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How 7 Big-Box Retail Stocks Are Faring

Lou Carlozo

Just like consumers, investors love to shop big-box stores for bargains, albeit with a twist. While the average customer browses the aisles for DVDs or a GPS, share-buying types are more interested in that sweet little steal that goes by acronym ROI: return on investment.

Trouble is, lots of investors have headed elsewhere looking for happy returns -- especially to e-commerce giants such as Amazon.com (AMZN) and eBay (EBAY).

"As quickly as mom-and-pop stores were replaced by Wal-Mart Stores, Target Corp. and Best Buy Co. (BBY) over the last 50 years, it just took a tenth of that time -- five years -- for e-commerce to overcome those retailers," says K.C. Ma, director of the Roland George Investments Institute at Stetson University.

Why? As much as technology, it also boils down to the retail basics.

"Common complaints about big-box stores include poor customer service, long lines, apathetic employees and a very time-consuming process," says Gary Tsarsis, clinical assistant professor at the University of Pittsburgh's Katz Graduate School of Business.

[See: 10 Energy ETFs That Will Clear Your Conscience.]

Yet some big-box stalwarts have proven, or at least hope to, that they can jab a lifeline into to the World Wide Web and draw critical cash transfusions -- while others tout their tactile advantages over the virtual marketplace.

"There will be continued room for a group of resilient legacy retailers who know their markets that want to touch, feel and smell the merchandise," says Eugene Fram, professor emeritus of marketing at the Rochester Institute of Technology's Saunders College of Business.

Here we examine seven big-box retail stocks either faring well or flailing in their quest to stay relevant. So check that shopping list -- and if your friendly broker takes those newfangled computer chip credit cards, so much the better.

Target Corp. (TGT). Down 18 percent since last June, Target actually beat Wall Street's expectations on first-quarter earnings. But light revenue sent investors running for the express checkout lanes. It trades at $69, but clever retail experiments include localized merchandise in Chicago and Los Angeles.

"Investors looking for dividends and value would be better off buying Target," says Jesse Cohen, senior editor at Investing.com. "The retailer has recorded six consecutive quarters of traffic growth, while its digital efforts have seen the company's e-commerce sales rise sharply in recent months."

Sears Holdings Corp. (SHLD). Attention, Kmart shoppers: The corporate parent is in deep financial doo-doo.

"Sears has closed more than 300 stores in the past two-plus years," Tsarsis says. "Since Edward Lampert took over Sears in 2004, the company's theoretical value has gone from $11 billion to approximately $1.5 billion."

Nor is Sears a bargain-basement buy.

[See: 8 Soaring Stocks That Suffered the Big Bounce.]

"Once the top U.S. retailer, Sears is suffering through an incredible implosion with more pain foreseen ahead," Cohen says. "Years of declining sales and massive operating losses have pushed it to the brink of bankruptcy."

Home Depot (HD). Home Depot has a future filled with promise. Besides benefiting from the recent housing boom, HD stock has been unstoppable since 2010, up more than 300 percent to $128 per share.

The same rising tide on the housing front has lifted competitor Lowe's Companies (LOW).

"Home Depot is No. 1 in the right sector," says Jordan Kimmel, managing member of FACTS Asset Management in New York. "They understand stakeholder management."

Macy's (M). Macy's inspires the same investor jitters that other department store chains do: It's off 54 percent since mid-July 2015 to $33 per share. But prior, it hit a bull run lasting more than four years; share prices more than tripled.

At least one pundit sees it as a plum value: "I've invested in Macy's because I feel it will be a long-term survivor," Fram says. "It has already taken steps to move to lower price levels, retain its 'sales' format, close unproductive stores, and provide higher-styled private brands."

TJX Companies (TJX). Sometimes when prices go up, it's a great thing -- and the company that runs Marshall's and T.J. Maxx discount stores has been on an uninterrupted climb over five years, more than tripling to $77 a share.

"TJX has compelling prospects," says Peter Cohan, a visiting lecturer at Babson College who teaches strategy and entrepreneurship. Out of many big-box stores, "TJX is the only one that has a competitive advantage consumers find attractive: the ability to buy brand-name clothing at a low price and sell it at a discount."

Nordstrom (JWN). Famous for half yearly sales, the high-end retailer has weathered a more ominous halving: Share prices this last year tumbled 50 percent.

Yet like its brick-and-mortar cousin Macy's, Nordstrom climbed the previous four years without a hitch, up 83 percent.

So what next for the Seattle-based chain? In an age of razor-thin margins among online competitors, consumers may be tired of Nordstrom's lofty prices -- and unwilling to wait half a year for a break. "Nordstrom has very high costs and very little traffic -- a recipe for trouble," Cohan says.

Wal-Mart Stores (WMT). Always low prices? Ask the nearest white-knuckled investor. Wal-Mart recently spent five months with a stock market hangover, slumping 22 percent. It's since recovered, but concerns remain over a massive $2.7 billion in committed wage increases.

The future depends on how WMT handles the apples and oranges of retail. On the one hand, it faces intense competition from dollar stores including the surging Dollar General Corp. (DG), whose stock is up 53 percent since mid-November.

[Read: Why Warren Buffett Snapped Up Apple Stock.]

And while Wal-Mart expects to grow online sales 20 to 30 percent in the near future, that could ironically cannibalize in-store sales. Meanwhile, privately owned superstore competitors Costco and Meijer continue to grow without the pressure of shareholder demands.

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