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4 Discount Retailers to Steal the Show this Earnings Season
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A favorable consumer environment and strategic endeavors undertaken at company level are working in tandem for the Retail – Discount Stores industry. It goes without saying that the industry’s prospects are closely tied to the purchasing power of consumers. In fact, strengthening labor market and rising disposable income are forming a perfect base for higher consumer spending — which accounts for more than two-third of the U.S. economic activity.
The industry has certainly succeeded in creating a niche in spite of rising popularity of e-commerce players. This has been achieved on the back of investments, focus on cost savings, and introduction of loyalty and marketing programs. These apart, enhancement of omni-channel capacities, introduction of new brands, refurbishment of stores, and expansion of same-day delivery options have also been playing crucial roles.
These favorable factors paint a rosy picture for a number of industry participants this reporting cycle, which generally coincides with the holiday season. Per the report from Mastercard SpendingPulse sales from Nov 1 through Dec 24 increased 5.1% to more than $850 billion. The festive season is “make or break time” for retailers and companies vie to seize the bigger slice.
As companies are trying all means to gain market share, costs associated with promotional activities and an aggressive pricing strategy have been eating into margins. Meanwhile, any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses are other bottlenecks.
4 Discount Retailers Likely to Beat Estimates
It is hard to predict what awaits investors but with earnings season underway it would be prudent to invest in stocks that are likely trump earnings estimates. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we have highlighted four discount retail stocks, which are broadly grouped under the Retail – Wholesale sector. Per the latest Earnings Preview report, the sector is expected to record top and bottom-line growth of 5% and 19.3%, respectively, in this reporting cycle.
Ross Stores, Inc. (ROST - Free Report) , which is expected to report fourth-quarter fiscal 2018 results on Mar 5, is a solid bet with a long-term earnings growth rate of 10%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $1.13. The company registered average positive earnings surprise of 3.6% in the trailing four quarters. This operator of off-price retail apparel and home fashion stores has an Earnings ESP of +1.68% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can even count on Costco Wholesale Corporation (COST - Free Report) with a Zacks Rank #3 and an Earnings ESP of +2.46%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $1.64. It has a long-term earnings growth rate of 10%. This operator of membership warehouses is expected to report second-quarter fiscal 2019 results on Mar 6.
Another lucrative option is Target Corporation (TGT - Free Report) , a general merchandise retailer. The stock has a Zacks Rank #3 and an Earnings ESP of +0.94%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $1.53. It has a long-term earnings growth rate of 6%. The company is expected to announce fourth-quarter fiscal 2018 results on Mar 5.
You may also consider Burlington Stores, Inc. (BURL - Free Report) with a Zacks Rank #3 and an Earnings ESP of +0.22%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $2.77. The company delivered average positive earnings surprise of 13% in the trailing four quarters. It has a long-term earnings growth rate of 20.8%. This retailer of branded apparel products is expected to report fourth-quarter fiscal 2018 financial numbers on Mar 14.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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4 Discount Retailers to Steal the Show this Earnings Season
A favorable consumer environment and strategic endeavors undertaken at company level are working in tandem for the Retail – Discount Stores industry. It goes without saying that the industry’s prospects are closely tied to the purchasing power of consumers. In fact, strengthening labor market and rising disposable income are forming a perfect base for higher consumer spending — which accounts for more than two-third of the U.S. economic activity.
The industry has certainly succeeded in creating a niche in spite of rising popularity of e-commerce players. This has been achieved on the back of investments, focus on cost savings, and introduction of loyalty and marketing programs. These apart, enhancement of omni-channel capacities, introduction of new brands, refurbishment of stores, and expansion of same-day delivery options have also been playing crucial roles.
These favorable factors paint a rosy picture for a number of industry participants this reporting cycle, which generally coincides with the holiday season. Per the report from Mastercard SpendingPulse sales from Nov 1 through Dec 24 increased 5.1% to more than $850 billion. The festive season is “make or break time” for retailers and companies vie to seize the bigger slice.
As companies are trying all means to gain market share, costs associated with promotional activities and an aggressive pricing strategy have been eating into margins. Meanwhile, any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses are other bottlenecks.
4 Discount Retailers Likely to Beat Estimates
It is hard to predict what awaits investors but with earnings season underway it would be prudent to invest in stocks that are likely trump earnings estimates. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we have highlighted four discount retail stocks, which are broadly grouped under the Retail – Wholesale sector. Per the latest Earnings Preview report, the sector is expected to record top and bottom-line growth of 5% and 19.3%, respectively, in this reporting cycle.
Ross Stores, Inc. (ROST - Free Report) , which is expected to report fourth-quarter fiscal 2018 results on Mar 5, is a solid bet with a long-term earnings growth rate of 10%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $1.13. The company registered average positive earnings surprise of 3.6% in the trailing four quarters. This operator of off-price retail apparel and home fashion stores has an Earnings ESP of +1.68% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can even count on Costco Wholesale Corporation (COST - Free Report) with a Zacks Rank #3 and an Earnings ESP of +2.46%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $1.64. It has a long-term earnings growth rate of 10%. This operator of membership warehouses is expected to report second-quarter fiscal 2019 results on Mar 6.
Another lucrative option is Target Corporation (TGT - Free Report) , a general merchandise retailer. The stock has a Zacks Rank #3 and an Earnings ESP of +0.94%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $1.53. It has a long-term earnings growth rate of 6%. The company is expected to announce fourth-quarter fiscal 2018 results on Mar 5.
You may also consider Burlington Stores, Inc. (BURL - Free Report) with a Zacks Rank #3 and an Earnings ESP of +0.22%. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $2.77. The company delivered average positive earnings surprise of 13% in the trailing four quarters. It has a long-term earnings growth rate of 20.8%. This retailer of branded apparel products is expected to report fourth-quarter fiscal 2018 financial numbers on Mar 14.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
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