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Digitization Now a "New Normal" in Retail: 4 Stocks in Focus

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The coronavirus pandemic has certainly changed the very dynamics of the way people live, procure and consume products. The retail sector, being an integral part of every lifestyle, has witnessed sea change in the way it functions. With social distancing and work-from-home trend becoming part of the new normal, the world has witnessed a few years’ worth of digital transformation in just a few months.

Per media report, the pandemic pushed 40% of consumers to e-commerce regulars this year. It comes as no surprise that most retailers are pulling out all stops to enhance digital platforms, optimize supply chain and streamline fleets in order to engage with customers better. The companies are also aggressively pursuing ways to improve omni-channel capabilities and delivery facilities, including curbside pickup, as people are still apprehensive about visiting stores.

The outbreak has rapidly changed the convenience of digitization into a necessity, and the retail sector has been taking every step to capitalize on that demand. Notably, U.S. e-commerce sales are anticipated to improve 18% to $709.8 billion in 2020, with e-commerce making up 14.5% of total retail sales, according to a report by eMarketer.

Our Choices

Although steps to normalize the day-to-day affairs are underway globally, the pandemic-triggered apprehensions are still far from fading. Given this scenario, it may be prudent to invest in retail stocks that are well positioned to capitalize on the prospects present in the online retail space on the back of their sound fundamentals.

Target Corporation (TGT - Free Report) is well equipped to serve customers, be it through curbside pickup or delivery at home. This is quite evident from robust e-commerce sales numbers in its recently reported second-quarter fiscal 2020 results. The company’s same-day services — Order Pick Up, Drive Up and Shipt — cumulatively soared 273% and made up roughly 6 percentage points of total comparable sales growth. While sales made through Shipt increased more than 350% year over year in the last reported quarter, those made through Drive-up soared 700%. Meanwhile, in-store pick-up sales climbed 60%.

Notably, the Zacks Consensus Estimate for its current financial-year sales suggests an improvement of 12.4% from the year-ago period. This general merchandise retailer currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Columbus, OH-based Big Lots, Inc. (BIG - Free Report) has been making every effort to capitalize on the current scenario, by leveraging market strategies, enhancing e-commerce to building loyalty databases. The Zacks Rank #2 (Buy) company has been witnessing robust e-commerce growth on the back of its “Buy Online Pick-up In Store” (BOPIS) functionality.

This discount retailer also recently launched same-day delivery in collaboration with Instacart. The company is committed to improving the omni-channel capabilities in a bid to eliminate friction and provide seamless shopping experience. Moreover, the Zacks Consensus Estimate for its current financial-year sales suggests growth of 13.7% from the prior-year period.

Best Buy Co., Inc. (BBY - Free Report) appears to be a consistent performer, thanks to its outstanding digital endeavors. The company’s quick shift to a contactless curbside service-only operating model amid the coronavirus crisis has worked wonders. In fact, the company’s domestic comparable online sales increased 242.2% to $4.85 billion in second-quarter fiscal 2021, mainly courtesy of higher traffic and conversion rates. The company is focused on enhancing buy online, pickup-in-store services. In fact, each of its stores is adept at shipping out online orders.

This provider of technology products, services and solutions carries a Zacks Rank #2. Further, the Zacks Consensus Estimate for its current financial-year sales indicates an improvement of 3.8% from the year-ago period.

Sprouts Farmers Market, Inc. (SFM - Free Report) , which operates as a grocery store retailer, has launched Sprouts.com website and mobile app in a bid to improve the shopping experience of customers. It has added to convenience of shopping by rolling out pickup services across all its stores and partnering with Instacart to offer same-day delivery.

The company has been consistently focusing on innovation and utilization of technology. The company’s e-commerce accounted for 12% of sales in the second quarter, reflecting an improvement of 500% from the year-ago quarter. It carries a Zacks Rank #2. Additionally, the Zacks Consensus Estimate for its current financial-year sales suggests growth of 15.8% from the prior-year period.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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