Once again it appears that the death of brick and mortar retail appears to be exaggerated. First-quarter earnings are showing that many retailers that rely on in-person traffic for a considerable chunk of their business are seeing a rebound in sales. And many are planning to open stores in 2021.
This isn’t to say that e-commerce is going away. In fact, a common feature for many of these stocks is that they either developed or enhanced their digital footprint during the pandemic.
This special presentation focuses on retailers that are planning to add to their brick-and-mortar footprint in 2021. And some are planning to do so by a substantial margin. Once again, this doesn’t signal a transformative shift in the overall trend, but it does mean that for the foreseeable future, brick and mortar will have some relevance.
Quick Links
- Dollar General
- Dollar Tree
- L Brands
- The TJX Companies
- Five Below
- Tractor Supply Company
- Signet Jewelers
#1 - Dollar General (NYSE:DG)
The first company on the list is one with the most aggressive store opening plans. Dollar General (NYSE:DG) plans to open 1,035 new stores in 2021. In fact, according to data released by Coresight Research, one in every three new stores to open in 2021 will be a Dollar General store.
Dollar General caters to small towns that are not serviced by big-box retailers. This gives it the ability to capture a wide demographic base.
Central to Dollar General’s plans is an expansion of its Popshelf brand which targets a higher-income consumer. The company plans to build these as stand-alone stores as well as store-in-store remodels. Dollar General is also expanding its selection of frozen meats and produce to provide options for health-conscious consumers.
In the trailing twelve months, DG stock is up 11.6%. It is down 3% in 2021 and it’s fair to wonder why. Some of it may be skepticism that the company can repeat its strong growth numbers. Another reason may be reports that a new CEO may take charge in the near future. Both of those concerns look to be overblown and the stock has been making a nice rally since March.
About Dollar General
Dollar General Corporation, a discount retailer, provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. It offers consumable products, including paper and cleaning products, such as paper towels, bath tissues, paper dinnerware, trash and storage bags, disinfectants, and laundry products; packaged food comprising cereals, pasta, canned soups, fruits and vegetables, condiments, spices, sugar, and flour; and perishables that include milk, eggs, bread, refrigerated and frozen food, beer, and wine.
Read More - Current Price
- $73.25
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 13 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $104.00 (42.0% Upside)
#2 - Dollar Tree (NASDAQ:DLTR)
It’s not surprising that Dollar Tree (NASDAQ:DLTR) would also make this list. Discount retailers are expected to do very well in 2021. This is due, in part, to the expansion of wealth inequality created by the pandemic.
Dollar Tree is the parent company of Family Dollar. Between the two chains, the company is planning to open nearly 600 stores in 2021. Part of this strategy will take the form of combination stores. These stores will be located in small towns with roughly 3,000 to 4,000 people where there are limited shopping options.
Both “stores” will target the same demographic. However, where the Family Dollar side will focus on everyday items, the Dollar Tree side will focus on seasonal offerings and items that are literally priced at $1. The stores will also offer a Crafter’s Square to capitalize on a trend that has surged during the pandemic.
DLTR stock is up 36% in the trailing twelve months and is flat in 2021.
About Dollar Tree
Dollar Tree, Inc operates retail discount stores. The company operates in two segments, Dollar Tree and Family Dollar. The Dollar Tree segment offers merchandise at the fixed price of $ 1.25. It provides consumable merchandise, which includes everyday consumables, such as household paper and chemicals, food, candy, health, personal care products, and frozen and refrigerated food; variety merchandise comprising toys, durable housewares, gifts, stationery, party goods, greeting cards, softlines, arts and crafts supplies, and other items; and seasonal goods that include Christmas, Easter, Halloween, and Valentine's Day merchandise.
Read More - Current Price
- $63.18
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $87.95 (39.2% Upside)
#3 - L Brands (NYSE:LB)
Self-care took on heightened importance during the pandemic. And with brands like Bath & Body Works and Victoria’s Secret, L Brands (NYSE:LB) was in a good position to capitalize. LB stock has grown over 450% in the last 12 months.
And after a year in which the company proved it could flourish in an e-commerce environment, analysts are projecting that there may be growth ahead. LB stock was upwardly revised from 98 cents to $1.25 in advance of their first-quarter earnings report. If the company delivers on that number and comes in at or above its top-line estimate of $2.89 billion the company would show not only a year-over-year gain, but also a gain from the same quarter in 2019.
Investors should note that the company is spinning off its Victoria’s Secret and Bath & Body Works into two publicly traded companies. A previous deal to sell the Victoria’s Secret business fell through during the pandemic. At the time, Victoria’s Secret was valued at $1.1 billion.
About LandBridge
LandBridge Company LLC owns and manages land and resources to support and enhance oil and natural gas development in the United States. It owns surface acres in and around the Delaware Basin in Texas and New Mexico. The company holds a portfolio of oil and gas royalties. It also sells brackish water and other surface composite materials.
Read More - Current Price
- $66.09
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $36.57 (44.7% Downside)
#4 - The TJX Companies (NYSE:TJX)
The TJX Companies (NYSE:TJX) recently reported stellar earnings but the stock is dropping as investors are concerned about store closures in Europe and Canada. The company reported that those closures resulted in a loss of $1.1 billion in sales on the top line and an impact between 21 cents and 24 cents on the bottom line.
TJX is the parent brand of several off-price apparel and home fashion brands including T.J. Maxx, Marshalls, and HomeGoods. The company is planning to open 122 new stores in 2021 and it may have some success since its stores are not tied to mall locations.
Prior to the release of its earnings report, TJX stock was up approximately 45% in the last 12 months and was approaching its 52-week high. With the stock dropping after the report, investors may want to use this opportunity to grab the stock at a discount. The company does pay a modest dividend that it increased by three cents at the end of 2020.
