It’s no secret that retail stocks have struggled. Of course, some companies are doing worse than others. Many have had trouble, plenty are stagnating and a rare few are bucking the trend. The key is having the right product in the right place. It also helps if the retailer is able to box-out or fend off the power of e-commerce.
Retail sales haven’t climbed more than 1% since May of last year, while results for March were actually negative.
We’ve seen the SPDR S&P Retail (ETF) (NYSEARCA:XRT) stumble 2% on the year and 4% over the past 12 months.
Online retailers have fared much better though. Amazon.com, Inc. (NASDAQ:AMZN) has climbed 20% on the year and 42% over the past 12 months. eBay Inc (NASDAQ:EBAY) has seen its stock climb 8% in 2017 and 33% over the past year.
Of course, those are just two stocks vs. an entire sector. But the point is the same: Retail is getting its butt kicked, with the exception of a few names. So what stocks are doing well? Let’s take a look at the eight retail stocks not getting crushed by Amazon.
While retail as a whole struggles, the beauty industry is apparently doing just fine. For confirmation, look no further than Ulta Beauty Inc (NASDAQ:ULTA). Shares are up 10% in 2017 and 36% over the past year. The stock is up a casual 200%-plus since January 2014.
So what has led to this huge outperformance? Mary Dillon took over as CEO of the beauty store in July 2013 and her presence has been felt immediately. Ulta hasn’t missed an EPS or revenue estimate for at least 13 consecutive quarters. It’s a feat very few companies — regardless of sector — can claim.
In 11 of the past 12 quarters, Ulta has grown revenues by more than 20%. Last quarter, comp-store sales climbed a whopping 16.6% — an acceleration from the 12.5% results in the same quarter a year ago. Additionally, in October 2016, Dillon said she plans to double Ulta’s market share in the next few years.
Ulta isn’t just an in-store experience either. The company continues to do well online too, as it saw e-commerce sales explode more than 63%. For 2016, net income grew a whopping 60%.
I apologize for the number blitz here. But it’s just to highlight how well this company has done and how well it continues to do. There’s little reason to believe that will change going forward.
Some may consider BURL expensive, trading at 32x times last year’s earnings. But its forward price-to-earnings ratio is just 21.7. Again, some may consider “just” 27.7 expensive. But with expectations that it will grow earnings 20% this year, 15.5% next year and 16.7% for the next five years, it doesn’t seem too egregiously priced.
Burlington hasn’t missed an EPS estimate since March 2014 and has only missed revenues estimates once in that period.
BURL thrives on its merchandise selection. By offering steep discounts on its products, this strip-mall-based retailer is able to lure in customers. And it’s not just beating its brick-and-mortar peers — BURL is effectively holding off online competitors too.
While the retail landscape can change quickly, fashionable discount retailers are in style — and it doesn’t look likely to change.
When searching for discount retailers crushing the competition, look no further than TJX Companies Inc (NYSE:TJX). While this is a very-high-quality company, the share price has been deceiving. The stock is only up 4% over the past year, consolidating some of the 65% gains it saw in the three years prior.
But make no mistake, TJX is an excellent company holding up well in this downbeat retail environment. The stock trades with a forward P/E ratio of 18.6, which actually seems a bit high given that earnings are only expected to grow ~7% this year. However, over the next five years, analysts expect earnings to grow 10.3% annually.
Investors may have trouble paying up for a stock with growth that they view as subpar, but management has found its strategy to be working under the TJ Maxx, Marshalls, HomeGoods and Sierra Nevada brands.
In particular, emphasis on its home goods section (not just the brand) has given TJX’s top-line results a boost as shoppers look to continually spruce up their homes.
Since missing both earnings and revenue estimates in back-to-back quarters three years ago, TJX has topped analysts’ estimates since August 2014. TJX pays a dividend yield of about 1.6% — not bad for a steadily growing company. Since 2012, it has grown the dividend at about a 22% compound annual growth rate (CAGR), which is pretty impressive.
While the stock may not be the most impressive, investors can bet they’re getting a high-quality retailer doing well in a tough environment.
When it comes to finding a stud in retail — pun intended — it’s best to check out Home Depot Inc (NYSE:HD). HD stock is up more than 11% on the year. After roaring higher by 27% in 2015, the stock struggled in 2016, climbing just 1%.
However, a consolidation year should never be frowned upon after a big run up. It lets the valuation catch up to the stock price, while allowing investors to add to their position and collect a dividend. In HD’s case, the latter is nothing to sneeze at.
Home Depot has grown its quarterly dividend payout from 29 cents in 2012 to 89 cents in the most recent quarter, growing at a 25.1% CAGR and now yielding 2.4%. Last quarter HD also announced a $15 billion share repurchase plan.
Sales growth at Home Depot should be modest, with expectations of 4.7% growth in 2017 and 4.9% growth in 2018. EPS growth is better though, with analysts looking for 11.5% and 12.7% growth in 2017 and 2018, respectively. For the next five years, estimates call for annual EPS growth of 11.6%.
