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For Immediate Release
Chicago, IL – June 16, 2021 – Today, Zacks Equity Research discusses Retail – Discount including Target Corporation TGT, Burlington Stores, Inc. BURL, Costco Wholesale Corporation COST and Ross Stores, Inc. ROST.
A favorable consumer environment and strategic endeavors undertaken at company level are working in tandem for the Retail – Discount Stores industry. It goes without saying that the industry's prospects are closely tied to the purchasing power of consumers. In fact, strengthening the labor market, stepped-up vaccinations and record savings are forming a perfect base for higher consumer spending — which accounts for more than two-third of the U.S. economic activity.
The industry has certainly succeeded in creating a niche in spite of rising popularity of pure e-commerce players. This has been achieved on the back of strategic investments, cost optimization, and loyalty and marketing programs. Again, enhancement of omni-channel capabilities, introduction of new brands, refurbishment of stores, and faster delivery options, be it curbside pickup or at home, have been playing crucial roles.
The strategy to sell products at discounted prices has been helping players in the industry to attract customers, who have been seeking both value and convenience. Under the prevailing circumstances, people in the low-to-middle income groups have been showing preference for discount stores.
Easing of social distancing norms and resumption of active social lifestyle and events are likely to fuel demand across a diverse set of categories. No doubt, retailers have been replenishing shelves with in-demand merchandise.
Markedly, the National Retail Federation envisions U.S. retail sales to increase between 10.5% and 13.5% to an estimated $4.44 trillion to $4.56 trillion in 2021, considering the favorable consumer environment and upbeat momentum in the economy. Also, a look at the data released by Mastercard SpendingPulse suggest a stellar back-to-school season for retailers, as more children head back to the classroom. Sales during the back-to-school period — Jul 15 through Sep 6 — are anticipated to increase 5.5% from the last year and 6.7% from 2019.
That said, we have highlighted four stocks from the Retail – Discount Stores industry that look well positioned based on their sound fundamentals. The industry currently carries a Zacks Industry Rank #27, which places it in the top 11% of more than 250 Zacks industries.
4 Prominent Stocks
You may invest in Target Corp. The company has been deploying resources to enhance omni-channel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide seamless shopping experience. Markedly, the company plans to make an investment of about $4 billion annually during the next several years to ramp up store openings and remodels, scale up fulfillment services and enhance supply chain capabilities.
We note that this general merchandise retailer has a trailing four-quarter earnings surprise of 62.1%, on average. This Zacks Rank #1 (Strong Buy) stock has a long-term earnings growth rate of 13.3%.
Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 9.1% and 25.6%, respectively, from the year-ago period. You can see the complete list of today's Zacks #1 Rank stocks here.
We suggest betting on Burlington Stores, which operates as a retailer of branded apparel products in the United States. The company has been gaining from its strategic endeavors including Burlington 2.0 off-price initiative. Via this strategy, the company focuses on three aspects, marketing, merchandising and store prototype.
Moreover, it has been strengthening vendor counts, making technological advancements and focusing on localized assortments. Impressively, this Zacks Rank #1 stock has a trailing four-quarter earnings surprise of 74.7%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 52.6% and 432.3%, respectively, from the year-ago period.
Investors can also count on Costco Wholesale Corp. The company's growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its performance.
Cumulatively, these factors have been aiding this operator of membership warehouses in registering impressive comparable sales run. Costco registered comparable sales growth of 22.8% in May.
This Zacks Rank #2 (Buy) stock has a trailing four-quarter earnings surprise of 7.7%, on average. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 15% and 17.2%, respectively, from the year-ago period. It has a long-term earnings growth rate of 9.1%.
Ross Stores is another potential pick. The company is likely to witness pent-up demand owing to the acceleration in traffic trends as the economy reopens. Additionally, its efforts to expand the store base and enhance product offerings bode well.
The company expects to open 30 stores in the second quarter of fiscal 2021, comprising 22 Ross and eight dd's DISCOUNTS. This Zacks Rank #3 (Hold) stock has a long-term earnings growth rate of 10%.
This operator of off-price retail apparel and home fashion stores has a trailing four-quarter earnings surprise of 33.5%, on average. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings indicates an improvement of 43.5% and 453.9%, respectively, from the year-ago period.
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Target Corporation (TGT) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
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