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Coronavirus-Led E-commerce Trend Here to Stay: 5 Retail Bets

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The coronavirus outbreak and resultant social distancing have largely encouraged consumers to shift from brick-and-mortar stores to digital shopping. In fact, industry experts cited that the stay-at-home trend has caused a big digital transition in just a few months.

According to the U.S. Census Bureau of the Department of Commerce’s (DOC) recent data, consumers spent $211.5 billion on e-commerce in the second quarter of 2020, reflecting an increase of 44.5% year over year. Moreover, the figure rose 31.8% sequentially. 

Retailers Step Up to the Need of the Hour

As online shopping has become a vital part of the new normal, players in the retail space have been speeding up digital transformation and enhancing supply chain to ensure an enriched shopping experience and seamless deliveries. Retailers are optimizing their omni-channel and contactless services—including Buy Online, Pick-Up in Store, curbside pickup and drive-through— amid the crisis.  

Even as the states have largely reopened their economies, customers are reluctant about visiting crowded retail stores owing to the recent spike in coronavirus cases. A recent survey suggests that as many as 82% of shoppers are likely to continue shopping online even as stores reopen. Clearly, the new digital trend is likely to prevail in the future.

In fact, retailers are sharpening their digital edge to avoid glitches in the upcoming holiday season, which is likely to be an unusual one, thanks to the pandemic. According to a report from CNBC, Deloitte envisions e-commerce sales improvement of 25-35% to reach $182-$196 billion this festive period.

All said, retailers with a strong digital presence are sure to gain from the trend. On that note, we have shortlisted five top-ranked stocks from the Retail-Wholesale sector, which appear well placed on robust online operations as well as fundamentals. Encouragingly, these stocks have returned more than 10% on a year-to-date basis, easily outdoing the S&P 500’s 1.8%.

5 Prominent Picks

Target Corporation (TGT - Free Report) , which sports a Zacks Rank #1(Strong Buy) at present, is poised to gain from strength in its digital channel. In this regard, the company has been deploying resources to enhance its omni-channel capabilities. Its digital comparable sales soared 195% and added 13.4 percentage points to comparable sales in the last-reported quarter. The company’s same-day services — Order Pick Up, Drive Up and Shipt — cumulatively surged 273% and contributed nearly 6 percentage points to 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%.

Notably, the Zacks Consensus Estimate for the company’s current fiscal-year sales suggests growth of 12.4% from the figure recorded in the year-ago period. This general merchandise retailer’s shares have risen 20.5% so far this year. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods, Inc. (DKS - Free Report) , which has returned 14.1% year to date, has been on track to build the best omni-channel experience for athletes by strengthening store network and expanding e-commerce presence. In fact, the company put up a strong online show driven by solid digital demand and improved omni-channel capabilities, including curb-side pickup services and BOPIS during the last-reported quarter. E-commerce sales surged 194% year over year, and accounted for nearly 30% of net sales in the said quarter.

This major omni-channel sporting goods retailer sports a Zacks Rank #1. Further, the Zacks Consensus Estimate for the company’s current-fiscal sales indicates an improvement of 3% from the year-ago reported figure.

Best Buy Co., Inc. (BBY - Free Report) , which sports a Zacks Rank #1, looks well placed on its outstanding digital endeavors. The company’s quick shift to a contactless curb-side service-only operating model amid the pandemic is noteworthy. Notably, its domestic comparable online sales soared 242.2% to $4.85 billion in second-quarter fiscal 2021, mainly courtesy of higher traffic and conversion rates. Best Buy continues to focus on improving the buy online, pickup in store service. Markedly, all of the company’s stores are capable of shipping out online orders.

The Zacks Consensus Estimate for its current fiscal-year sales indicates year-over-year growth of 3.8%. Shares of this multinational specialty retailer of consumer electronics, home office products, entertainment software among others have surged 22% so far this year.

Walmart Inc.’s (WMT - Free Report) e-commerce business has been flourishing due to the pandemic-led social distancing. Certainly, the company’s concerted e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems are paying off. Apart from this, Walmart has been making aggressive efforts to expand in the booming online grocery space. U.S. e-commerce sales soared a whopping 97% in the recently reported second quarter of fiscal 2021.

This Zacks Rank #2 (Buy) company’s shares have rallied 16.5% on a year-to-date basis. The Zacks Consensus Estimate for its current fiscal-year sales indicates an improvement of 5.2% from the year-ago figure.

The Kroger Co. (KR - Free Report) , which boasts an impressive digital business, also deserves a mention. The company has been making prudent investments to enhance supply chain, bolster omni-channel operations and deploy additional e-commerce staff to ensure swift customer service amid the coronavirus crisis. We note that the company’s digital sales surged 127% during the second quarter of fiscal 2020.

This Cincinnati, OH-based company carries a Zacks Rank #2. Further, the Zacks Consensus Estimate for its current fiscal-year sales suggests growth of 8.2% from the year-ago period’s reported figure. Kroger’s shares have gained 17.1% on a year-to-date basis.

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