About TJX Companies
The TJX Companies, Inc, together with its subsidiaries, operates as an off-price apparel and home fashions retailer in the United States, Canada, Europe, and Australia. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The company sells family apparel, including footwear and accessories; home fashions, such as home basics, furniture, rugs, lighting products, giftware, soft home products, decorative accessories, tabletop, and cookware, as well as expanded pet, and gourmet food departments; jewelry and accessories; and other merchandise.
Read More - Current Price
- $119.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $127.41 (6.4% Upside)
#5 - Five Below (NASDAQ:FIVE)
Five Below (NASDAQ:FIVE) operates in the high-end segment of the discount store sector. The company is known for attracting tweens and teenagers (and their parents) with its “treasure hunt” concept. It’s served the company well. FIVE stock has tripled in the last four years. And in the last 12 months, the stock is up 92%.
Unlike some other chains, Five Below still has a relatively small footprint. Heading into 2021, the retailer had less than 1,000 stores nationwide. So even with its plans to add 158 new stores in 2021 oversaturation should not be an issue. And with the typical store being around just 8,500 square feet expansion isn’t too bad on the bottom line.
Unlike many of the other companies in this presentation, Five Below does not have a strong e-commerce presence. That’s one of the company’s 2021 goals. Investors riding the fence on FIVE stock may want to wait for some additional clarity when the company reports earnings in early June.
About Five Below
Five Below, Inc operates as a specialty value retailer in the United States. The company offers range of accessories, which includes novelty socks, sunglasses, jewelry, scarves, gloves, hair accessories, athletic tops and bottoms, and t-shirts, as well as nail polish, lip gloss, fragrance, and branded cosmetics; and personalized living space products, such as lamps, posters, frames, fleece blankets, plush items, pillows, candles, incense, lighting, novelty décor, accent furniture, and related items, as well as provides storage options.
Read More - Current Price
- $83.10
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 12 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $106.40 (28.0% Upside)
#6 - Tractor Supply Company (NASDAQ:TSCO)
Although discount retailers are drawing a lot of attention in terms of retail expansion, Tractor Supply Company (NASDAQ:TSCO) should not be overlooked. The company has plans to build up to 80 new stores in 2021.
TSCO stock is up 63 in the trailing 12-month period and is up 27% so far in 2021. However, despite a solid earnings report in April, the stock appears to be range-bound and looking for direction. But at a time when consumer stocks, in general, are out of favor, the fact that Tractor Supply is holding its own is encouraging.
Yes, you can buy shares of The Home Depot (NYSE:HD) and you’ll be well served in doing so. But with the ability to generate free cash flow that could, theoretically, be used to boost its dividend and share repurchase programs, TSCO looks like it could be ready to break out particularly since the housing market remains strong.
About Tractor Supply
Tractor Supply Company operates as a rural lifestyle retailer in the United States. The company offers various merchandise, including livestock and equine feed and equipment, poultry, fencing, and sprayers and chemicals; food, treats, and equipment for dogs, cats, and other small animals, as well as dog wellness products; seasonal and recreation products comprising tractors and riders, lawn and garden, bird feeding, power equipment, and other recreational products; truck, tool, and hardware products, such as truck accessories, trailers, generators, lubricants, batteries, and hardware and tools; and clothing, gift, and décor products consist of clothing, footwear, toys, snacks, and decorative merchandise.
Read More - Current Price
- $270.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $282.82 (4.7% Upside)
#7 - Signet Jewelers (NYSE:SIG)
The last stock on this list is Signet Jewelers (NYSE:SIG). I’ll admit to not paying much attention to jewelry retailers in the last 12 months or more. So it was more than a little surprising to see that SIG stock is up a whopping 522% in the trailing twelve months. And it’s up 116% in 2021. That may be the tailwind that will allow Signet to meet its forecast of opening 87 new stores in 2021.
Jewelry is typically the kind of item that consumers want to see and touch. But through its “Path to Brilliance” initiative, Signet was able to more than quadruple its e-commerce sales. This took the company from 5% which was below the sector average to over 20% which was above the sector average.
With over 700 trained virtual sellers and features such as virtual try-on’s, the company is poised to continue that success even as the company’s stores are now open. The company is also making inroads with Gen Z customers with a program in which consumers can pay for items in four bi-weekly payments.
About Signet Jewelers
Signet Jewelers Limited operates as a diamond jewelry retailer. It operates through three segments: North America, International, and Other. The North America segment operates jewelry stores in jewelry stores in malls, mall-based kiosks, and off-mall locations in the United States and Canada primarily under the Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry, Jared Vault, Zales Outlet, Zales Jewelers, Diamonds Direct, James Allen, Banter by Piercing Pagoda, and Peoples Jewellers names, as well as operates online through its digital banners, James Allen and Blue Nile.
Read More - Current Price
- $96.66
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $109.60 (13.4% Upside)
Perhaps the death of in-person retail is inevitable. But for now, in 2021, brick-and-mortar stores still have a purpose. And as the companies in this presentation show, successful retailers can take a “both/and” approach. E-commerce and a brick-and-mortar presence can co-exist. It’s about the customer. And increasingly it’s about the customer experience (CX).
In an omnichannel world, consumers want the flexibility to buy what they want, when they want it, and to be able to pick it up or have it delivered in a way that’s most convenient to them. As the pandemic eases, convenience may be taking a back seat to getting out and being among people again.
However, with the current bifurcation in the economy, many consumers remain extremely price sensitive. Some of these same consumers may lack internet access.
For these and other reasons, it’s a favorable environment for in-person retail. Be sure you’re taking advantage of it by considering these stocks and others like them for your portfolio.
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