Why Are Investors Watching These 3 Retail Stocks This Holiday Season?
The coronavirus pandemic has undoubtedly been a massive challenge for retail stocks this year. Many top retail stocks saw large chunks of their market caps wiped out earlier in the year. However, in recent months, most players in the retail business appear to have put out the fires and regained their composure. They have done so by shifting towards e-commerce and digital sales. This has been a good move for most retail companies. Stores like Target (TGT Stock Report) and Kroger (KR Stock Report) are some notable retail companies that have a strong e-commerce presence.
On December 10, Pfizer’s (PFE Stock Report) received an endorsement for emergency use authorization (EUA). Where would this lead to, and most importantly, how does it affect the top retail stocks in the stock market today? First, you could speculate that nonessential retailers are the ones well-positioned to ride along with the vaccine optimism during this holiday season. The enthusiasm around some of the best retail stocks to watch right now comes as holiday traffic appears to be picking up pace as the Christmas season hits full swing.
All this is a much-needed change for the industry which suffered massive losses in the first half of the year. Investors looking for top retail stocks to buy are hoping for a strong rebound in retail activities this holiday season. But the real question here is, will the annual year-end shopping wave be good enough to offset the losses faced by the industry? Your guess is as good as mine. With all this in mind, do you have a list of top retail stocks to watch ahead of the holiday season?
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Top Retail Stocks To Watch This Christmas: Lululemon Athletica
First up, Lululemon Athletica (LULU Stock Report) has been one of the best performing retail stocks in the stock market this year. Lululemon is a fitness company with a large focus on retail and e-commerce. The company sells athletic apparel products such as performance pants, shirts, and accessories for working out as well. With over 500 stores worldwide, it has grown to be a household name for many. Let’s look at some recent advancements that this retail stock has been able to make.
On December 10, the company’s shares price rose slightly after the athletic apparel posted quarterly results that topped estimates. Lululemon reported sales of $1.1 billion, up 22% from a year ago. Its earnings per share also beat expectations. The company reported an increase in direct-to-consumer sales by 94%. That certainly helped to offset lower sales in the company’s stores. Comparable store sales decreased by 17% year over year.
The coronavirus pandemic hasn’t held Lululemon’s stock back this year. Despite its retail stores being shuttered during the pandemic earlier this year, Lululemon still managed to post strong quarterly results. This demonstrates the company’s potential, as most of its peers couldn’t manage the same feat during the pandemic. Having established its niche in the sportswear market, is Lululemon’s moat enough to continue producing solid performance in 2021 and beyond?
Top Retail Stocks To Watch This Christmas: Sonos
In the face of the pandemic, consumers continue to spend more on home entertainment. Sonos (SONO Stock Report), known for its speakers, has been one of the beneficiaries, delivering strong performance across the board. Which explains why the stock price soared over 50% in November alone. This came after the speaker company delivered better than expected quarterly results last month. This may not be entirely surprising as consumers have been looking for ways to enhance the streaming experience. Listening to music with a great sound system is one thing, watching movies with high-quality speakers creates a whole new experience.
“As our customers recognize, Sonos products operate seamlessly together, with more products improving the experience. That’s why year in and year out, our existing customers add more products to their systems – every new household that we gain starts that cycle anew. Fiscal 2020 was the 15th year in a row we grew total households by at least 20%, while our existing customers once again showed strong repurchase habits, accounting for a record 41% of total product registrations. We deliver a consistent cadence of new, innovative products and services, and we have only started the process of realizing the lifetime value of our customers, both old and new.”– Patrick Spence, CEO of Sonos
On November 18, Sonos reported fiscal fourth-quarter net income of $18.4 million, after reporting a loss in the same period last year. The company also launched a number of new products. They include a replacement for its most powerful speaker and a premium soundbar that works with TVs. For the upcoming fiscal year, Sonos projects $1.44 billion to $1.5 billion in revenue, beating analysts’ consensus. That represents a growth of 11% to 15%. The company also announced a common stock repurchase program of $50 million. That could provide a boost to earnings per share going forward. With all that in mind, would you include SONO stock on your watchlist today?
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Top Retail Stocks To Watch This Christmas: Etsy
Etsy (ETSY Stock Report) has had a big year in general, with the broader surge in online spending. The company focuses on handmade or vintage items and craft supplies. The company is essentially a global marketplace for unique and creative goods. From unique handcrafted pieces to vintage treasures, Etsy has it all. With people being furloughed and unemployed, more people have turned to Etsy to make a living. The company’s shares are up by over 265% year-to-date.
In the company’s third-quarter fiscal posted in October, Etsy posted revenue of $451 million, a jump of 128% from a year ago. It also reported over 15 million new and reactivated buyers on Etsy, an increase of 112% year over year. This along with 69 million active buyers that have purchased at least once in the year is certainly an impressive figure to boast. CEO Josh Silverman says that consumer shopping habits have been greatly influenced by the events of 2020. Etsy truly stands for something different as it has been able to sustain growth by driving retention and becoming an important shopping destination for new buyers.
Of course, there is a chance that Etsy can continue its momentum into 2021. But with vaccine rollout insight, we should manage our expectations. After all, the growth in online spending could taper off when the economy reopens fully. Then again, new habits could stick around. Some of the new users who used the platform this year may return again. Considering all these, ETSY stock is certainly worth watching going forward.