Last quarter, HD also reported U.S. comp-store sales of 6.3%. That’s an impressive figure given the lackluster retail environment. Throw in the fact that the spring season is like Christmas for Home Depot, and investors surely have a winner on their hands.
Can you mention Home Depot without talking about Lowe’s Companies, Inc. (NYSE:LOW)? There’s not much back-and-forth about which one is better. Most hold HD in a brighter light than Lowe’s, but both companies have their merits.
Honestly, Lowes and Home Depot are both great companies. At times, one stock may be better than the other. But for the most part, investors can justify owning either one, or in some cases, both.
While HD has grown its dividend at a 25% clip for the past five years, LOW is no slouch either. With a 20.1% CAGR in that same timeframe, Lowe’s has clearly put an emphasis on its dividend, now yielding 1.7%.
LOW might not beat HD on its dividend, but when it comes to EPS growth and valuation, it has the advantage.
HD is expected to grow earnings 11.5% this year and 12.7% next year. The stock trades with a forward P/E ratio of 18.4. LOW on the other hand is expected to grow 2017 earnings by 16% and 2018 earnings by 14%. The stock trades at just 15.8x forward earnings too.
So which is better? It comes down to the investor, but honestly both can be owned. Consumers continue to invest in their homes, be it by painting a room or adding on a deck. Either way, it trickles right down to LOW and HD’s bottom lines.
With a market cap of just $2 billion, Childrens Place Inc (NASDAQ:PLCE) tends to fly under the radar … at least, when it comes to the mainstream media. On Wall Street though, investors have warmed up to the retailer, driving its stock higher by 11% in 2017. That’s not a fluke either. Over the past year, shares are up 37%.
While it has missed revenue estimates in four of the past 12 quarters — albeit barely in some cases — PLCE hasn’t missed EPS estimates once. For 2016, comp-store sales rose 4.9%, while fourth-quarter comps climbed 6.9%.
In an environment where retail continues to struggle, these are very good results. In March, management doubled the quarterly dividend from 20 cents per share to 40 cents per share. PLCE also announced a new $250 million share repurchase plan. This may not seem like much, but at current prices, this represents more than 10% of outstanding shares.
Further, earnings are expected to grow 22.5% this year and 9.6% in 2018, despite near-flat revenue growth. Perhaps the lack of revenue growth explains the forward P/E ratio of 15.4. Normally a company with this kind of earnings growth would trade with a slightly higher valuation.
Regardless, PLCE clearly has figured out its market and continues to excel.
There are a few retailers that are close to Amazon-proof, one of which is Costco Wholesale Corporation (NASDAQ:COST).
Costco has a unique business model. The company sells mostly wholesale goods to its customers, but they need a membership to get in first.
Because Costco requires a membership, it’s able to drive a substantial amount of revenue before customers even start shopping. While keeping costs down — it’s a warehouse for Pete’s sake! — and maintaining a profitable retail business, Costco has an attractive business model.
It’s because of this model that the stock trades with a premium valuation. Trading at 26.6x forward earnings is certainly not cheap — especially when analysts only expect COST to grow earnings 6.4% in 2017 and 13.2% in 2018. Revenue growth of 7.2% and 5.5% those years is impressive, but still doesn’t justify the valuation on its own.
From this standpoint, COST isn’t for everyone. But its business model has shown that it can withstand the e-commerce onslaught hitting the rest of the sector. Its customers have shown they will stick with their membership, even when prices go up. Coincidentally, COST plans to raise prices in June.
Shares yield just over 1% and the dividend has steadily increased over the years. So has the stock, which is up 95% over the past five years. Even though COST climbed less than 1% in 2016, its performance has been positive every year since 2009. That’s an impressive feat that will hopefully continue in 2017.
Some might be asking about Wal-Mart Stores Inc (NYSE:WMT), given that it’s the biggest brick-and-mortar retailer. It’s also going head-to-head with Amazon after its Jet.com purchase and other initiatives. It yields 2.7% and its stock is up 8.6% on the year. So why is Five Below Inc (NASDAQ:FIVE) on the list instead?
Simply put, it’s a better buy.
FIVE has a lot of things going for it, but let’s get the worst out of the way now: Its valuation. This stock trades at 37x last year’s earnings and has a forward P/E ratio of 25.1. Despite reporting in-line results or beating EPS expectations for the past 12 quarters, shares are up just 29% over the last four years.
So why is it a buy now? Analysts expect sales to increase 22% this year and 19% in 2018. If that’s not impressive enough, estimates call for EPS growth of 22.3% this year and 19.5% next year. Need more? How about estimates for 20.7% annual EPS growth for the next five years.
With a short interest of 17% and an outstanding share count of just 53.4 million, a short squeeze is surely on the table. Perhaps that explains the stock’s 23% rally over the past month.
The bottom line with FIVE is simple: Sales and earnings are going significantly higher. That means the stock could certainly take out its previous 52-week high of $52.70. On a pullback, investors would do themselves a favor by getting long and holding on for the long-term.