Strong second-quarter results have made retail stocks look more attractive to investors. Of course, Amazon continues to draw attention, but investors are looking at stocks that extend beyond the online giant that continues to change the retail business model. This is great news for the industry as a whole as the sector prepares to ramp up for what they hope will be a profitable holiday season.
Will that excitement spill over into 2019? For several retailers, it appears that may be the case. We’ve identified eight stocks that are showing strong results now and are projected to see their stock price climb into the coming year.
Quick Links
- Amazon
- Macy's
- Callaway Golf Co.
- Boot Barn Holdings Inc.
- Five Below Inc.
- Burlington Stores Inc.
- TJX Cos.
- Williams-Sonoma, Inc.
#1 - Amazon (NASDAQ:AMZN)
Amazon (NASDAQ: AMZN) - Does Amazon still have room to grow? For many investors and analysts, the answer is yes. There are a few reasons for that. First, e-commerce is a sector that is still in its developing stages. According to Statista, e-commerce is well-positioned to capture more than their fair share of growth in a sector that only accounted for approximately 10% of worldwide retail sales (9.7% in the United States). One of the reasons for that is their fulfillment centers which allow them to deliver on their promise of two-day shipping for their Prime customers – a benefit that may also be accounting for Prime customers outspending Amazon’s non-subscribers.
Another area where Amazon is set to grow is cloud computing. With $6.1 billion in sales, they are the market share leader in the category by a large margin. At 34%, their market share is over twice the share of the second-place company, Microsoft. But while competitors are trying to keep up with Amazon in the digital space, Amazon continues to make in-roads in the brick-and-mortar market. Their acquisition of Whole Foods and their partnership with Berkshire-Hathaway and JPMorgan Chase to help them become a player in the healthcare sector. Add to that, their continued investment and growth in their Echo voice-activated speakers and you can see why investors remain bullish on the company's stock going into 2019 despite its current valuation which may scare off some investors.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $171.39
- Consensus Rating
- Buy
- Ratings Breakdown
- 41 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $222.49 (29.8% Upside)
#2 - Macy's (NYSE:M)
Macy’s (NYSE: M) - If you’re looking for a retail stock with a solid valuation, then you might be attracted to Macy’s. The brick-and-mortar retailer’s shares are up over 50% for the year, helping it rise to be a top 10 performer (year-to-date) in the S&P 500. The question that you might be asking is why. Part of the answer is if you can't beat them, join them. And Macy's has been aggressively making strides to stake a claim in the digital space. This embracing of digital sales has had another welcome benefit. Consumers are buying online and when they go to pick-up their order at stores, they are making additional purchases. In their last earnings report, Macy’s cited a 25% increase in sales to customers in this scenario. What’s more, the Macy’s app seems to be providing customers with a good experience, including the ability to check prices, track purchases, conduct an online chat, and offering mobile wallet payments.
But digital growth is not the only reason analysts think Macy's may be able to stand up to Amazon. The company remains invested in its specialty beauty stores, Bluemercury as well as Macy's Backstage – a discount outlet brand. And, like many retailers, Macy's has had to close stores that are underperforming to help reduce costs and increase profits. While some analysts may wonder if Macy's is closing stores rapidly enough, there's a lot to like about the direction the company is headed. And with a P/E ratio of around 10, it's a competitive stock in this space.
About Macy's
Macy's, Inc, an omni-channel retail organization, operates stores, websites, and mobile applications in the United States. The company sells a range of merchandise, such as apparel and accessories for men, women, and kids; cosmetics; home furnishings; and other consumer goods under the Macy's, Bloomingdale's, and bluemercury brands.
