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5 Retail Stocks to Buy Amid Changing Retail Landscape
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The retail landscape has been undergoing a fundamental change, with technology playing a major role and the focus shifting to online shopping. This shift in buying patterns has forced retailers to come up with innovative ways to market their products. Retailers who have responded quickly to it by staying ahead technologically stand in good stead.
With a digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers including big-box ones are struggling to compete with e-commerce channels. They are being forced to trim their store count to focus more on an online model. Amazon.com Inc. (AMZN - Free Report) has been in the spotlight for the last few years, as changing customer patterns have made the retail industry more dependent on e-commerce.
Amazon recently announced its plan to acquire online retail platform Souq.com to tap the Middle East market. The company entered the Chinese market with the buyout of Joyo.com, an online retailer of music, books, videos and DVDs.
Wal-Mart Stores, Inc. (WMT - Free Report) is seeking to expand in the fast-growing online retail market. This is quite evident from the retail bellwether’s recent buyouts, which include Jet.com, a U.S.-based e-commerce company; ModCloth, an online clothing seller; Moosejaw, an outdoor apparel and gear retailer; and ShoeBuy, an e-commerce shoe retailer. The company is slated to acquire Bonobos, a men's clothing e-commerce company.
Other retail giants too are following the same path. Retailers are focusing more on enhancing their omni-channel capabilities, optimizing store fleet and restructuring activities.
Sector’s Correlation with the Economy
The Retail-Wholesale sector has not been an outstanding performer but it still holds some promise, given the favorable economic indicators. The rebound in oil prices from all-time lows, decelerating unemployment rate, and a gradual improvement in the housing market signal that the economy is on a recovery mode. These factors are playing a crucial role in raising consumers’ confidence. We expect this positive sentiment to translate into higher consumer spending.
As per the Commerce Department, sales at U.S. retailers increased 0.4% in April and were 4.5% higher than the year-ago levels. It was the strongest sales gain in three months. March sales were also stronger than originally reported. A monthly decline of 0.2% in March was revised upward to show a 0.1% uptick. Non-store retailers, which include online shopping outlets, saw sales growth of 1.4% in April.
Kiplinger’s latest forecast shows that retail sales, excluding gasoline, are expected to jump 3.8% in 2017. The report further suggests that e-commerce sales are expected to increase 14% this year compared with 13.1% in 2016.
Some Key Picks
With steady job additions, persistently low unemployment and gradual wage acceleration, the background looks promising for consumers. This calls for investing in the retail space. Here we have highlighted five Retail/Wholesale stocks with a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a VGM Score of “A” or “B.”
We suggest investing in The Children's Place, Inc. (PLCE - Free Report) , with a long-term earnings growth rate of 8% and a VGM Score of “A.” In the past one year, the stock has surged roughly 51.3% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 15.5%. This specialty retailer of children's apparel delivered an average positive earnings surprise of 36.6% over the trailing four quarters and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can count on Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) , an operator of casual-dining and fast-casual restaurants, with a long-term earnings growth rate of 10.3%. The company posted an average positive earnings surprise of 17.3% over the trailing four quarters and has a VGM Score of “A.” In the past one year, this Zacks Rank #1 stock has exhibited a bullish run and surged 39.5%, while the Zacks categorized Retail-Food & Restaurants industry gained 12.4%.
You may also consider Big 5 Sporting Goods Corporation (BGFV - Free Report) , which operates as a sporting goods retailer. The stock sports a Zacks Rank #1 and has a VGM Score of “A.” The company posted an average positive earnings surprise of 94.5% in the trailing four quarters and has a long-term earnings growth rate of 12%. In the past one year, the stock has displayed a fabulous bull run on the index and has risen 67.1%, while the Zacks categorized Retail – Miscellaneous/Diversified industry decreased 5.3%.
Ulta Beauty, Inc. (ULTA - Free Report) , which operates as a beauty retailer, is a solid bet, with a Zacks Rank #2 and a VGM Score of “B.” The company posted an average positive earnings surprise of 4.2% in the trailing four quarters and has a long-term earnings growth rate of 19.5%. The stock has surged roughly 30% in the past one year and comfortably outperformed the Zacks categorized Retail – Miscellaneous/Diversified industry, which fell 5.3%.
We suggest investing in Best Buy Co., Inc. (BBY - Free Report) , which has a long-term earnings growth rate of 11.4% and a VGM Score of “A.” This retailer of technology products, services, and solutions delivered an average positive earnings surprise of 33.8% in the trailing four quarters and carries a Zacks Rank #2. We note that in the past one year, the stock has advanced approximately 83.4%, while the Zacks categorized Retail-Consumer Electronic industry has gained 56.2%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>
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5 Retail Stocks to Buy Amid Changing Retail Landscape
The retail landscape has been undergoing a fundamental change, with technology playing a major role and the focus shifting to online shopping. This shift in buying patterns has forced retailers to come up with innovative ways to market their products. Retailers who have responded quickly to it by staying ahead technologically stand in good stead.
