We’ve already seen some strong earnings results from a number of high-profile retailers, as second-quarter profits have been outstanding in the face of a declining market. However, the selling in the broad market has served to put pressure on even the best-of-breed back-to-school retailers. But the market’s widespread selling actually could turn out to be good for astute back-to-school bargain shoppers, because getting in on the right stocks in the space now could pay off big time when the bulls return to Wall Street.
Here are five back-to-school stocks for a bloody market.
Target
The cheap-chic retailer just posted better-than-expected second-quarter earnings that came complete with a full-year forecast that topped even the most optimistic analysts’ opinions. Target (NYSE:TGT) said it expects full-year profits to range from $4.15 to $4.30 per share, while analysts are looking for just $4.14 per share. Target’s full-year profit target could hit the bull’s-eye if the company has a good back-to-school buying season.
As you can see here in the 12-month chart of TGT, the stock took a tumble in early August, even breaking below the 50-day moving average. Those shares now are back above that mark, and they appear headed toward the 200-day average at $51.75. Good August and September sales could be the catalyst this retailer needs to build on its current rally.
Staples
The office retailer sells plenty of back-to-school supplies for the kids, including paper, backpacks, electronics, pens, etc. Of course, it’s also the leading retailer for the small-business and home-office customer. Staples (NASDAQ:SPLS) also recently posted better-than-expected second-quarter earnings that included a boost in its full-year outlook.
The company said it now expects full-year earnings to range from $1.42 to $1.48 per share, which is up nicely from its prior outlook for EPS of $1.35 to $1.45. The chart here of SPLS shows a stock that’s taken a big hit since May. It also shows a beaten-down retailer coming up off the canvas just in time for a back-to-school rally.
Nordstrom
Upscale apparel retailer Nordstrom (NYSE:JWN) always has had a strong appeal for the more affluent shopper, and these days the more affluent back-to-school shoppers are going to be the ones with enough money to actually spend on looking good for class. On Aug. 11, Nordstrom posted strong second-quarter earnings that beat Wall Street expectations. The stock spiked on the news; however, shares sunk back down last week in large part because of the wider selling bias in the market (only to rise significantly once again today). If we see the broader market stabilize soon, JWN shares will look like a big bargain here under $40 — especially if back-to-school sales are robust.
Kohl’s
Mid-range department store Kohl’s (NYSE:KSS) sells a lot of back-to-school clothes, shoes, jackets and more for kids and adults alike. The company also has sold a lot of merchandise in the second quarter, as profits rose 17% from the same quarter a year ago. Like Target and Staples, Kohl’s easily bested consensus estimates, and it also raised its full-year profit outlook. The company said full-year 2011 earnings will be in the range of $4.45 to $4.60 per share, which is up nicely from its prior estimate of $4.25 to $4.40.
As you can see in the chart here of KSS, the stock cratered in early August along with much of the market. Shares got a nice bounce on the earnings news, but since then the rally has stalled. Here again, a good back-to-school season could bode well for third-quarter profits, and for the stock. That means owning shares here at the $46 level could be a well-timed move.
Amazon.com
These days, a big portion of back-to-school shopping is done on the Internet, and that means it’s a very busy time of year for online retailer Amazon.com (NASDAQ:AMZN). The company already is one of the most profitable entities around, and in July it proved that with second-quarter earnings that included its highest level of revenue growth in a decade. Amazon did say it expects to report lower-than-expected operating profit in the coming quarter, but that’s because it plans to spend some capital on expansion.
The chart here of AMZN shows a stock that’s been beaten up pretty badly in August. Shares now are below both the 50- and 200-day moving averages. Buying into this earnings powerhouse could allow you to book some very big profits in the months ahead.
