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3 Under-the-Radar Retail Stocks to Buy As Sector Surges
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The retail sector has been all over the news this week, with many of the major players reporting their latest earnings results, and on Wednesday, the Commerce Department added more fuel to the fire by showing that retail sales increased 0.5% in July.
Various retailers have posted impressive results, driven by rising sales to consumers who are spending more. Walmart (WMT - Free Report) surged Thursday after its quarterly sales grew at the fastest rate in a decade, and Home Depot’s (HD - Free Report) profit and revenue topped estimates.
It is apparent that “retail apocalypse” talk is dying down, and the sector as whole is moving in the right direction. The Zacks Retail and Wholesale sector, consisting of 214 companies, has generated a 14.28% return so far this year.
With this positive trend, it is important to be aware of more retailers than the ones that have been making headlines this week. Here are 3 retail stocks that should be on your radar amid the current retail momentum:
Five Below is a value retailer that offers a wider range of merchandize to mainly teen and pre-teen customers. By only selling products, such as toys, crafts, or candy, that are $5 or under, the company has been able to differentiate itself in the crowded retail space.
Along with developing a strong niche in value retailing, Five Below has implemented a successful aggressive store growth strategy. As many other retailers are choosing to shut down stores, Five Below is on a mission to rapidly expand its storefront. The company opened 103 new stores in fiscal 2017 and plans to open 125 more this year.
Clearly, this robust strategy has been working. Shares of Five Below have been on a significant rise this year, growing by over 50% to date.
Further, Five Below beat earnings and sales expectations for the 6th straight quarter in its Q1 report. The figures not only surpassed analyst’s expectations but also management’s own guidance range. Net sales grew 27.2% from the year-ago quarter.
Another stellar report could push shares even higher when the company releases its Q2 results on September 6.
Abercrombie has outperformed the retail industry as well this year, with shares nearly increasing 50%.
This momentum has been driven by the retailer improving its Direct-to-Consumer business and narrowing its focus on Millennial shoppers. One of the company’s recent youth-focused initiatives was partnering with Paypal’s (PYPL - Free Report) Venmo to be the first retailer to let customers purchase products directly through their Venmo accounts.
Additionally, Abercrombie is utilizing its Hollister brand to drive growth. Hollister recorded sales growth across all channels and geographies in the first-quarter. Net sales improved 13% from the same quarter one year ago. The brand is gaining from positive customer responses to product innovation and marketing efforts. Hollister will launch a collaboration with popular pop musician Khalid in stores and online on September 13.
Abercrombie is set to release its Q2 earnings on August 30. The company is currently one of only 8 retail stocks that hold a Zacks Rank of #1 (Strong Buy).
RH, formerly known as Restoration Hardware, is a leading luxury retailer in the home furnishing space.
RH’s primary focus on home furnishing products means that demand for its products is driven by the performance of the broader housing market. Positives like an improving economy, high labor productivity, and solid consumer confidence raise optimism about the housing sector’s performance and thus help RH.
So far this year, the economy is working in RH’s favor. Shares of the retailer have moved a remarkable 67% higher.
Other factors have also contributed to RH’s success. The company is redesigning its supply chain, rationalizing product offerings, and transitioning inventory into fewer facilities. RH has also been experimenting with its store locations. The company recently opened RH Toronto and RH West Palm, its second and third locations with integrated restaurants to boost the customer experience.
While the stock has been on a major climb, investors should be aware of the economic risks that come with RH. Not only is demand heavily predicated on the housing market, but the company also sources a majority of its merchandise from outside the United States. Tariffs could lead to an increase of costs of goods sold.
But for now, an upbeat retail sector and economy as a whole make RH’s outlook seem promising moving forward.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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3 Under-the-Radar Retail Stocks to Buy As Sector Surges
The retail sector has been all over the news this week, with many of the major players reporting their latest earnings results, and on Wednesday, the Commerce Department added more fuel to the fire by showing that retail sales increased 0.5% in July.
Various retailers have posted impressive results, driven by rising sales to consumers who are spending more. Walmart (WMT - Free Report) surged Thursday after its quarterly sales grew at the fastest rate in a decade, and Home Depot’s (HD - Free Report) profit and revenue topped estimates.
It is apparent that “retail apocalypse” talk is dying down, and the sector as whole is moving in the right direction. The Zacks Retail and Wholesale sector, consisting of 214 companies, has generated a 14.28% return so far this year.
With this positive trend, it is important to be aware of more retailers than the ones that have been making headlines this week. Here are 3 retail stocks that should be on your radar amid the current retail momentum:
Five Below (FIVE - Free Report)
Five Below is a value retailer that offers a wider range of merchandize to mainly teen and pre-teen customers. By only selling products, such as toys, crafts, or candy, that are $5 or under, the company has been able to differentiate itself in the crowded retail space.
Along with developing a strong niche in value retailing, Five Below has implemented a successful aggressive store growth strategy. As many other retailers are choosing to shut down stores, Five Below is on a mission to rapidly expand its storefront. The company opened 103 new stores in fiscal 2017 and plans to open 125 more this year.
Clearly, this robust strategy has been working. Shares of Five Below have been on a significant rise this year, growing by over 50% to date.
Further, Five Below beat earnings and sales expectations for the 6th straight quarter in its Q1 report. The figures not only surpassed analyst’s expectations but also management’s own guidance range. Net sales grew 27.2% from the year-ago quarter.
Another stellar report could push shares even higher when the company releases its Q2 results on September 6.
Abercrombie & Fitch (ANF - Free Report)
Abercrombie has outperformed the retail industry as well this year, with shares nearly increasing 50%.
This momentum has been driven by the retailer improving its Direct-to-Consumer business and narrowing its focus on Millennial shoppers. One of the company’s recent youth-focused initiatives was partnering with Paypal’s (PYPL - Free Report) Venmo to be the first retailer to let customers purchase products directly through their Venmo accounts.
Additionally, Abercrombie is utilizing its Hollister brand to drive growth. Hollister recorded sales growth across all channels and geographies in the first-quarter. Net sales improved 13% from the same quarter one year ago. The brand is gaining from positive customer responses to product innovation and marketing efforts. Hollister will launch a collaboration with popular pop musician Khalid in stores and online on September 13.
Abercrombie is set to release its Q2 earnings on August 30. The company is currently one of only 8 retail stocks that hold a Zacks Rank of #1 (Strong Buy).
RH (RH - Free Report)
RH, formerly known as Restoration Hardware, is a leading luxury retailer in the home furnishing space.
RH’s primary focus on home furnishing products means that demand for its products is driven by the performance of the broader housing market. Positives like an improving economy, high labor productivity, and solid consumer confidence raise optimism about the housing sector’s performance and thus help RH.
So far this year, the economy is working in RH’s favor. Shares of the retailer have moved a remarkable 67% higher.
Other factors have also contributed to RH’s success. The company is redesigning its supply chain, rationalizing product offerings, and transitioning inventory into fewer facilities. RH has also been experimenting with its store locations. The company recently opened RH Toronto and RH West Palm, its second and third locations with integrated restaurants to boost the customer experience.
While the stock has been on a major climb, investors should be aware of the economic risks that come with RH. Not only is demand heavily predicated on the housing market, but the company also sources a majority of its merchandise from outside the United States. Tariffs could lead to an increase of costs of goods sold.
But for now, an upbeat retail sector and economy as a whole make RH’s outlook seem promising moving forward.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>