We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Retail stocks currently enjoy a spot near the top of the Zacks Sector Rank, sitting in the #2 position. With the highly anticipated economic recession that never materialized, retail stocks have experienced some considerable revisions higher to their earnings estimates, boosting the near-term expectations of their stock prices.
That isn’t to say the economic picture is perfect though. One interesting trend to emerge this year is the strength of discount retailers. With inflation continuing to put pressure on consumers’ budgets, many are preferring to shop where the prices are lower.
Stocks like Ross Stores (ROST - Free Report) and The TJX Companies (TJX - Free Report) , who represent some of the top discount retailers, have seen strong upward trending earnings revisions, bullish prices action, and strong Q2 earnings that are beating analyst estimates.
Sprouts Farmers Market (SFM - Free Report) is another retailer that is building a powerful business, although it isn’t in the discount segment. All three of these stocks have top Zacks Ranks and are sitting at or near the all-time highs in their stocks.
Image Source: Zacks Investment Research
Ross Stores
Ross Stores is a well-known off-price retail chain that operates under the brand names "Ross Dress for Less" and "dd's DISCOUNTS." ROST offers a wide range of discounted apparel, footwear, home goods, and accessories from various brands.
With a focus on providing value-conscious consumers with quality products at affordable prices, Ross Stores has built a strong customer base. The company's unique business model of purchasing excess merchandise from manufacturers and department stores enables it to offer customers significant discounts. Ross Stores has a strong presence in the retail sector and continues to expand its footprint, making it a prominent player in the off-price retail industry.
During its most recent quarterly earnings report Ross Stores beat earnings estimates by 13.5% and sales estimates by 4% confirming the flight to discount thesis. Following the trend, ROST has experienced some significant earnings estimate upgrades giving it a Zacks Rank #1 (Strong Buy) rating.Top of Form
Current quarter earnings have been revised higher by 5.3% and are projected to grow 20% YoY to $1.20 per share. FY24 earnings have been increased by 5.7% and are expected to climb 18.5% YoY to $5.19 er share.
Image Source: Zacks Investment Research
Ross Stores stock has an extremely impressive long-term performance, nearly 4x that of the broad market over the last 20 years. During that period ROST has compounded at an annual rate of 16.7%. Interestingly, the stock has been trading sideways for almost five years now, however it looks like a big breakout could be just around the corner.
Image Source: Zacks Investment Research
All that sideways trading has allowed ROST to bring down its earnings multiple and has become even more appealing in valuation terms over that time. Ross stores is trading at a one year forward earnings multiple of 22.8x, which is above the market average of 20.6x, and below its five-year median of 23.6x.
Image Source: Zacks Investment Research
The TJX Companies
The TJX Companies is another leading off-price retailer that operates popular brands such as T.J.Maxx, Marshalls, HomeGoods, and Sierra. With a vast network of stores, TJX offers a diverse selection of discounted apparel, home goods, and accessories from various brands.
The company's unique business model involves sourcing merchandise from a wide range of suppliers, including manufacturers and department stores, allowing it to offer customers quality products at reduced prices. This approach has helped TJX build a loyal customer base that seeks value and treasure-hunt shopping experiences. As a result, TJX has established itself as a major player in the off-price retail segment and continues to expand its presence both domestically and internationally.
Just last week The TJX Companies reported stellar Q2 earnings, beating analysts estimates on both the top and bottom line. In Q2 TJX witnessed a 6% increase in overall comp store sales, driven solely by customer traffic. Marmaxx's comp store sales surged by 8% in the same period, with strong performance in both its apparel and home segments. The pretax profit margin for Q2 improved by 1.2 percentage points compared to the previous year, reaching 10.4%. Diluted earnings per share for the quarter reached $0.85, marking a 23% increase from the previous year.
These results sent TJX stock to new all-time highs, where it currently sits. Additionally, the company returned $932 million to shareholders through share repurchases and dividends. As a result, the company has raised its outlook for FY24 in terms of overall comp store sales, pretax profit margin, and earnings per share.
