Retail sales signify a crucial economic barometer each month. The past year has seen lackluster monthly and year-over-year (YOY) numbers at best, but beneath the surface lies a more profound crisis. When accounting for inflation, retail sales numbers plummet. Consumers, in their duel role as purchasers and investors, are keenly aware of the truth. They began shunning price hikes some time ago and are now beginning to tighten their purse strings altogether.
However, a glimmer of hope may be on the horizon for struggling retail chains. As we hurtle towards the final quarter of the year, a season abounding in festivities and consumer spending looms. This year, the ailing sector might find relief through interest rate cuts.
Even though it may take a quarter or so for these cuts to manifest in earnings, investors are likely to anticipate their impact through sector rotation. Thus, the late summer presents an opportune moment to contemplate investing in retail stocks that may not rely on Black Friday salvation.
Walmart (WMT): Riding the Stock Split Surge
The golden halo of owning Walmart (NYSE: WMT) stock has not dimmed this year. The retail giant undertook a 3-for-1 stock split on February 26, propelling its stock up by a substantial 30% with still five months remaining in the year. Despite this meteoric rise, analysts are continuing to bid WMT stock higher.
In a significant development, Piper Sandler initiated coverage on Walmart with an Overweight rating and a price target of $81 on July 10, eclipsing the current consensus target of $71 by over 15%. Walmart’s first-quarter earnings report revealed beats on both the top and bottom lines. More notably, its discourse on the impact of inflation stood out. While low-income consumers are cutting back on discretionary spending, affluent consumers, not typically Walmart patrons, are stepping in to fill the gap.
Moreover, Walmart’s strategic investment in its e-commerce arm bore fruit, with e-commerce sales witnessing a substantial 20% surge in 2023.
Deckers Outdoors (DECK): Scaling New Heights
Deckers Outdoors (NYSE: DECK) is another emblem of stock splits, set to execute a 6-for-1 split in September. Post this split on September 9, DECK stock shares will commence trading at their split-adjusted price.
Deckers Outdoors stands out as one of the top-performing retail stocks, not only in 2024 but over the past half-decade. With a staggering 517% growth in share prices, its success lies in the stable of footwear brands it manages, including Hoka, Uggs, and Teva. The company’s first-quarter earnings report for 2024, released on July 25, exhibited a remarkable 22% YOY revenue surge and an impressive 87% growth in earnings.
Despite a recent 7.9% uptick post the earnings report, DECK stock had witnessed a nearly 10% dip prior. For prospective investors eyeing DECK, it might be prudent to await the stock split before taking a position.
Genuine Parts (GPC): The Beacon of Stability
Genuine Parts (NYSE: GPC) shines as a beacon of steadiness for value investors within the retail stocks realm. Bestowed with the title of a ‘dividend king,’ it has consistently raised its dividend for an impressive 69 consecutive years, boasting a current yield of 2.79%.
However, the stock’s allure extends beyond its reliable dividend payouts. Over the past decade, GPC stock has delivered a total return exceeding 130%, showcasing the company’s robust business model revolving around office products, automotive and industrial replacement parts, and electrical/electronic materials.
The Resilient Spirit of Financial Giants
Through the tumultuous waves of the financial market, some stalwart giants have stood firm, weathering the shifting winds of investor sentiment.
Domino’s Pizza: A Slice of Success
Despite recent fluctuations, Domino’s Pizza (NYSE: DPZ) has proven to be a steady performer in the market. Investors who have stayed the course have reaped significant rewards over the past five years, with a total return of 83.13%. However, the current year has presented challenges, with the stock price showing a modest 2.4% increase.
While the company has adjusted its store opening strategy, projecting a more conservative approach, it still maintains ambitious plans for future expansion. With intentions to launch up to 1,100 stores by 2028, Domino’s aims to bolster its sales by approximately 7% annually.
Chewy: Navigating Changing Tides
As consumer spending habits shift amidst rising inflation, Chewy (NYSE: CHWY) has emerged as a beacon of stability in the retail sector. Unfazed by the turbulence in the market, Chewy continues to attract investors with its robust revenue and earnings growth.
Despite commanding a premium valuation at 102x forward earnings, analysts foresee a substantial 60% earnings growth trajectory for Chewy. This promising outlook positions the company for potential double-digit share price expansion, dispelling concerns related to its current valuation.
e.l.f. Beauty: Dazzling Performance in the Retail Arena
Amidst the competitive cosmetics and skincare landscape, e.l.f. Beauty (NYSE: ELF) has swiftly carved out a niche for itself since its debut in 2019. With a remarkable market share increase of 305 basis points in fiscal year 2024, the company has become a growth powerhouse in its sector.
e.l.f. Beauty’s commitment to offering 100% vegan products resonates strongly with its millennial and Gen-Z customer base. This ethical stance has translated into tangible business success across all operational facets.
Lululemon: Embracing Change and Challenging Expectations
Embodying adaptability in the face of uncertainty, Lululemon (NYSE: LULU) continually redefines its market position. With a history of resilience, Lululemon has managed to navigate through market obstacles, offering a testament to its enduring appeal among consumers.
Despite recent fluctuations in the stock price, investors remain optimistic about the company’s future prospects. As Lululemon prepares to report its earnings in the coming days, heightened analyst interest suggests a positive outlook for the company.