3 Retail Stocks Thriving in an Uncertain Economy

With numerous prominent brick-and-mortar retail bankruptcies this year and major shopping malls being converted into Amazon (NASDAQ:AMZN) distribution centers, you might be thinking that retail stocks are not the sector that investors want to be in right now. Thanks to the rise of e-commerce, lots of physical retail businesses were a sinking ship even before the pandemic. Now, many of the retail chains that have been a staple for decades are being forced to take drastic measures just to stay afloat.

While it’s true that quite a few retail stocks are struggling mightily at the moment, certain companies are prospering. These businesses are seeing large increases in sales and are focused on expansion plans that could reward savvy investors over the long-run. Here are 3 retail stocks that are thriving in an uncertain economy.

Lululemon Athletica (NASDAQ:LULU)

The first stock on our list is an athletic apparel company that has been heading higher over the past week and is seeing rapid sales growth. It’s a company that started out selling yoga pants and has since grown into an international apparel powerhouse. Lululemon’s brand stands out thanks to higher quality materials and stylish product designs. Although it has been negatively impacted by the pandemic as many of its physical stores were closed for a period of time, it’s a stock that is worth a look at this time.

In Q2, the company saw a year-over-year decline in revenues of 17% to $652 million. However, there were a lot of bright spots in its Q2 earnings report including a 68% increase in direct to consumer sales and e-commerce revenue of $352 million which was a year-over-year increase of 67.7%. As the world recovers from the health crisis, Lululemon should see in-store sales bounce back along with continued growth in its e-commerce business. The company also made an intriguing acquisition this month by buying Home Fitness MIRROR, which is an interactive workout platform similar to Peloton (NASDAQ:PTON).

Target (NYSE:TGT)

Target is the 8^th largest retailer in the United States and is the perfect example of a company that is flourishing in the current economic environment. Since it is considered an “essential-retailer”, stores have been open throughout the pandemic and Target has seen “unusually strong market-share gains” across all five of its core merchandise categories. The company reported a blowout Q2 earnings report and the stock has risen to new all-time-highs as a result.

Q2 was perhaps the best quarter that Target has ever seen. The company saw Q2 EPS increase by 84.4% year-over-year and revenue grow by 24.7% year-over-year, confirming just how successful Target has been during the pandemic. Another impressive number from the report was Q2 comparable sales growth of 24.3%, which was the strongest that the company has ever reported. Lastly, the company’s curbside pickup sales increased by over 700% in the quarter, which is nothing short of remarkable. There’s no reason to believe that this stock will stop rewarding shareholders anytime soon, and long-term investors will also appreciate the dividend payments that Target provides.

Dollar General (NYSE:DG)

With many Americans looking for ways to save money on their everyday purchases, retailers like Dollar General are seeing a strong uptick in sales. Investors are picking up on this trend, and Dollar General stock has been steadily rising to hit new all-time highs since its March lows. Adding a discount retailer to your portfolio makes sense during uncertain economic times since there will always be a demand for non-cyclical consumer products at low prices.

What’s interesting about Dollar General is that they tend to focus on targeting rural and working-class regions. This has allowed the company to develop a strong footprint with about 16,500 stores across the United States. With unemployment affecting these rural areas heavily, Dollar General stores are seeing a high increase in foot traffic. It’s a store that sells pretty much everything and is making progress with expansion into e-commerce. In Q1, net sales increased by 27.6% year-over-year in while net income grew a staggering 68.8% year-over-year. Dollar General reports its second-quarter earnings on August 27^th and should be able to continue its streak of positive results.

Retail Rewards

All of these retail stocks have made impressive moves so far this year and have a chance to continue rewarding investors for years to come regardless of how long a full economic recovery takes. Keep an eye on each one of them going forward if you are interested in adding some retail exposure to your portfolio.