With a digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers including big-box ones are struggling to compete with e-commerce channels. They are being forced to trim their store count to focus more on an online model. Amazon.com Inc. (AMZN - Free Report) has been in the spotlight for the last few years, as changing customer patterns have made the retail industry more dependent on e-commerce.
Amazon recently announced its plan to acquire online retail platform Souq.com to tap the Middle East market. The company entered the Chinese market with the buyout of Joyo.com, an online retailer of music, books, videos and DVDs.
Wal-Mart Stores, Inc. (WMT - Free Report) is seeking to expand in the fast-growing online retail market. This is quite evident from the retail bellwether’s recent buyouts, which include Jet.com, a U.S.-based e-commerce company; ModCloth, an online clothing seller; Moosejaw, an outdoor apparel and gear retailer; and ShoeBuy, an e-commerce shoe retailer. The company is slated to acquire Bonobos, a men's clothing e-commerce company.
Other retail giants too are following the same path. Retailers are focusing more on enhancing their omni-channel capabilities, optimizing store fleet and restructuring activities.
Sector’s Correlation with the Economy
The Retail-Wholesale sector has not been an outstanding performer but it still holds some promise, given the favorable economic indicators. The rebound in oil prices from all-time lows, decelerating unemployment rate, and a gradual improvement in the housing market signal that the economy is on a recovery mode. These factors are playing a crucial role in raising consumers’ confidence. We expect this positive sentiment to translate into higher consumer spending.
As per the Commerce Department, sales at U.S. retailers increased 0.4% in April and were 4.5% higher than the year-ago levels. It was the strongest sales gain in three months. March sales were also stronger than originally reported. A monthly decline of 0.2% in March was revised upward to show a 0.1% uptick. Non-store retailers, which include online shopping outlets, saw sales growth of 1.4% in April.
Kiplinger’s latest forecast shows that retail sales, excluding gasoline, are expected to jump 3.8% in 2017. The report further suggests that e-commerce sales are expected to increase 14% this year compared with 13.1% in 2016.
Some Key Picks
With steady job additions, persistently low unemployment and gradual wage acceleration, the background looks promising for consumers. This calls for investing in the retail space. Here we have highlighted five Retail/Wholesale stocks with a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a VGM Score of “A” or “B.”
We suggest investing in The Children's Place, Inc. (PLCE - Free Report) , with a long-term earnings growth rate of 8% and a VGM Score of “A.” In the past one year, the stock has surged roughly 51.3% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 15.5%. This specialty retailer of children's apparel delivered an average positive earnings surprise of 36.6% over the trailing four quarters and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can count on Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) , an operator of casual-dining and fast-casual restaurants, with a long-term earnings growth rate of 10.3%. The company posted an average positive earnings surprise of 17.3% over the trailing four quarters and has a VGM Score of “A.” In the past one year, this Zacks Rank #1 stock has exhibited a bullish run and surged 39.5%, while the Zacks categorized Retail-Food & Restaurants industry gained 12.4%.
You may also consider Big 5 Sporting Goods Corporation (BGFV - Free Report) , which operates as a sporting goods retailer. The stock sports a Zacks Rank #1 and has a VGM Score of “A.” The company posted an average positive earnings surprise of 94.5% in the trailing four quarters and has a long-term earnings growth rate of 12%. In the past one year, the stock has displayed a fabulous bull run on the index and has risen 67.1%, while the Zacks categorized Retail – Miscellaneous/Diversified industry decreased 5.3%.
Ulta Beauty, Inc. (ULTA - Free Report) , which operates as a beauty retailer, is a solid bet, with a Zacks Rank #2 and a VGM Score of “B.” The company posted an average positive earnings surprise of 4.2% in the trailing four quarters and has a long-term earnings growth rate of 19.5%. The stock has surged roughly 30% in the past one year and comfortably outperformed the Zacks categorized Retail – Miscellaneous/Diversified industry, which fell 5.3%.
We suggest investing in Best Buy Co., Inc. (BBY - Free Report) , which has a long-term earnings growth rate of 11.4% and a VGM Score of “A.” This retailer of technology products, services, and solutions delivered an average positive earnings surprise of 33.8% in the trailing four quarters and carries a Zacks Rank #2. We note that in the past one year, the stock has advanced approximately 83.4%, while the Zacks categorized Retail-Consumer Electronic industry has gained 56.2%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>