Consumers mean a lot to the U.S. economy. But they mean a lot to every economy. Regardless of how governments are set up and how they have handled the novel coronavirus pandemic and ensuing economic turmoil, the fact is, every country needs its consumers to get back to working and spending those wages.
While we hear that consumers are getting back to spending, we’re also in the in holiday season which skews things a little. And spending this year isn’t what it was in years before.
Granted, consumers are certainly making headway in China and the U.S., but with second and third waves of the virus shutting down countries and cities again, it’s hard to tell how long that comeback will be.
That’s why I wanted to feature these seven retail stocks that should have a happy New Year. These stocks should be the leaders in the retail space, now and when things get back to something that resembles normalcy:
- Amazon (NASDAQ:AMZN)
- BJ’s Wholesale Club (NYSE:BJ)
- Chewy (NYSE:CHWY)
- JD.com (NASDAQ:JD)
- Shopify (NYSE:SHOP)
- Target (NYSE:TGT)
- Pinduoduo (NASDAQ:PDD)
Retail Stocks to Watch: Amazon (AMZN)
You can’t make a list of retail stocks without including this one. AMZN is the modern version of Sears (OTCMKTS:SHLDQ) in the U.S. It’s a massive retailer that got even stronger during the pandemic because it does far more than just sell things online.
It has built an integrated operation that is unrivaled outside of Asia. And it’s fueled by Amazon Web Services, the largest cloud provider in the world, which has huge margins that the company can use to launch new operations or expand existing ones.
It’s so diversified at this point that AMZN is almost an index of U.S. companies unto itself. And you can bet as the pandemic wanes, AMZN will be ready to buy into its next sector, whether that be a logistics business or brick and mortar stores or a financial business.
Whatever Amazon chooses to do, it will do it right. That’s part of why AMZN stock is up nearly 80% in the past year.
BJ’s Wholesale Club (BJ)
Launched in 1983 around the time of its rivals Sam’s Club and Costco (NASDAQ:COST), BJ was owned by the old discount retailer Zayre.
It has since gone through a number of different owners and incarnations. However, as of 2011, it has been run by a couple private equity firms that have given it a more consistent identity.
BJ’s has the same concept as its two much larger rivals, but it’s more of a regional company, with most operations on the East Coast. It’s the No. 1 wholesale club in Massachusetts and has 220 stores in 15 states.
It has around 5.5 million members. COST has an order of magnitude more members. But BJ’s is well loved and continues to grow and make money. Its bulk pricing will help consumers as they recover from the pandemic.
BJ stock is up 71% in the past year and its price-to-earnings ratio is still just 14x.
If there’s one thing Americans love, it’s their pets. According to the American Pets Products Association, Americans spent nearly $100 billion on their pets in 2019. And that number has been growing for years.
You can bet that we’ve left $100 billion far behind in 2020 as lockdowns have motivated people to bring in a furry or feathered or scaled friend to help them cope with lockdowns and the general isolation of the pandemic.
Chewy launched in 2011 as an e-commerce solution to pet needs. Before many of the large pet stores started using e-commerce, CHWY was laser-beam focused on it. And now it has a strong online presence and smooth, profitable operation while brick and mortar chains have a tough time growing margins.
CHWY stock is up 269% in the past 12 months, and it will continue to grow now that it has established national brand recognition.
You might not have heard about this company because it operates in China. But think of it as a cross between AMZN and eBay (NASDAQ:EBAY). Started in 1998 by a programmer, it opened a humble brick and mortar store selling electro-optical devices.
Today, it’s the largest retailer in China and was the first Chinese stock traded on the Nasdaq. It also has the largest drone delivery fleet in the world. It should also be no surprise since it was built by a geek, JD is leading the way in developing artificial intelligence for e-commerce in Asia.
The company is 20% owned by another Chinese juggernaut, Tencent (OTCMKTS:TCEHY). That means they can help each other expand their businesses without having to move into sectors outside their strengths.
The U.S. stock is up 125% over the past year, and it’s unlikely that U.S. regulators will cause too much trouble for the listing moving forward.
SHOP stock is one of those retail stocks that seems like it could be a gift that keeps on giving. It was hot before the pandemic and now it’s on fire. In the past 3 years, SHOP is up over 1,000%. And most of that has happened more recently.
What does Shopify do?
It helps small and medium-sized businesses build and maintain e-commerce platforms. And it also contracts its services to some companies so they can encourage new sellers on their platforms.
With unemployment numbers at record levels and the gig economy in full swing as people try to make ends meet, hanging an electronic shingle is another important side hustle. Also remember that a lot of jobs aren’t going to be coming back now that e-commerce and digital experiences have supplanted many positions.
The bet is, SHOP stock is going to be very popular for many years to come. That’s why it currently carries a P/E of 756x, yet the stock is up 216% in the past year.
With all these sexy companies that are little more than a couple decades old, there’s one company that goes back nearly 120 years that is worth your attention.
TGT was almost sunk by the rise of e-commerce. But it brought in a new CEO with a new vision and turned this old-school department store into a 21st Century e-commerce contender.
It was a massive risk, but the company new that the risk was greater if it stuck to its traditional guns like others and gutted it out. And the risk paid off handsomely.
Its e-commerce business was going strong before the pandemic and it’s even stronger now, as it offers store pick-up as well as deliveries. And with so many stores it has a built-in distribution network to help get goods to consumers as fast as its competitors.
TGT stock is up 33% in the past year and delivers a 1.6% dividend. It isn’t sexy, but it’s solid and shareholder friendly.
You might be familiar with some of the powerful Chinese e-commerce companies, but it’s likely PDD isn’t one of them.
PDD is a relative newcomer to the e-commerce sector and it’s going up against some of China’s most powerful companies. Just 5 years old, PDD has a $174 billion market cap in the U.S., having listed only 2 years ago.
How has it accomplished this kind of success in such a short amount of time? It went down market. Instead of catering to aspirational and affluent demographic groups, it focuses on deeply discounted goods — discounts closer to 90%. That has driven significant demand from more price inelastic consumers as well as bargain hunters of all stripes.
PDD stock is up 281% in the past year and will be one of the stronger retail stocks moving forward.
On the date of publication, Louis Navellier has long positions in AMZN, BJ, CHWY, JD, SHOP, TGT, COST and PDD in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.