One Lone Department Stores Rated ‘Buy’ at UBS

UBS has a ‘Buy’ rating on only one department store. Know which it is?

According to analyst Michael Binetti the best stock in the space right now -- and therefore a 'Buy' -- is Nordstrom.

Binetti has crunched the numbers, examined the trends and believes Nordy’s, as it’s affectionately called, will see strong growth throughout 2012 due to recently increased loyalty program incentives, rising customer satisfaction ratings and historically outperforming when the economy is improving.

Plus, their client base is more likely to open their wallets. “High end consumers always have a greater propensity to spend.

And he also thinks history bodes favorably for Nordstrom.

“During 2003-2007 Nordstrom outperformed most other department stores. We think this is a similar economy where people start to feel better about their budgets – and people will trade up to Nordstrom.”

Binetti initiated Nordstrom with a $63 price target.

By contrast Binetti started coverage of rivals Saks, Macy's, Kohl's, and J.C. Penney with "Neutral" ratings.

Of those mentioned above, Binetti said that Saks is one of the retailers with the most potential for its 2012 revenue at stores open at least a year, explaining that as the economy gets better it will create new aspirational customers.

He gave Saks a $12 price target.

Binetti views Macy's as the most improved stock in the department store sector over the last two years. "The company emerged from the recession with stores customized to local tastes, significantly re-energized employees and a top-notch e-commerce platform," he wrote.

Binetti started Macy's with a $43 price target.

Binetti said he’s concerned a bit about J.C. Penney's near-term sales but that the company should be able to make $900 million in selling, general and administrative cuts by 2013.

“The new everyday value strategy seems smart but we have to see if it gains traction with consumers.”

Binetti gave J.C. Penney a price target of $36.

Finally, the analyst says Kohl's will likely face some pressure as J.C. Penney works on its aggressive turnaround strategy and Macy's momentum continues to build.

Binetti has a price target of $53 on Kohl's.

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For Michael Benetti
UBS AG, its affiliates or subsidiaries has acted as manager/co-manager in the underwriting or placement of securities within the past 12 months of KSS
Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment banking services from this company/entity: KSS
UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking servicesfrom this company/entity within the next three months: KSS
UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services from this company/entity within the next three months: JWN
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided: KSS
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided: KSS
Within the past 12 months, UBS Securities LLC has received compensation for products and services other thaninvestment banking services from this company/entity: KSS
UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company`s common equity securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end): JCP
UBS Securities LLC makes a market in the securities and/or ADRs of this company: JCP
UBS Securities LLC makes a market in the securities and/or ADRs of this company: KSS
UBS Securities LLC makes a market in the securities and/or ADRs of this company: M
UBS Securities LLC makes a market in the securities and/or ADRs of this company: JWN
UBS Securities LLC makes a market in the securities and/or ADRs of this company: SKS
UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of last month`s end (or the prior month`s end if this report is dated less than 10 working days after the most recent month`s end): M
UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of last month`s end (or the prior month`s end if this report is dated less than 10 working days after the most recent month`s end): JWN

CNBC.com with wires.