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7 Retail Stocks on a Bull Run: Up More Than 40% YTD

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In spite of lingering apprehensions associated with the coronavirus crisis, the Retail – Wholesale sector has been steadily making its way out of the woods. The pandemic and associated lockdowns did wreak havoc but things started to turn in favor following stimulus package, stepped-up vaccinations and resumption of business activities. Well, rebounding economy with more people returning to workplaces and households sitting on a large pile of savings are likely to result in higher spending.

Let’s Delve Deeper

Americans look way more confident now as they step out for work, shopping, travel and leisure. Easing restrictions owing to mass inoculation and waning coronavirus cases coupled with improving job prospects are playing a major role in lifting the sentiment. The U.S. economy added 850,000 jobs in the month of June — the biggest gain in 10 months — with hospitality and leisure sector hiring about 343,000 people. Amid a recovery in the labor market, wage growth also picked up. Average hourly earnings rose 0.3% in June and 3.6% on a year-over-year basis.

Economists cited that as and when business organizations and industries start to operate at an optimum level, this will potentially ramp up hiring activity, and in turn spending, thereby contributing to GDP. The Federal Reserve recently raised its 2021 real GDP forecast to 7% from 6.5%. The Jerome Powell-led Fed now envisions unemployment rate to be 4.5% in 2021, down from the level of 5.9% in June 2021.

Considering the favorable consumer environment and upbeat momentum in the economy, the National Retail Federation (NRF) now envisions U.S. retail sales to increase between 10.5% and 13.5% to an estimated $4.44 trillion to $4.56 trillion in the current year. According to Deloitte's latest United States Economic Forecast, real personal consumption expenditure is likely to jump 7.6% in 2021. Any uptick in consumer spending, which accounts for more than two-thirds of U.S. economic activity, is always welcome news for retailers.

With retailers directing resources toward advancing omni-channel capabilities, enhancing supply chain and providing faster delivery options, they look well-poised to tap any rise in demand. Meanwhile, per the latest Zacks Earnings Preview, the Retail – Wholesale sector is anticipated to witness top-line growth of 8.6% with bottom line expected to increase 25.5% in the current financial year. Impressively, the sector now carries a Zacks Sector Rank #2, and occupies position in the top 13% of 16 Zacks sector list.

That said, we have highlighted seven stocks from the Retail – Wholesale sector that have gained more than 40% year to date and look well positioned based on their sound fundamentals and growth prospects. These stocks have either Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance Year-to-Date

 

Zacks Investment ResearchImage Source: Zacks Investment Research

7 Prominent Picks

You may invest in Target Corporation (TGT - Free Report) . The company has been deploying resources to enhance omni-channel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide seamless shopping experience. To accelerate industry-leading capabilities and gain consumer’s wallet share, the company plans to make an investment of about $4 billion annually during the next several years to ramp up store openings and remodels, scale up fulfillment services and enhance supply chain capabilities, keeping in mind speed and convenience. The stock has a Zacks Rank #1 and a VGM Score of B. This general merchandise retailer has a trailing four-quarter earnings surprise of 62.1%, on average. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 9.1% and 28.5%, respectively, from the year-ago period.

Macy's, Inc. (M - Free Report) , one of the nation’s premier omni-channel retailers, is worth betting on. In spite of a tough retail landscape, the company has managed to stay afloat, courtesy of its Polaris Strategy. The strategy includes rationalizing store base, revamping assortments and managing costs prudently. Markedly, customers have been responding well to the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. The company also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. Additionally, the company is constantly improving its mobile and website features to deliver enhanced shopping experience. Impressively, this New York-based company has a trailing four-quarter earnings surprise of 161.8%, on average. The stock has a Zacks Rank #1 and a VGM Score of B. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 27.6% and 197.3%, respectively, from the year-ago period.

You may also invest in Sally Beauty Holdings, Inc. (SBH - Free Report) . Growing online business and strength in Transformation Plan have been contributing to its overall performance. Also, its efforts to enhance customers’ experience coupled with prudent acquisitions are encouraging. The company has been undertaking a number of efforts to augment its online business amid the ongoing pandemic. In fact, robust investments to enhance the digital space have been yielding results. The stock has a Zacks Rank #1 and a VGM Score of B. This specialty retailer and distributor of professional beauty supplies has a trailing four-quarter earnings surprise of 37.8%, on average. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 7.7% and 89.3%, respectively, from the year-ago period.

Foot Locker, Inc. (FL - Free Report) , a retailer of athletic footwear and apparel, also looks a great investment option. Notably, the company has been witnessing strong demand for athleisure and fitness products. It plans to continue investing in boosting store fleet, including revamping and remodeling of the same. Markedly, it will be converting nearly one-third of its Footaction stores to other existing banner concepts. Such initiatives will help the company focus on its iconic banners. Further, it has been actively investing toward reinforcing digital presence. Impressively, the company has a trailing four-quarter earnings surprise of 47.6%, on average. The stock has a Zacks Rank #1 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 11.2% and 101.4%, respectively, from the year-ago period.

DICK’S Sporting Goods, Inc. (DKS - Free Report) is worth giving a shot right now as its sound fundamentals and growth efforts look impressive. Diverse category portfolio, supply chain enhancement, technology advancement and omni-channel capabilities have been aiding this sporting goods retailer to capitalize on robust consumer demand across golf, outdoor activities, home fitness and active lifestyle. The company has also been making efforts to strengthen its store network. Remarkably, the company has a trailing four-quarter earnings surprise of 136.8%, on average. The stock has a Zacks Rank #1 and a VGM Score of B. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 12.9% and 36.1%, respectively, from the year-ago period.

We also suggest betting on AutoNation, Inc. (AN - Free Report) , which operates as an automotive retailer in the United States. The company’s diversified product mix, large dealer network and store expansion efforts bode well. Markedly, AutoNation has been making investments to enhance its digital capabilities. It significantly upgraded its AutoNation Express integrated retailing solution. Moreover, the acquisition of 11 stores and a collision center from Peacock Automotive Group is likely to add $380 million to AutoNation’s annual revenues. Markedly, this Fort Lauderdale, FL-based company has a trailing four-quarter earnings surprise of 103.6%, on average. The stock has a Zacks Rank #2 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 16.1% and 42.6%, respectively, from the year-ago period.

Last but not the least, investors can also count on Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) , which operates, and franchises full-service and casual-dining restaurants. Notably, it is benefiting from robust delivery program, off-premise sales and strong digital initiatives. The company engages guests through its guest loyalty program — Red Robin Royalty. Moreover, it has been investing in technology and data infrastructure. Impressively, the company has a trailing four-quarter earnings surprise of 27.9%, on average. The stock has a Zacks Rank #2 and a VGM Score of B. Moreover, the Zacks Consensus Estimate for its current financial year top and bottom-line suggests growth of 36.3% and 98.9%, respectively, from the year-ago period.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

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