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Retail Stocks are on Sale: Should You Bite?

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  • (0:20) - Tariff Impacts On Retail Industry
  • (3:45) - Screening For Value Stocks In Retail
  • (10:10) - Tracey's Top Picks: Retail Home Furnishing and Regional Department Stores
  • (21:45) - Footwear Manufacturers
  • (26:30) - Episode Roundup: XELB, ETH, WSM, M, BBBY, MIK, JILL, SKX, SHOO

Welcome to Episode #144 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

For retail stocks in 2019, it looks a lot like 2017 when retail was crushed amidst worries that they were all “doomed” by a resurging Amazon.

It never happened and the stocks rallied fiercely in early 2018.

But now, in 2019, the worry isn’t Amazon but the new threats of tariffs and a possible recession. The tariffs make any imported goods more expensive and a recession usually leads to reduced consumer spending.

Neither one is good for the retailers which have been enjoying strong consumer confidence thanks to a 20-year low in the unemployment rate.

Retail Stocks are Down Big in 2019

With all the worries and uncertainty, it’s not surprising that the retail stocks, especially those in apparel and shoes, are down big so far this year.

The Apparel and Shoe industry, which consists of 39 companies on, is down 13.9% year-to-date. That’s a lot of pain compared to the S&P 500 which is up 12.7% in that same time period.

Over the last year, it’s even worse with Apparel and Shoes down 31.6% versus the S&P 500 up 4.1%.

How Do You Find Cheap Retailers?

You can screen by industry on Zacks has 15 different subgroups in the retail sector, including Apparel and Shoes.

To look for cheap stocks, screen for a P/E under 10.

You can also use the Zacks Rank, including looking for #1 (Strong Buys) and #2 (Buys), to try and screen for rising earnings estimates.

In a screen including Zacks Rank #3 (Hold) stocks, along with the #1s and #2s, in the Apparel and Shoe industry, it returned 9 stocks that had P/Es under 10.

5 Cheap Retail Stocks Right Now

1.       Xcel Brands is a media and consumer products company that only has a market cap of $24 million. Its revenue comes from licensing, e-commerce and wholesale of its 5 brands. The shares have fallen 57% over the last year and now trade with a forward P/E of just 3.3. It’s a Zacks Rank #1 (Strong Buy).

2.       Williams-Sonoma (WSM - Free Report) shares aren’t as cheap as others as the stock got a boost off of the last earnings report. Still, it trades at just 12.5x.

3.       J.Jill (JILL - Free Report) saw its full year earnings estimates slashed following a disappointing quarter where inventory rose 10% and sales fell. But it’s still cheap, with a forward P/E of just 7.5. However, those slashed earnings estimates mean it has a Zacks Rank of #4 (Sell).

4.       Macy’s (M - Free Report) is back to trading with a forward P/E of just 6.9. Shares have sunk in 2019 but haven’t yet taken out the 2017 lows. It still pays a dividend, currently yielding 7%. But earnings are expected to fall this year and next.

5.       Bed Bath & Beyond (BBBY - Free Report) has new management but can they turn it around? Shares are still cheap with a forward P/E of 6.9. It pays a dividend, yielding 4.1% but will the new management cut that? It’s a Zacks Rank #2 (Buy) as earnings estimates are mostly holding in place.

What else do you need to know about the retail stocks in 2019?

Listen into this week’s podcast to find out.

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In-Depth Zacks Research for the Tickers Above

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J.Jill, Inc. (JILL) - free report >>

WilliamsSonoma, Inc. (WSM) - free report >>

Bed Bath Beyond Inc. (BBBY) - free report >>

Macys, Inc. (M) - free report >>