If you think retail is dead in the age of e-commerce, you haven’t been paying attention lately.
Sure, it’s folly to bet against Amazon.com (AMZN) which has been gobbling up retail market share. But don’t think for a second that Amazon’s wins are devastating retailers.
Consider that the SPDR S&P Retail ETF (XRT) one of the most popular ways to play the sector, is up more than 14% this year to double the broader stock market. Amazon makes up a mere 1.3% of the fund, so don’t think this outperformance is just a trick of how it’s weighted.
Within the sector, individual stocks show even more profits. This proves that Amazon isn’t the only game in town for investors looking to play booming consumer trends right now.
Sure, not all is rosy at the mall. The troubles of J.C. Penney (JCP) and Sears Holdings (SHLD) as they slouch toward irrelevancy is proof that not all retailers will survive. And even retailers that aren’t quite as battered, like department store Macy’s (M) which recently slumped over 15% in a single day to a hit a new 52-week low, don’t exactly have a lot of wiggle room with investors.
Recent earnings reports from big-name retailers show in black and white why investors should have confidence, and why the momentum seems to be building, not slowing.
Here are seven stocks that are making big moves, and that prove the retail sector remains one of the strongest investment themes of 2018.
One of the biggest stories in retail lately has been big box store Target (TGT) which is trading near all-time highs in the wake of strong earnings on Wednesday morning. There’s nothing to not like in the details — a beat on both the top and the bottom lines, raised guidance and the fastest same-store sales growth since the financial crisis of 2008.
Aside from the general choppiness suffered by the market at large in January, it has pretty much been a steady upward slope for TGT stock in the last year. Shares are up about 50% over 12 months, and show no sign of slowing.
Not to be outdone, mega-retailer Walmart (WMT) reported its best same-store sales growth in a decade for the month that ended July 31. It also dropped impressive second-quarter numbers that showed shoppers are spending more per visit to its stores, but more importantly that it is tracking growth in e-commerce revenue of an impressive 40% this year over last.
Shares of this $260 billion merchant are still down over 10% from their February highs, but momentum is back, with WMT stock bouncing back 25% from its summer lows after significant gains since its Aug. 16 report.
Digging into department stores next, Nordstrom (JWN) has risen about 15% in the past week or so, thanks to powerful performance. A recent earnings report showed a beat on the bottom line and increased guidance for the full year.
Like Walmart, however, the details were really what got investors to take note. Digital sales and e-commerce transactions grew to represent 34% of second-quarter revenue, up from 29% a year earlier, and a sure sign that JWN stock is figuring out how to connect with consumers even in the age of Amazon.
Another big name showing the strength of specialty retail is Home Depot (HD). Investors were skeptical of this stock earlier in the year, after the home-improvement chain posted weaker-than-expected margins in February and then missed on sales back in May.
But HD stock just came roaring back with a vengeance in its latest report. A big beat and raised guidance for the full-year restored confidence, with important big-picture numbers that included 8% revenue growth and 8% same-store sales growth as well as encouraging details like bigger average receipts show this stock remains a key retail name to watch.
Discounter TJX (TJX) offered another strong showing recently, with second-quarter revenue that beat Wall Street expectations. Its two main nameplates, T.J. Maxx and Marshalls, combined for consolidated same-store sales of 7% to drive a beat on that metric as well; executives said increased customer traffic was a primary driver of growth.
TJX is among the top decile of best-performing S&P 500 components over the past 12 months, thanks to consistently impressive numbers, with returns of almost 40% since Jan. 1 vs. about 6% for the benchmark. Additionally, shares of TJX recently powered through their pre-recession peak of 2008 to set a new all-time record.
Apparel company Urban Outfitters (URBN) saw total net sales rise about 14% in its most recent report, topping expectations, and posted a big beat on the bottom line to boot. As with other names on this list, enthusiasm from investors was built on these strong fundamentals as well as the details that showed “strong, double-digit growth” in URBN digital transactions, according to management.
URBN stock has admittedly been choppy, and some investors were burned as shares plummeted from a peak north of $47 in 2015 to a low of just $17 in the summer of 2017. The past 12 months have featured a more than 130% run for the retailer, however, and the stock remains within spitting distance of new highs despite recent volatility.
Another stock that has been on a tear in the last year or so is affordable retailer Kohl’s (KSS). The company’s second-quarter numbers topped expectations on both sales and earnings, and KSS raised guidance for good measure.
There was a brief bit of profit taking — perhaps understandable since the stock has more than doubled in the past 12 months — but shares are trading near a new 52-week high and challenging levels not seen since 2015. Wall Street seems to expect these new records are a foregone conclusion, with analysts at Telsey Advisory group putting a new $99 target on the shares and analyst firm MKM Partners raising its forecast to $83 in the wake of the strong results.
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