Which Department Store Do Working Moms Prefer Most?

Working mothers have a lot of spending power, and they’re often shopping for more than themselves. Therefore, investors will want to know the answer to this question.

Feb 6, 2014 at 5:05PM

Most department stores attract more women than men, and working moms shop for themselves as well as their children. On occasion, they might even shop for their husbands. 

According to Nielsen, approximately 40% of moms have children under 18 years of age and are employed full-time. A working mom in this category is also 40% more likely to have an annual household income of $100,000 or more (compared to all moms). Therefore, department stores are going to want that customer, and they're going to do everything in their power to keep that customer. 

Another reason working moms are so important to department stores: they're more engaged with household finances than the average mom. Therefore, they decide where the money goes, at least to a certain extent. Furthermore, working moms are 35% more likely to be college graduates. That being the case, this consumer's spending power is likely to be more sustainable. With a college degree, this consumer has an easier time remaining employed. 

With all this in mind, it's clear that a department store would want to be the most loved by working moms. Which department store stands at the top of this list?

Best performers ... and why?
Working moms have ranked their favorite department stores in the following order: Nordstrom's (NYSE:JWN) Nordstrom Rack, Kohl's (NYSE:KSS), Macy's (NYSE:M), TJX Companies' (NYSE:TJX) HomeGoods, and J.C. Penney (NYSE:JCP).

At Nordstrom Rack, working moms (and everyone else) have an opportunity to purchase items normally found at Nordstrom for 50% to 60% off. The reasons for the discounted prices vary, and items include leftover merchandise from Nordstrom, discontinued items, and items with small flaws (also known as "seconds").

Kohl's constantly offers promotions, so working mothers keep coming back. Kohl's offers everything from clothing to accessories to home products. This broad product diversification also plays a significant role in Kohl's appeal.

Macy's has been a technological leader in its peer group, having raised the bar for omni-channel innovation. Macy's invested heavily in technology back in 2010, and that investment has since paid off. Customers can now shop for what they want, whenever and however they want, as Macy's has successfully integrated in-store, online, and mobile shopping experiences. 

TJX Companies' HomeGoods isn't a discount retailer. It wants to be seen as offering an opportunistic shopping experience. That's because it sells high-quality items at 25% to 60% off. It's not selling low-quality merchandise as some people might suspect. 

Then there's J.C. Penney, which is struggling more than all of the other companies mentioned above. The reason for its struggles has a lot to do with former CEO Ron Johnson's attempt at making J.C. Penney more hip and offering everyday low prices. This was a terrible failure because it alienated J.C. Penney's core customer, who loved J.C. Penney because of all the promotions. Now that Myron Ullman is back as CEO, he's attempting to reestablish J.C. Penney as heavily promotional. This might have resulted in working mothers liking J.C. Penney again, but highly promotional equals contracting margins, which then means that consistent profitability will be difficult to achieve. 

You might have noticed that every department store mentioned above attempts to offer great value in one way or another. Therefore, even if working mothers have spending power, they still want bargains. That's the mind-set of today's consumer, whether a working mother or not. There is so much competition among retailers that a consumer will find a better deal elsewhere if they're not pleased. 

The bottom line
Nordstrom Rack is the clear winner, but when you invest in Nordstrom Rack, you also must invest in Nordstrom. This is a well-run retailer, but it's highly discretionary. Nordstrom relies primarily on high-end consumers.

Macy's is also one of the best-run department stores. Therefore, long-term success is likely. However, Macy's is also not as resilient as Kohl's and TJX Companies are, simply because consumers will go for the biggest discounts across the broadest ranges of products when times are tough.

As far as J.C. Penney is concerned, its brand is hurting too much for investment consideration. 

TJX Companies should offer the most potential thanks to its continuous growth and business model. It also offers diversification with HomeGoods, T.J. Maxx, and Marshalls (its largest three retail brands). Making the list of most-loved department stores by working moms doesn't hurt, either. Please do your own due diligence prior to making any investment decisions.  

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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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