This exceptionally strong quarter has prompted analysts to increase their estimates nearly unanimously as well, giving TJX a Zacks Rank #2 (Buy) rating. Current quarter earnings estimates have been boosted by 1% and are expected to climb 11.6% YoY, while FY24 estimates have been raised by 3.7% and are expected to grow 18.7% YoY.
Image Source: Zacks Investment Research
The TJX Companies is trading at a one year forward earnings multiple of 24.1x, which is below the industry average of 26.5x, and above its 10-year median of 21.2x.
Image Source: Zacks Investment Research
Sprouts Farmers Market
Sprouts Farmers Market is a grocery store chain specializing in natural and organic products. With a focus on healthy and sustainable offerings, SFM provides fresh produce, natural meats, bulk foods, vitamins, and more. The company emphasizes a farm-to-table approach and aims to provide customers with affordable, high-quality options for healthier living.
Sprouts Farmers Market sits at an interesting intersection of trends that should play in its favor for years to come. With a focus on healthy and sustainable offerings it plays off the broader trend towards mindfulness around healthy consumption. But it also makes sure to concentrate on value and inexpensive options, which can be hard to do when providing high quality products.
Sprouts Framers Market’s expansion hasn’t gone unnoticed, and the stock currently has a Zacks Rank #2 (Buy) rating, reflecting upward trending earnings revisions. Over the next 3-5 years earnings are expected to grow 9.3% annually, while sales are projected to grow 6% YoY during the next two years.
SFM stock has been making very steady gains since putting in a low during the Covid-19 pandemic. And although the stock is up 60% over that time, outperforming the broad market, it still offers an extremely compelling valuation today.
Image Source: Zacks Investment Research
Sprouts Farmers Market is trading at a one year forward earnings multiple of 14.3x, which is below the industry average of 16x, and below its 10-year median of 18.8x.
Image Source: Zacks Investment Research
Conclusion
While retail has gone through some tremendous changes over the last decade thanks to the explosion in e-commerce, the industry has stabilized as more people realize there will always be a place for brick-and-mortar consumption. Additionally, with the incredible and persistent strength the US economy has demonstrated, it looks like there may be an extended period of retail success over the next few years.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Top Ranked Retail Stocks to Buy Now
Retail stocks currently enjoy a spot near the top of the Zacks Sector Rank, sitting in the #2 position. With the highly anticipated economic recession that never materialized, retail stocks have experienced some considerable revisions higher to their earnings estimates, boosting the near-term expectations of their stock prices.
That isn’t to say the economic picture is perfect though. One interesting trend to emerge this year is the strength of discount retailers. With inflation continuing to put pressure on consumers’ budgets, many are preferring to shop where the prices are lower.
Stocks like Ross Stores (ROST - Free Report) and The TJX Companies (TJX - Free Report) , who represent some of the top discount retailers, have seen strong upward trending earnings revisions, bullish prices action, and strong Q2 earnings that are beating analyst estimates.
Sprouts Farmers Market (SFM - Free Report) is another retailer that is building a powerful business, although it isn’t in the discount segment. All three of these stocks have top Zacks Ranks and are sitting at or near the all-time highs in their stocks.
Image Source: Zacks Investment Research
Ross Stores
Ross Stores is a well-known off-price retail chain that operates under the brand names "Ross Dress for Less" and "dd's DISCOUNTS." ROST offers a wide range of discounted apparel, footwear, home goods, and accessories from various brands.
With a focus on providing value-conscious consumers with quality products at affordable prices, Ross Stores has built a strong customer base. The company's unique business model of purchasing excess merchandise from manufacturers and department stores enables it to offer customers significant discounts. Ross Stores has a strong presence in the retail sector and continues to expand its footprint, making it a prominent player in the off-price retail industry.
During its most recent quarterly earnings report Ross Stores beat earnings estimates by 13.5% and sales estimates by 4% confirming the flight to discount thesis. Following the trend, ROST has experienced some significant earnings estimate upgrades giving it a Zacks Rank #1 (Strong Buy) rating.Top of Form
Current quarter earnings have been revised higher by 5.3% and are projected to grow 20% YoY to $1.20 per share. FY24 earnings have been increased by 5.7% and are expected to climb 18.5% YoY to $5.19 er share.