Read More - Current Price
- $14.61
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $19.50 (33.5% Upside)
#3 - Callaway Golf Co. (NYSE:ELY)
Callaway Golf Co. (NYSE: ELY) - Who said golf is dead? Maybe it’s the Tiger effect, maybe it’s Nike's exit from the category, or maybe it's the growth of simulators and other programs that are beginning to take root to make the game more accessible to a younger market. Whatever the reason for the growth, the golf equipment, and accessories manufacturer has seen its stock climb approximately 71% in the 12 months that led up to its last earnings report. That growth is leaps and bounds ahead of the consumer discretionary market (4%) and the S&P 500 (18%) in that same period. So is it overvalued? Maybe not. Despite the massive jump, there was a pullback and shares sit slightly below their 52-week high. The stock has a P/E ratio of over 19 and is trading at 22x forward 12-month earnings estimates.
But the question for investors is where will the stock go? Full-year revenue estimates are projected to rise nearly 17% to $1.23 billion with adjusted earnings to rise to $1.00 per share (an 88.7% increase). Analysts love the stock which has received 10 upward earnings estimates for the rest of 2018 and 2019 and no downward estimates for the same timeframe.
About Callaway Golf
Callaway Golf Company, together with its subsidiaries, designs, manufactures, and sells golf equipment, golf and lifestyle apparel, and other accessories. It operates through three segments: Topgolf; Golf Equipment; and Apparel, Gear and Other. The Topgolf segment operates Topgolf venues equipped with technology-enabled hitting bays, multiple bars, dining areas, and event spaces, as well as Toptracer ball-flight tracking technology used by independent driving ranges and broadcast television; and World Golf Tour digital golf game.
Read More - Current Price
- $0.00
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Boot Barn Holdings Inc. (NYSE:BOOT)
Boot Barn Holdings Inc. (NYSE: BOOT) - Another niche player that is enjoying a surge in their stock price is Boot Barn. In the last three years, the company has seen its shares rise nearly 30%. While this trails the S&P 500 over the same period, the same can’t be said for the last 12 months. In that time frame, the company’s stock price has shot up 237%. And while the stock is now sitting at right about its 52-week high, analysts are projecting growth on both its top and bottom lines, helping to fuel speculation that the stock still has room to grow.
The company has seemed to find a sweet spot between the opening of new stores and the trend towards positive consumer spending in the area of apparel. That was evident in the first quarter of 2018 when gross margins increased from 29.7% to 31.8%
In the current quarter, revenues are expected to reach $161.55 million, an increase of almost 13%. And on the top line, the company is expected to reach $757.54 million, an increase of nearly 12%. On the EPS front, Boot Barn is projecting their full-year EPS to reach $1.15 per share, an increase of over 64% from current levels. The estimates are supported by analysts many of whom are positively revising the stock’s earnings estimates.
About Boot Barn
Boot Barn Holdings, Inc, a lifestyle retail chain, operates specialty retail stores in the United States. The company's specialty retail stores offer western and work-related footwear, apparel, and accessories for men, women, and kids. It offers boots, shirts, jackets, hats, belts and belt buckles, handbags, western-style jewelry, rugged footwear, outerwear, overalls, denim, and flame-resistant and high-visibility clothing.
Read More - Current Price
- $135.51
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $138.20 (2.0% Upside)
#5 - Five Below Inc. (NASDAQ:FIVE)
Five Below Inc. (NASDAQ: FIVE) - For investors, there is an axiom that you either want to be a high-end retailer or a discount retailer. Five Below is one of the best at creating a discount experience that caters to both teenagers and parents alike. The stores are bright and loud. Their model is to sell items at a price of $5 or below, which makes them attractive to an audience of pre-teens and teenagers who are finding that discount can be chic. And in some cases, stores are loaded with items that are discounted beyond these already low prices.
In their latest earnings report, the company reported a 2% increase in same-store sales. And the company is not just relying on same-store sales. They plan to open more stores with an aggressive revenue growth target of 20% through 2020. While the company faces headwinds from the online convenience and low pricing of Amazon and, increasingly, Wal-Mart, Five Below seems to know its audience well and is catering an experience that captures those dollars well.
