Are These The Best Retail Stocks To Buy In September?
Retail stocks have been one of the hardest hit by the unprecedented global health crisis in modern history. The health crisis has triggered a wave of companies seeking bankruptcy protection. For instance, JCPenney (JCPNQ Stock Report) filed for bankruptcy in May. It saw its shareholders’ value being substantially wiped out. However, as the world prepares for gradual reopening, Simon Property Group (SPG Stock Report) and Brookfield Property Group (BPY Stock Report) see an opportunity to buy JCPNQ out of bankruptcy. As a result, the stock has jumped more than 100% during Wednesday’s intraday trading.
On the flip side, there are also some retail companies that have adapted quite well to the new normal. They thrived during the second quarter. Among those that did really well are Walmart (WMT Stock Report) and Kroger (KR Stock Report) as they turn to e-commerce for growth during the pandemic. After 3 days of heavy market sell-off, we now have a more attractive setup among retail stocks. That said, could these 3 retail stocks be on your watchlist this week?
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Top Retail Stocks To Buy [Or Avoid] Now : LuluLemon Athletica
Lululemon Athletica (LULU Stock Report) proved that it is a fast-growing name by topping estimates this week. But the stock is down more than 10% this week. The plunge in LULU stock could simply be due to the stock being overly expensive in the past. The big question now to investors is, is it a buying opportunity? Even in the face of the coronavirus pandemic, the company seems to be doing better than its industry peers. This makes it one of the best retail stocks to buy.
While second-quarter revenue of $287.2 million from company stores was down 51% year over year, direct-to-consumer (DTC) revenue increased by 155% to $554.3 million. That shows that DTC has become the most important source of income for Lululemon. It accounted for 61.4% of total sales.
The management also expressed a relatively positive outlook. CEO Calvin McDonald said, “we are cautiously optimistic with regard to the second half of the year as we continue to navigate the uncertain environment.” Still, Lululemon management declined to provide any clear guidance for the year, as COVID-19 continues to create an uncertain environment globally.
Top Retail Stocks To Buy [Or Avoid] Now: Nike
Next up, Nike (NKE Stock Report) has been seeing optimism ahead of the Sept. 22 earnings report. This kept NKE stock stable even during the past few days of market sell-off. The stock is now only 4% below its highs. That’s a much better position than most other stocks right now.
As sportswear culture grew and sneakers became more popular, Nike saw its stock price doubling over the last five years. Besides, the ongoing expansion of Nike’s online business will be a growth driver going forward.
There is an opportunity to improve gross margins here. Now, the stock doesn’t look cheap. It is at its highest price-to-sales ratio in the last 10 years. But Nike focusing on maintaining direct connections with customers, high growth in online sales and better margins could keep the price moving up.
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Top Retail Stocks To Buy [Or Avoid] Now: BestBuy Co.
Like Lululemon, Shares of BestBuy (BBY Stock Report) drops even after beating estimates. The company is a market leader when it comes to consumer electronics. The massive surge in the number of people working from home played to Best Buy’s strengths.
It is hence not surprising that demand for home essentials, such as computers and appliances, were the largest drivers of the chain’s sales. From a long term perspective, Best Buy should also benefit from a rise in remote health services.
In addition, Best Buy is positioning itself for robust e-commerce growth going forward. Total domestic online sales soared 240% year over year during the quarter. And management expects digital sales to comprise a higher percentage of customers’ shopping activity in a post-pandemic world.