Still lower gasoline prices, an improving labor market and positive consumer sentiment are enough to drive momentum in the retail space. Therefore, it would be feasible on your part to add a few retail stocks to your portfolio that have solid fundamentals and could provide a sound investment opportunity.
Here we have highlighted one such stock – Foot Locker, Inc. FL – that looks promising and carries a Zacks Rank #2 (Buy), with a long-term earnings growth rate of 9.7%. We have analyzed a few basic aspects of the stock that has surged 22% in the past six months and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which witnessed a decline of 3.9%.
Foot Locker is one of the most widely recognized names in the athletic footwear and apparel industry. It boasts a strong portfolio of leading brands under a variety of store banners which aids it to target specific markets and effectively meet consumer demand. The company had outlined its long-term financial goals that include attaining sales of $10 billion, sales per gross square foot of $600, operating margin of 12.5%, net income margin of 8.5% and a return on invested capital of 17%.
Management believes that the company can benefit in the long run by persistently capitalizing on opportunities like children’s business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments. International expansion, especially in Europe, is another catalyst.
Further, Foot Locker is focused on augmenting its eCommerce platform, growing direct-to-consumer operations, margin expansion and foraying into under-penetrated markets.
Foot Locker posted positive earnings surprise for the second straight quarter, as it reported third-quarter fiscal 2016 results. Sturdy comparable sales performance, cost containment efforts and strategic initiatives helped it to continue registering year-over-year growth in both the top line and bottom line. Management reaffirmed its projection of a mid-single-digit increase in comparable sales in fiscal 2016. Moreover, it continues to expect double-digit growth in earnings per share for the fiscal year.
Other Stocks to Consider
Some other favorably placed stocks in the retail sector include Best Buy Co., Inc. BBY, The Children's Place, Inc. PLCE and Burlington Stores, Inc. BURL, all flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.9%.
The Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.
Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.
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Foot Locker, Inc. (FL): Free Stock Analysis Report
Children's Place, Inc. (The) (PLCE): Free Stock Analysis Report
Best Buy Co., Inc. (BBY): Free Stock Analysis Report
Burlington Stores, Inc. (BURL): Free Stock Analysis Report
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