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
- $79.17
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 13 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $109.63 (38.5% Upside)
#6 - Burlington Stores Inc. (NYSE:BURL)
Burlington Stores Inc. (NYSE: BURL) - What’s in a name? For Burlington Stores, it could be more a case of what’s not in their name. The company dropped the words “Coat Factory” from their name and investors seem to approve. Burlington Stores seeks to focus more on its line of beauty and women’s sportswear collections, making it no longer just a seasonal company (the company calls it “de-weatherizing). The company has also been opening new stores, which is unusual at a time when many brick-and-mortars are closing stores to shore up their bottom line. During the second quarter of 2018, they opened 18 new stores. For the entire fiscal year, the company plans to open between 35 and 40 new stores in addition to remodeling 34 others.
The company’s strong performance began in the fourth quarter of 2017 and has continued into 2018. Burlington Stores posted a solid first quarter where adjusted earnings reached $1.26 per share beating analysts’ estimates of $1.09. That was also a 59% increase from the same period in 2017. Revenue increased as well with net sales jumping nearly 13% to $1,518.4 million, which also beat estimates by a healthy margin.
About Burlington Stores
Burlington Stores, Inc operates as a retailer of branded merchandise in the United States. The company provides fashion-focused merchandise, including women's ready-to-wear apparel, menswear, youth apparel, footwear, accessories, toys, gifts, and coats, as well as baby, home, and beauty products.
Read More - Current Price
- $259.92
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $294.94 (13.5% Upside)
#7 - TJX Cos. (NYSE:TJX)
TJX Cos. (NYSE: TJX) - The question investors need to consider for TJX is if their stock is overpriced relative to their growth. The company has a business network that gives it the scale to sell their merchandise at prices 20-60% below traditional retailers and, in some cases, even being a lower option than Amazon and Wal-Mart. The company is also known for frequently rotating its merchandise, giving customers a continuous new selection of offerings. The stock price has reflected the strength of their business model, and reached an all-time high in August of 2018. Revenue rose to $9.3 billion (a 12% gain) and GAAP earnings increased to $1.17 per share. Both numbers beat expectations. And analysts are still forecasting that the stock has room to run with some projections of revenue growth reaching 12% for 2019. The one question may be a valuation that some may say is 26X this year’s earnings when you discount the tax reform boost. However, the valuation is in-line with competitors in this space, such as Ross Stores which trades at about 23x earnings. When you add in its dividend yield (currently about 1.6%), TJX looks to be a solid long-term growth stock for 2019.
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
- $115.62
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $126.76 (9.6% Upside)
#8 - Williams-Sonoma, Inc. (NYSE:WSM)
Williams-Sonoma, Inc. (NYSE: WSM)- Branding is an often mocked word among investors … until it works. And Williams-Sonoma is an example of how branding can boost a company’s image as well as its stock. Williams-Sonoma is one of the true practitioners of an omni-channel marketing strategy. This basically means that however, a customer chooses to engage with the company whether that's on their smartphone, tablet, through their printed catalog (yes, those still exist) or the in-store experience. Their experience will be the same. And for a company that is known for selling high-priced home furnishings and décor, that experience is essential to separating it from its competitors. The company also is the parent company of subsidiaries such as Pottery Barn, Pottery Barn for Kids and West Elm among others.
Although the stock had a rough couple of years in 2015 and 2016, it has started to rally in 2018 and at around $66 per share, it has room to run to meet its five-year high of $87.50.
About Williams-Sonoma
Williams-Sonoma, Inc operates as an omni-channel specialty retailer of various products for home. It offers cooking, dining, and entertaining products, such as cookware, tools, electrics, cutlery, tabletop and bar, outdoor, furniture, and a library of cookbooks under the Williams Sonoma Home brand, as well as home furnishings and decorative accessories under the Williams Sonoma lifestyle brand; and furniture, bedding, lighting, rugs, table essentials, and decorative accessories under the Pottery Barn brand.
Read More - Current Price
- $130.43
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 10 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $134.90 (3.4% Upside)
Despite rumors to the contrary, retail is not dead, and there are many options beyond Amazon and Wal-Mart that investors can choose to make money. This report shows you that if the niche players offer strong value, albeit in some cases with high valuations. While retail may not be a short-term delight for traders, any of the stocks in this report can be solid long-term investments moving as you look for growth into the future.
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