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Retail Innovation: Invest in the Leaders

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  • (1:00) - Should You Be Looking To Invest Into Retail Stocks?
  • (6:45) - RH’s Strength Continues With More Growth and Expansion
  • (13:30) - Is The E-Commerce Craze Slowing Down?
  • (19:00) - Turning Failing Stores Into E-Commerce Brands
  • (27:15) - Why Brick and Mortar Sales Still Dominate
  • (41:10) - Episode Roundup: W, RH, WSM, OXM, GPS, DECK


Welcome to Episode #322 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, Tracey is joined by Kevin Cook, Zacks Senior Stock Market Strategist, to discuss what is happening in retail in 2022.

A lot of retail rotated online in the pandemic, but now that there is a reopening, are shoppers returning to the mall? Is brick and mortar coming back?

Who is innovating to gain an edge, especially as a possible recession looms?

Retail Remains as Competitive as Ever

1.       Wayfair (W - Free Report)

Wayfair was a big pandemic winner as consumers ordered everything from school desks coffee makers from online retailers. But now, that shopping surge is over and consumers are focusing on experiences.

Wayfair, which made its claim to fame on online shopping, recently launched its first AllModern brick and mortar store in Massachusetts with plans to open stores under its other brands including Joss & Main, Birch Lane and flagship Wayfair over the next few years.  

Wayfair shares have plunged 73% this year as earnings are expected to take a dive. The Zacks Consensus Estimate has fallen to a loss of $6.81 this year versus positive earnings of $2.32 last year.

Should you make a bet on Wayfair’s brick and mortar strategy?

2.       RH (RH - Free Report)

RH has been an innovator in retail for the last decade. It was the first to focus on its stores, opening up galleries which feature its products in beautiful locations around the United States. Europe is next, with its first gallery expected to open this year in a historic manor home in the English countryside.

RH has also added a successful hospitality component to its business with its gallery restaurants.

But RH has warned on sales twice in the last month as the economy slows and furniture sales soften.

Shares are down 51% year-to-date and now trade with a forward P/E of just 10.5. But those earnings may come down further in a recession.

Should RH be on your short list?

3.       Deckers (DECK - Free Report)

Deckers was a pandemic winner as consumers bought footwear and other accessories. But like everything else, shares have sold off in 2022, falling 26%.

Yet shoes normally do well during recessions as they are a cheaper way to update a wardrobe. Deckers owns two of the most popular footwear brands in UGG and Hoka One One.

Shares are cheap with a forward P/E of 14.6. Earnings are expected to rise 11.3% this year.

Should investors be hiding out in Deckers this year?

4.       Oxford Industries (OXM - Free Report)

Oxford Industries operates two of the hottest retailers in Lilly Pulitzer and Tommy Bahama. But it’s in Tommy that it is innovating by expanding the hospitality business as the economy has reopened.

In June, Oxford Industries reported a record fiscal first quarter where sales were up even in its restaurant business, gaining 23% year-over-year, at its 21 food and beverage locations.

Shares are down “just” 15.7% year-to-date as it raised full year guidance in June.

Oxford Industries is cheap, with a forward P/E of 8.7.

Investors might want to keep Oxford Industries on their short list.

5.       Ulta Beauty (ULTA - Free Report)

Ulta Beauty initially struggled during the pandemic as women didn’t buy as much make-up, including lipstick, while huddling at home and wearing masks. But on the reopen, demand for beauty, including hair and skincare, has rebounded.

Ulta has also expanded its experiences in the stores, including salon and brow bar, as well as other in-person beauty events.

Ulta shares have only fallen 7.2% year-to-date and are up 11.6% over the last year. You’ll pay a premium for it, with a forward P/E of 18.7.

It’s a Zacks Rank #1 (Strong Buy).

Should you be stocking up on Ulta Beauty on any pullbacks?

What Else do you Need to Know About Retail in 2022?

Tune into this week’s podcast to find out.

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