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E-Commerce Aiding Retailers Survive Pandemic: 5 Stocks to Buy

Ritujay Ghosh
·5 mins read

Retailers are cutting jobs as fewer Americans are visiting stores. Also, the pandemic has compelled many retailers to reduce fixed costs like wages to workers. While these definitely aren’t good news, the brighter side to the situation is that more people are shopping online.

Retailers are reporting some of the biggest gains in online sales in their history thanks to the coronavirus outbreak that has locked most people in their homes. Naturally, an increasing number of retailers and food companies are stressing on their e-commerce arm.

Retailers Reporting Record Jump in Online Sales

The coronavirus pandemic temporarily shut many stores, holed consumers up at home, and pushed more people to the Internet to browse and buy groceries, clothes and workout gear. The pandemic may have taken a much worse shape without e-commerce. The past few months have seen e-commerce sales soaring.  

At Best Buy Co, Inc. BBY, online sales were up 242% during its fiscal second quarter, as more people stocked up on electronics and equipment for their home offices. Target Corporation TGT recently said that it attracted 10 million new digital customers in the first half of 2020. Amazon.com, Inc.’s AMZN grocery e-commerce sales tripled in the second quarter, hitting $7.2 billion in June. In the past six months, Amazon has tripled its overall grocery delivery capacity and total number of grocery pickup locations.

Also, Dick’s Sporting Goods, Inc. DKS, Lowe’s Companies, Inc. LOW and Home Depot, Inc. (HD) reported triple-digit growth in e-commerce sales. Gap Inc.’s GPS total online sales surged 95% from a year ago, and within that its Old Navy business surged 136% online. The surge is likely to continue as economies are yet to open completely.

Pandemic Helping E-Commerce to Flourish

This year is proving to be a game changer for e-commerce not only in the United States but also globally. COVID-19 has been a defining event for e-commerce, accelerating the adoption curve significantly.

According to a report by eMarketer, total U.S. retail sales are projected to decline 10.5% this year, with a 14% drop in brick-and-mortar sales. However, e-commerce is poised to grow 18% (following a 14.9% gain in 2019), suggesting a notable increase in both the number of digital buyers and the average spending per buyer.

Online sales have been driven by a surge in click-and-collect, specifically curbside pickup. According to the report, U.S. click-and-collect e-commerce sales are expected to grow to $58.52 billion, which indicates 60.4% growth versus its initial forecast of 38.6% growth.

Our Choices

The economy has started reopening but the government is still struggling to contain the spread of the pandemic.  Safety measures like at-home orders and social distancing will exist for at least a few more months now. Hence, more people will rely on online delivery, especially grocery and household staples. Given this situation, it might be prudent to invest in retail stocks that have a strong online presence.

Target Corporation has evolved from just being a pure brick & mortar retailer to an omni-channel entity. The company has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.

The company’s expected earnings growth rate for next year is 11.9%. The Zacks Consensus Estimate for current-year earnings has improved 44.2% over the past 30 days.  Target sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services.

The company’s expected earnings growth rate for next year is 17.3%. The Zacks Consensus Estimate for current-year earnings has improved 26.7% over the past 30 days.  Best Buy holds a Zacks Rank #2 (Buy).

The Kroger Co. KR operates supermarkets, multi-department stores, marketplace stores and price impact warehouse stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and the multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.

The company’s expected earnings growth rate for the current year is 29.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the past 60 days. Kroger has a Zacks Rank #2.

DICKS Sporting Goods, Inc. operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment.

The company’s expected earnings growth rate for next year is 11.9%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 30 days.  DICKS Sporting carries a Zacks Rank #1.

Casey’s General Stores, Inc. CASY offers a variety of food selection (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, school supplies and houseware.

The company’s expected earnings growth rate for next year is 13.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days.  Casey’s holds a Zacks Rank #2.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


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
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
 
The Gap, Inc. (GPS) : Free Stock Analysis Report
 
Lowes Companies, Inc. (LOW) : Free Stock Analysis Report
 
DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
 
The Kroger Co. (KR) : Free Stock Analysis Report
 
Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
 
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