Are These Two Top Retail Stocks On Your Watchlist This Week?
Retail stocks have been one of the sectors hit hardest in the stock market. The coronavirus pandemic has created an unprecedented crisis that brought the U.S. economy to its knees. Does that mean we should avoid this space at all costs? With some of the major retailers such as Tailored Brands (TLRDQ Stock Report) and J.C. Penney (JCPNQ Stock Report) seeking bankruptcy protection, it sure seems like there is not much reason to look at this area. But the truth is, not every retail stock is faring badly. On the contrary, even under duress, some retail is thriving. They are dealing with the changes, and gearing up for economic recovery.
Maybe it is just me, but it increasingly appears that the worst of the coronavirus pandemic is over. Should the economy really reopen and rebound in the following few quarters, we can expect consumer confidence to slowly return. And beaten-up retail stocks could possibly bounce back stronger and are here to stay.
Top Retail Stocks With Huge Online Presence Takes The Lead
Most retailers have gone under so far in 2020 due to the pandemic, and more could join if the pandemic continues to stay. Yet, some would emerge stronger after the crisis. The major retailers have been among the big winners. This is as consumers accelerated their shift to online shopping in the wake of the coronavirus pandemic and subsequent government-mandated lockdown measures. Ahead of the retailer’s upcoming quarterly results, could these two retail stocks with huge online presence compete with Amazon (AMZN Stock Report) online?
Top Retail Stocks To Buy [Or Sell ] Ahead Of Its Earnings: Walmart Inc.
First, up the list, Walmart (WMT Stock Report) will be reporting its quarterly earnings on 18 August. The world’s largest brick-and-mortar retailer saw its earnings and revenue easily beat estimates in the first quarter. But the big question here is, can investors expect the same results this quarter when the company announces their earnings tomorrow? In the coming quarter, analysts are forecasting adjusted net income of $3.3 billion, or $1.15 a share, on sales of $131.7 billion.
Investors are paying close attention to the growth in Walmart’s e-commerce figures, which soared by a record 74% in the previous quarter. Most retailers are also catching up fast, such as Kroger (KR Stock Report) which has posted strong gains. Kroger’s saw comparable store-sales spiked 19% through late May. Nevertheless, investors are only expecting a modest gain from Walmart. Sales trends are likely to be lower than what it posted during the first quarter. Despite strong gains in their e-commerce segment, COVID-19 related expenses are also ballooning. They could surpass the $900 billion mark from the previous quarter. From the profit margin end, this segment is likely to see challenges as well from the transition from in-person shopping to contactless fulfillment home delivery.
Recall that a few months ago, management showed optimism about the company’s growth. Consumers have been responding favorably to Walmart’s omnichannel selling platform. Nevertheless, the company did express caution on the profitability of the business. It seems margins will continue to be under some pressure for the rest of the year.
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Top Retail Stocks To Buy [Or Sell] Ahead Of Its Earnings: Target Inc.
Shares of Target (TGT Stock Report) have recently turned positive this year after rebounding 50% from its March low. That rebound signals investors’ confidence that the retailer can weather the storm from COVID-19 pandemic. That is as more shopping demand moves online. In fact, Target’s growth was comparable to that of Walmart in the first quarter, which makes it one of the top retail stocks to buy during the pandemic. The explosive demand from its digital channel is also the reason why investors are looking forward to its earnings report on 19 August.
The 3 months under review will likely see the impact of the pandemic on its online sales. As the economies reopen, there will be a return to more normal growth. What is important for investors is to see how online demand has changed. Recall that growth jumped from 33% in February to 282% in April. On another note, rival Walmart is announcing its Q2 results the day before. That presents a good comparison to see if both retailing giants will be able to increase their market shares.
The reality is, smaller retailers may not have the same online reach of the giants. In a sector that has seen unequally impact by the coronavirus pandemic, could TGT stock outperform its industry peers?