During the last few years, we have seen a lot of changes in the retail stocks market. The biggest one being that many retailers are starting to move away from brick and mortar stores to e-commerce. This can be good or bad for investors. Either way, there are a few factors that you should keep in mind when it comes to investing in retail stocks.
Amazon
During the first quarter of this year, Amazon retail stocks sputtered. They haven’t translated their improved financial results into a solid foothold.
But it’s not all doom and gloom. There are plenty of opportunities for investors. Wall Street research says Amazon is the preferred online shopping platform for consumers. During Black Friday, online sales rose 18.4 percent, according to Adobe Analytics.
Amazon also announced the biggest Prime Day ever. This year, shoppers can score deals using the company’s Alexa service as early as Sunday. And while the Amazon juggernaut is a great thing to have, it isn’t a must-have.
The S&P 500 and the Nasdaq hit new records on Friday. The benchmark index was up 0.63 percent for the week, marking the first weekly gain since September.
Home Depot
During the second quarter, Home Depot reported its strongest quarterly earnings in its history. Home Depot is now the world’s largest home improvement retailer for your home, with a market cap of over $26 billion. It has 2,316 stores in the United States and Canada.
Home Depot reported a 5.8% increase in comparable store sales for the second quarter. Home Depot’s diluted earnings rose 11.5% to $5.05 per share. Home Depot also raised its full-year earnings guidance to 3% growth from its previous estimate of 2%. The company’s operating margin improved to 15.4%, from 15.1% in the previous quarter.
The company’s stock gained a little on the news. Home Depot also reported that its comparable sales were 5.4% higher than in the second quarter of last year. This was good news, but it was still below the company’s average. The retailer noted that consumers were spending more time in their homes. It was also positive that the retailer had passed on inflation-related price increases to its customers.
Lululemon Athletica
LULU is a leading retail company that provides athletic apparel, shoes and accessories. Its products are sold through a chain of company-operated stores, e-commerce websites and mobile apps. The company also offers free yoga classes and events.
Lululemon has seen its sales increase at a double-digit rate over the past several years. The company has maintained market share during the recent tough economic period. The company’s revenues and EBITDA have also increased at strong rates. The company’s revenue growth has been balanced across all product categories. It is a leader in the higher-end athleisure apparel market.
Lululemon Athletica (LULU) is a US-based company that designs and distributes athletic apparel. The company sells through a chain of company-operated retail stores and its products are distributed through a network of wholesale accounts.
Ulta Beauty
Despite the fact that consumer spending in general has been sluggish, Ulta Beauty’s (ULTA) retail stocks have been resilient. With over 1,300 stores nationwide, Ulta offers a wide variety of cosmetic products, as well as hair, skincare, and makeup services.
In recent years, Ulta has enjoyed solid double-digit sales growth. The company has been able to improve its balance sheet as well, thanks to its repurchase authorization. In addition, Ulta has maintained a strong return on equity. In fact, over the last three years, Ulta has posted an average annual earnings growth rate of 32 %.
Ulta Beauty has also become a powerful omnichannel company. Each of its 1,300 stores features a full-service salon, which allows shoppers to try products on in the store. The company has also invested in how-to videos and tutorials.
Dollar General
Despite the recent gloom surrounding the market, Dollar General retail stocks are performing better than their Retail – Discount Stores peers. They have managed to expand into new stores and markets, and have increased their profitability. They also have a high return on equity. This has allowed them to increase their share repurchase program, which now stands at $2B.
The retail industry is undergoing a major transformation as consumers seek out bargains. This includes young people who left coastal metropolitan areas for more rural areas. Many retailers are building e-commerce capabilities to meet these needs. Amongst them are Dollar General and Five Below.
In addition, dollar-store stocks are providing essential goods at ultra-low prices. This business model appeals to consumers who are hard hit by the recent recession.
