Retail stocks to consider ahead of the earnings assault

After Amazon (AMZN) changed the rules of the market, certain retailers bowed down while others evolved, learning from their mistakes and adapting to the digital environment. And the survivors did reward their loyal investors who vowed trust in them in times of rampant store closures.

A slew of retail giants reported double-digit increases in stock price over the past 52 weeks, including Walmart (WMT +12.5%), Nordstrom (JWN +20%), Costco (COST +40%) and Dillard’s (DDS +60%). Department store chain Macy’s (M), meanwhile, doubled in value in the past one year.

Especially since the last Black Friday sales, most of these retailers became much cheaper in valuation, attracting investors who were looking for a discounted pick. With the retail earnings just around the corner and the year’s holiday season up ahead, let’s take a look at a few attractive retailers at the moment.

Target

Target (TGT) has been playing smart to keep up with the online rivals, and most of its efforts have paid off well so far. The stock has grown 49% in the past 52 weeks and 26% year-to-date. Perhaps the most ground-breaking strategy that the big box retailer employed was the penetration into small towns with limited population via its unique chic stores.

The acquisition of Shipt in December 2017 has helped the company with respect to delivery capabilities. Amazon’s Prime Now currently has a solid rival in Target, which is also offering same-day delivery of groceries in a few handpicked locations.

The company is reporting second-quarter earnings on August 22. For the first quarter, Target reported its fastest growth in traffic in a decade of 3.7%. Online sales jumped 28% as the retailer boosted its e-commerce presence with a huge shopping day event.

Related: Is it going to be Sears today and JCPenney tomorrow?

Best Buy

The onslaught of e-commerce had limited Best Buy (BBY) to an avenue of window shopping. However, since that low, the company managed to revive itself by improving its own online experience as well as by offering competitive prices. Best Buy was also a pioneer in the “buy online get offline” mode of purchases.

Comp sales increased an impressive 7.1% during the most recently ended first quarter, besides quarter-over-quarter growth of an even better 9%. Adjusted for one-off items, the PE ratio is at 16, while the dividend yield is at 2.4%. The consumer electronics company is scheduled to publish results on August 28. The stock has gained 29.5% in the last one year.

For the first quarter, Target reported its fastest growth in traffic in a decade of 3.7%. Online sales jumped 28% as the retailer boosted its e-commerce presence with a huge shopping day event.   

The Children’s Place

Kids apparel retailer The Children’s Place (PLCE) has had a tough ride this year, primarily due to the harsh cold weather conditions. The company was forced to implement additional discounts to move inventory, which reflected in the first quarter results.  The retailer missed analysts’ estimates and investors sent the shares down as much as 8% after the earnings announcement.

However, The Children’s Place has refrained from altering its target of doubling adjusted operating margin by 2020. With the unfavorable weather behind us, we are left with a company that has strong fundamentals and has the ability to repeat the rally it showed in 2016 and 2017. A majority of analysts believe that the company has a lot of upside potential, which makes it a good buy at this point in time.

The Children’s Place will report second-quarter results on August 22 before the opening bell.

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