Image Source: Zacks Investment Research
Ross Stores stock has an extremely impressive long-term performance, nearly 4x that of the broad market over the last 20 years. During that period ROST has compounded at an annual rate of 16.7%. Interestingly, the stock has been trading sideways for almost five years now, however it looks like a big breakout could be just around the corner.
Image Source: Zacks Investment Research
All that sideways trading has allowed ROST to bring down its earnings multiple and has become even more appealing in valuation terms over that time. Ross stores is trading at a one year forward earnings multiple of 22.8x, which is above the market average of 20.6x, and below its five-year median of 23.6x.
Image Source: Zacks Investment Research
The TJX Companies
The TJX Companies is another leading off-price retailer that operates popular brands such as T.J.Maxx, Marshalls, HomeGoods, and Sierra. With a vast network of stores, TJX offers a diverse selection of discounted apparel, home goods, and accessories from various brands.
The company's unique business model involves sourcing merchandise from a wide range of suppliers, including manufacturers and department stores, allowing it to offer customers quality products at reduced prices. This approach has helped TJX build a loyal customer base that seeks value and treasure-hunt shopping experiences. As a result, TJX has established itself as a major player in the off-price retail segment and continues to expand its presence both domestically and internationally.
Just last week The TJX Companies reported stellar Q2 earnings, beating analysts estimates on both the top and bottom line. In Q2 TJX witnessed a 6% increase in overall comp store sales, driven solely by customer traffic. Marmaxx's comp store sales surged by 8% in the same period, with strong performance in both its apparel and home segments. The pretax profit margin for Q2 improved by 1.2 percentage points compared to the previous year, reaching 10.4%. Diluted earnings per share for the quarter reached $0.85, marking a 23% increase from the previous year.
These results sent TJX stock to new all-time highs, where it currently sits. Additionally, the company returned $932 million to shareholders through share repurchases and dividends. As a result, the company has raised its outlook for FY24 in terms of overall comp store sales, pretax profit margin, and earnings per share.
This exceptionally strong quarter has prompted analysts to increase their estimates nearly unanimously as well, giving TJX a Zacks Rank #2 (Buy) rating. Current quarter earnings estimates have been boosted by 1% and are expected to climb 11.6% YoY, while FY24 estimates have been raised by 3.7% and are expected to grow 18.7% YoY.
Image Source: Zacks Investment Research
The TJX Companies is trading at a one year forward earnings multiple of 24.1x, which is below the industry average of 26.5x, and above its 10-year median of 21.2x.
Image Source: Zacks Investment Research
Sprouts Farmers Market
Sprouts Farmers Market is a grocery store chain specializing in natural and organic products. With a focus on healthy and sustainable offerings, SFM provides fresh produce, natural meats, bulk foods, vitamins, and more. The company emphasizes a farm-to-table approach and aims to provide customers with affordable, high-quality options for healthier living.
Sprouts Farmers Market sits at an interesting intersection of trends that should play in its favor for years to come. With a focus on healthy and sustainable offerings it plays off the broader trend towards mindfulness around healthy consumption. But it also makes sure to concentrate on value and inexpensive options, which can be hard to do when providing high quality products.
Sprouts Framers Market’s expansion hasn’t gone unnoticed, and the stock currently has a Zacks Rank #2 (Buy) rating, reflecting upward trending earnings revisions. Over the next 3-5 years earnings are expected to grow 9.3% annually, while sales are projected to grow 6% YoY during the next two years.
SFM stock has been making very steady gains since putting in a low during the Covid-19 pandemic. And although the stock is up 60% over that time, outperforming the broad market, it still offers an extremely compelling valuation today.
Image Source: Zacks Investment Research
Sprouts Farmers Market is trading at a one year forward earnings multiple of 14.3x, which is below the industry average of 16x, and below its 10-year median of 18.8x.
Image Source: Zacks Investment Research
Conclusion
While retail has gone through some tremendous changes over the last decade thanks to the explosion in e-commerce, the industry has stabilized as more people realize there will always be a place for brick-and-mortar consumption. Additionally, with the incredible and persistent strength the US economy has demonstrated, it looks like there may be an extended period of retail success over the next few years.