: Buy

Pennsylvania Real Estate Trust has seen several of its malls post growth, and in its last earnings listed 33 of its 38 malls at the time showing positive sales growth. Occupancy rates, as well as sales per square foot, are up. I think shares are now undervalued and represent a great opportunity to take advantage of growing retail sales while receiving a generous dividend.

Anchor Stores

Store: Barnes and Noble (NYSE:BKS)

Barnes and Noble is the largest brick-and-mortar book retailer in the United States. Along with its book stores the company also owns hundreds of college bookstores and also the e-reader Nook.

  • Competitors: Amazon (NASDAQ:AMZN), Books-a-Million (NASDAQ:BAMM)
  • Share Price: $6.20
  • Current Earnings: -$0.26
  • Next Year Earnings: $0.43
  • Dividend Yield: 6%
  • Number of Stores: 704 Barnes and Noble Stores, 635 College Bookstores
  • Recommendation: Sell

Shares of Barnes and Noble have traded up recently on reports of strong sales of the Nook e-book reader for the holidays. It is hard for the company to compete with Amazon (AMZN) in terms of e-reader sales and the increasing demands to purchase items online instead of in bookstores. The closure of Borders could provide some much needed store sales growth but could also spell the death of this brick and mortar company.

Store: JC Penney (NYSE:JCP)

JC Penney is one of the largest retailers in the nation. The stores are typically anchor stores, and have massive, two-story floor plans. The company also has Sephora locations, photo studios, and jewelry stores inside its stores.

  • Competitors: Kohls (NYSE:KSS), Sears (NASDAQ:SHLD), Macys (NYSE:M)
  • Share Price: $29.61
  • Current Earnings: $1.62
  • Next Year Earnings: $1.92
  • Dividend Yield: 2.7%
  • Number of Stores: 1100 (as of 09/14/11)
  • Recommendation: Buy

Department Stores are likely to see increased numbers of customers this holiday season. JCPenney has brought in a former Apple (NASDAQ:AAPL) retail leader to lead the rebuilding company. The company has beat analysts’ earnings estimates the past four quarters and will look to keep that streak alive when it reports in January.

Store: Kohls (KSS)

Department store chain Kohls operates the majority of its stores as free standing anchor stores or as parts of strip malls rather than being attached to the mall.

  • Competitors: JC Penney (JCP), Sears (SHLD)
  • Share Price: $51.81
  • Current Earnings: $4.48
  • Next Year Earnings: $5.23
  • Dividend Yield: 1.9%
  • Number of Stores: 1127 (as of 11/10/11)
  • Recommendation: Buy

My favorite place to shop for work and casual clothes is this large retailer. All reports have said that Black Friday sales were up, and that a younger crowd came out for shopping this year. These news reports could benefit Kohls as they appeal to a younger crowd more than older brands like JCPenney, Sears, and Macys. Kohls has strong licensed brands inside its stores and recently purchased the Dana Buchman brand from Liz Claiborne (LIZ). I like these shares at this level and think they represent a great long tem buying opportunity.

Store: Macys (M)

Macy’s is a higher end department store which relies for about a quarter of its sales from its exclusive brands. The company also licenses many large brands and celebrity names for items available for purchase.

  • Competitors: Nordstrom (NYSE:JWN), Saks (NYSE:SKS)
  • Share Price: $29.45
  • Current Earnings: $2.78
  • Next Year Earnings: $3.16
  • Dividend Yield: 1.3%
  • Number of Stores: 850 Stores Including the Bloomingdales brand (as of 11/9/11)
  • Recommendation: Hold

Shares of Macys have had a nice increase since they traded below $10 in 2009. The department store retailer targets the middle class shoppers with leading name brand clothing, accessories, and merchandise. While other department stores focus on licensing brands from other companies, Macy’s focuses on licensing celebrities to sell their products. Shares appear to be fully valued and could see only a slight gain over the next quarter.

Store: North Face, owned by V.F. Corporation (NYSE:VFC)

  • Large retailer VF Corporation owns Lee Jeans, Wrangler Jeans, Jansport, Vans, Nautica, North Face, 7 for all Mankind, along with several other small brands. North Face is a destination store for the mall as it features outdoor equipment and has a rock wall in the store as well.
  • Competitors: Dick’s Sporting Goods (NYSE:DKS), Levi’s Jeans (Private)
  • Share Price: $126.24
  • Current Earnings: $8.16
  • Next Year Earnings: $9.51
  • Dividend Yield: 2.2%
  • Number of Stores: 22
  • Recommendation: Buy

VF Corporation has strong brands with North Face, Vans, Jansport, Wrangler, and Lee. The company also has some strong licensed products including Major League Baseball and the National Football League. Shares are just off of a fifty-two-week and all-time high around $140. The company has strong brands that appeal to all ages and shareholders could be rewarded this holiday season. Look for VF Corporation to eventually acquire a new brand or company to explore a new market.

Store: Sears (SHLD)

Sears is a large retail conglomerate that owns the Sears and Kmart stores across the nation. Sears Holdings operates as the tenth largest retailer in the United States and the largest one represented here by this mall. The company owns a portion of its Sears Canada and Sears Mexico brands which are growing and expanding into new markets.

  • Competitors: JC Penney (JCP), Kohls (KSS)
  • Share Price: $58.40
  • Current Earnings: -$2.34
  • Next Year Earnings: -$1.89
  • Dividend Yield: 0
  • Number of Stores: 894 Sears, 1300 Kmart, 1350 Specialty Stores (as of 01/29/11)
  • Recommendation: Buy

One of the reasons I like Sears is the exclusive brands it has to offer only at its stores. These brands include Lands' End, Craftsman, Die Hard, Kenmore, and Dunlap. The company could some day expand these brands into other stores to further sales, but also might decide to keep them exclusive to get people into its stores, like it does now. The strong strength of its auto and repair business has remained strong as consumers hold off on purchasing new vehicles and have to make more repairs on current vehicles.

Summary

  • Pennsylvania Real Estate, $8.36, Buy
  • Barnes and Noble, $6.20, Sell
  • JC Penney, $29.61, Buy
  • Kohls, $51.81, Buy
  • Macys, $29.45, Hold
  • North Face, $126.24, Buy
  • Sears Holdings, $58.40, Buy

Continue to Part II >>

Source: Hitting The Mall For The Holiday Season, Part I: Anchor Stores