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4 Retailers That Are Up More Than 20% YTD & Still Look Solid

Sumit Singh

Retail-Wholesale sector, which occupies top 25% position in the list of Zacks sectors (four out of 16), has gained roughly 17.2% so far in the year, outpacing the S&P 500’s growth of approximately 15.5%. In fact, sturdy labor market, rising disposable income and an upbeat consumer environment with confidence index reaching a six-month high in May are working in favor of the sector. Further, any cut in the benchmark interest rate at this juncture will ramp up investment activities and reinforce consumer spending.

We note that consumer spending — which accounts for more than two-thirds of U.S. economic activity — has picked up in recent months. This is evident from an uptick of 0.5% in retail sales during the month of May, following an upwardly revised reading of 0.3% gain in April. As of now, this dissipates the fear of economy losing steam.

With consumers stepping up purchases and strategic endeavors undertaken at the company level, the sector seems to be on solid footing. Retailers are enhancing omni-channel capacities, introducing new brands, refurbishing stores and optimizing price. From opening smaller-format stores to bringing in new loyalty program and embracing new technologies to providing fast delivery options on online purchase or via apps, the retailers have been on their toes.

To be more precise, industry-participants now play dual in-store and online role. Definitely, players took a while to accommodate and evolve with changes in the retail landscape. But with right strategies in right place and right direction they hold promise. Here we have highlighted four stocks that have gained more than 20% year to date and looks well poised based on their sound fundamentals and earnings growth prospects.

4 Prominent Picks

Investors can count on Aaron's, Inc. AAN, which operates as an omni-channel provider of lease-purchase solutions. This Zacks Rank #2 (Buy) company has delivered average positive earnings surprise of 4.4% in the trailing four quarters. Moreover, the Zacks Consensus Estimate for earnings for the current financial year has risen by 3 cents to $3.83 over the past 30 days, indicating year-over-year improvement of roughly 14%. We note that the stock with a long-term earnings growth rate of 15% and a VGM Score of A has zoomed 45.9% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zumiez Inc. ZUMZ, which operates as a specialty retailer of apparel, footwear, accessories, and hardgoods, is a solid bet with a long-term earnings growth rate of 13.5%. This Zacks Rank #2 company has delivered average positive earnings surprise of 46.3% in the trailing four quarters. Moreover, the Zacks Consensus Estimate for earnings for the current financial year has increased by 4 cents to $1.89 over the past 30 days, suggesting year-over-year growth of 5.6%. The stock with a VGM Score of A has advanced 33.3% so far in the year.

You can also consider Target Corporation TGT, a general merchandise retailer with a Zacks Rank #2 and VGM Score of B. The company has delivered average positive earnings surprise of 2.6% in the trailing four quarters. Moreover, the Zacks Consensus Estimate for earnings for the current financial year has improved by 5 cents to $5.92 over the past 30 days, suggesting year-over-year growth of 9.8%. We note that the stock has surged 30.5% year to date.

Best Buy Co., Inc. BBY, a retailer of technology products, services, and solutions, is another lucrative option. The stock has a VGM Score of B and long-term earnings growth rate of 8.8%. This Zacks Rank #2 company has delivered average positive earnings surprise of 10.2% in the trailing four quarters. Moreover, the Zacks Consensus Estimate for earnings for the current financial year has jumped 8 cents to $5.74 over the past 30 days, indicating year-over-year growth of 7.9%. We note that the stock has increased 29.1% year to date.

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Aaron's, Inc. (AAN) : Free Stock Analysis Report
 
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