These 3 Discount Retailers Fight All Odds, Outmatch Industry
Brushing off market gyrations, market pundits are of the opinion that the economy is not in a bad shape after all. The Fed’s optimistic view also highlights the same. The Fed Chairperson envisions economic growth of 2.7% in 2018, up from the previous forecast of 2.5%. Jerome Powell expects a drop in unemployment rate from the current level of 4.1% to 3.8% in 2018 and further to 3.6% in 2019. All these paint a bright picture for retailers.
Industry experts believe that the strengthening labor market may lead to gradual wage acceleration and in turn boost consumer confidence. We expect this positive sentiment to translate into higher consumer spending, which accounts for more than two-thirds of U.S. economic activity. Moreover, individual tax cuts have paved the way for higher disposable income, which is likely to drive demand for discretionary items.
This brings the focus back to the Retail-Wholesale sector. We are cautiously optimistic about the sector’s overall performance. Heightened online competition, lower footfall and changing consumer spending patterns have compelled retailers to re-examine their strategies. They are now focusing more on enhancing omni-channel capabilities, optimizing store fleet and restructuring activities.
Out of the numerous industries in the sector, we are focusing on the retail-discount industry. We note that the industry, which occupies the top 46% (119 out of the 256) position, has rallied approximately 14.3% in the past six months compared with the S&P 500’s 6%.
Here we have picked three discount retailers that are trading higher than the industry.
Burlington Stores BURL has made multiple changes to its business model to adapt to the ongoing transformation in the sector. Notably, it has increased vendor counts, made technological advancements and initiated a better marketing approach. These along with effective inventory management and cost containment efforts have helped boost the gross margin. Shares of this Zacks Rank #2 (Buy) company have surged 39% in the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dollar General’s DG commitment toward better price management, cost containment, private label offering, effective inventory management, merchandise and operational initiatives should drive sales and margins. In addition, the company is expanding its cooler facilities to enhance the sale of perishable items and is also rolling out a DG digital coupon program. Dollar General’s impressive comparable-store sales also support its growth story. This Zacks Rank #2 stock has rallied 15.8% in six months’ time.
Ross Stores’ ROST commitment toward better price management, merchandise, cost containment and store expansion plan have been aiding its quarterly performance. The company’s proven off-price business model along with competitive bargains continues to make its stores an attractive destination for customers. Additionally, the company has been committed toward improving merchandise assortments in the ladies’ apparel business in order to boost the top line. These factors collectively underscore the company’s solid potential. This Zacks Rank #3 (Hold) stock has gained 19.3% in the said period.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Dollar General Corporation (DG) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
