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3 Retail Stocks to Buy in January

Christopher Vargas

Last year, retail stocks like Target TGT, Walmart WMT and Costco COST all put together strong performances that bolstered the health of the broader sector. Let’s take a look at a few retail stocks that can follow in these footsteps in the upcoming year.

Dick’s Sporting Goods DKS is a retailer that put together a strong performance in 2019 as it revamped its business. The company is coming off a third quarter where it saw its net revenue grow 5.6% to $1.96 billion on a 6% surge in comparable-store sales. The firm is trying to remake itself into an all seasons retailer that can resonate with consumers no matter the weather.

In addition, the company has brought in a variety of merchandise to displace its hunting category, which it has vowed to ween itself off of. As the popularity of its private-label merchandise picks up, this could bring extended success to the firm in the new year.

Our Q4 consensus estimates forecast earnings to increase 13% to $1.21 per share and for sales to grow 2.8% to $2.56 billion. Dick’s has had its earnings estimates revised higher, helping earn DKS stock a Zacks Rank #1 (Strong Buy).

Dollar General DG is a discount retailer coming off a strong 2019 where its shares rose over 44%. The company has big plans for 2020; it plans to get on the CBD bandwagon. Dollar General announced that it intends to start selling products infused with cannabidiol in 1,100 stores across seven states by spring 2020. The retail market is expected to be the biggest contributor to CBD’s forecasted $20 billion in sales by 2024, which could make this decision a lucrative one.

In the firm’s latest earnings release, it announced its plans for fiscal 2020, which includes 1,000 new store openings, 1,500 mature store remodels, and 80 store relocations. Dollar General is looking to capitalize on its strong performance in 2019, which could lead to another breakout performance in the new year. Our Q4 estimates project a bottom-line hike of 9.78% to $2.02 per share and a top-line rally of 7.46% to $7.15 billion. DG currently sports a Zacks Rank #2 (Buy).

Ross Stores ROST is another retailer that is looking to keep its momentum going in the new year. Ross shares rose over 40% in 2019, which was capped off by the firm’s third quarter performance. The firm saw its net revenue rise 8%, which was driven by a 5% jump in comparable store sales. The company also lifted guidance for full-year earnings per share to the range of $4.52 to $4.57 from $4.41 to $4.50.

While many other retailers have struggled to survive in the new digitally driven landscape, Ross has actually expanded its brick and mortar footprint. Our Q4 consensus estimates call for earnings to rise over 4% to $1.25 per share and for net revenue to reach $4.37 billion for a 6.42% gain. Ross has surpassed our earnings estimates the past four quarters with an average EPS surprise of 3.77%. The company’s estimate revisions have trended higher, earning its stock a Zacks Rank #2 (Buy).

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Walmart Inc. (WMT) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Dollar General Corporation (DG) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
Target Corporation (TGT) : Free Stock Analysis Report
DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
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