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Is 2022 a Buying Opportunity in the Retail Stocks?

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  • (0:45) - Does The Retail Sector Stand To Be A Big Winner?
  • (7:30) - Is Inflation Killing The Subscription Business Model?
  • (13:15) - Is Lululemon Recession Proof?
  • (17:45) - Breaking Down The Beauty Retail Sector
  • (24:20) - Will Furniture Purchases Slow Down With The Housing Market?
  • (32:40) - Inflation Impact On Amazon: Will They See Prime Users Decline?
  • (39:00) - Episode Roundup: RVLV, RENT, SFIX, LULU, ULTA, EL, JWN, LVMUY, CODY, WSM, ETD, RH, COST, TGT, WMT, AMZN
  •                 Podcast@zacks.com

 

Welcome to Episode #311 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, she’s joined by Zacks Stock Strategist, and the Editor of the Income Investor portfolio, Maddy Johnson, to talk about their favorite podcast topic: the retailers.

They have talked about retailers many times over the last 7 years on the podcast, including just after the pandemic hit. Only in 2022, things aren’t so clear cut with what is happening with the consumer, or the economy, and inflationary pressures are now starting to bite.

Will the consumer be spending as the economy reopens and we all attend weddings and other events this summer?

Or will she pull back her spending as inflation in the form of higher gasoline and food prices hits the budget?

5 Retailers to Watch in 2022

1.       Ulta Beauty (ULTA - Free Report)

Ulta Beauty may be in the sweet spot in retail. The price point on many beauty products is at an affordable level. Who hasn’t bought a lipstick or skincare lotion under $20 before?

Defying the growth stock weakness trend, Ulta shares have busted out to new 5-year highs in 2022, with shares up nearly 4% year-to-date.

Ulta isn’t cheap, with a forward P/E of 22, but it’s cheaper than some of its beauty peers.

Is Ulta the place investors should be hiding out in in 2022?

2.       Lululemon (LULU - Free Report)

Lululemon has been a superstar stock in the retail industry for investors for several years. But shares sold off 30% in 2022 on the growth stock sell-off.

However, they have bounced off the lows and are now up about 3.8% year-to-date.

Lululemon shares remain pricey, with a forward P/E of 42.

An analyst recently upgraded the stock on the argument that Lululemon’s upscale customer gives it some protection during this inflationary period and will keep shopping during it. In the 2008-2009 recession, many still had to have their Lulu yoga pants.

Is recent weakness in Lululemon’s shares a buying opportunity?

3.       Revolve Group (RVLV - Free Report)

Revolve Group is an e-commerce retailer that grew in popularity during the pandemic. Revenue is expected to jump another 24% in 2022 to $1.11 billion, which would be the company’s first billion-dollar year.

With all the events people are attending this year, like weddings, many dresses and other apparel will be sold. Will Revolve Group cash in?

Shares are down 2% year-to-date but Revolve Group still trades with a high forward P/E of 43.

Is Revolve Group poised to take market share this year?

4.       Stitch Fix (SFIX - Free Report)

Stitch Fix is an online personal styling service for men, women and kids. They will send you a curated box of apparel and accessories that fit your needs. There is no commitment to buy and no subscription.

However, Stitch Fix said in March 2022 that it was having difficulty in conversions and it cut its full year outlook.

Stitch Fix shares are down 45% year-to-date. It’s expected to lose $1.38 this year after losing just $0.08 last year.

Should investors be steering clear of Stitch Fix?

5.       Rent the Runway (RENT - Free Report)

Rent the Runway is a membership plan for apparel and accessories which features over 780 brands. Customers subscribe to one of the plans, starting with the $94 a month which gets you 4 pieces to rent or you can buy the item.

Rent the Runway went public in Oct 2021 and has had a harsh welcome to the public markets. Shares are down 69.4% during that time, including 27.6% in 2022.

While Rent the Runway is expected to lose $2.65 this year, that’s a big improvement from the loss of $8.51 in 2021.

Is this sell off a buying opportunity in Rent the Runway?

What Else Do You Need to Know About the Retail Stocks?

Tracey and Maddy talk about more than a dozen retailers. This is an episode you don’t want to miss.  

[In full disclosure, Tracey owns shares of ULTA and LULU in her personal portfolio.]