The retailing road to riches has a number of paths; if you had stuck with department store chains over the past year, you'd have chosen wisely.
My original thought was that department store retailer Kohl's
Surprisingly, when I pulled up a stock chart comparing Kohl's with archrival J.C. Penney
In contrast, giant retailers such as Target
Again, I figured Kohl's was at the sweet spot of retailing, as it also focuses on opening off-mall locations and sells affordable, well-known brands. That is definitely the case, but the more storied chains -- such as Penney's, Dillard's and Federated's Macy's -- have also figured out how to play the game and grow market share again.
J.C. Penney has improved its merchandise mix and is also growing outside of malls, and Federated has used acquisitive growth to leverage costs and take excess capacity out of the industry. Kohl's and Penney's have found that private-label merchandise can be popular with customers and more profitable, as they don't have to pay up for outside brands such as Levi's or Polo by Ralph Lauren
In other words, the value plays have worked, as the older guys have restructured their way into sales and earnings growth. Additionally, growth firms like Kohl's and Nordstrom have combined wide-open expansion opportunities with better inventory controls and fashionable apparel offerings that are selling well. Even Target has kept pace, with the laggard being neighborhood bully Wal-Mart. As a contrarian, I'm starting to sniff around Wal-Mart more, but the competition is also worth keeping tabs on.
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to further discuss any companies mentioned. The Fool has an ironclad disclosure policy.