Are you looking for retail stocks to buy?
If you are, and you actually care about environmental, social and governance (ESG) best practices — what some might call getting “woke” — there are plenty of retail brands out there that are standing up for causes they believe to be right and good.
Canadian digital marketing strategist Ross Simmonds wrote a blog post in 2018 that discusses this very subject. In it, he discusses the rise of brands promoting their wokeness.
This idea is not going away no matter how hard some people try to discredit this form of social awareness. It’s just not. The days of brands being pure capitalism with no thought given to all the stakeholders that interact with it are long gone.
Don’t believe me? According to Simmonds, “42% of North American shoppers would pay extra for products and services from companies committed to positive social and environmental impact.”
I sure would. So, with that in mind, I have picked seven retail stocks to buy that have made the top 25 holdings of several ESG funds producing excellent returns at a low cost to investors.
- Apple (NASDAQ:AAPL)
- Home Depot (NYSE:HD)
- Costco (NASDAQ:COST)
- Tesla (NASDAQ:TSLA)
- Disney (NYSE:DIS)
- SVB Financial (NASDAQ:SIVB)
- Nike (NYSE:NKE)
Retail Stocks to Buy: Apple (AAPL)
Apple is the No. 1 holding of the Vanguard FTSE Social Index Fund Admiral Shares (MUTF:VFTAX).
The fund tracks the performance of the FTSE4Good US Select Index, a collection of stocks that excludes companies from certain industries such as porn, alcoholic beverages, tobacco, firearms and several others.
Apple has more than 500 stores worldwide, including 271 in the U.S., 50 in China, 38 in the U.K., 28 in Canada, 22 in Australia and many other countries. They generate more dollars of revenue per square foot than any other retailer.
In early January, Apple launched a $100 million Racial Equity and Justice Initiative (REJI) that tries to eliminate the barriers, economic and otherwise, faced by communities of color.
“We are all accountable to the urgent work of building a more just, more equitable world — and these new projects send a clear signal of Apple’s enduring commitment,” CEO Tim Cook said in Apple’s press release announcing REJI.
I can remember back in 2018; Cook spoke out against the Trump Administration’s policies on immigration. While he’s got a vested interest in that subject given how many immigrants the company hires to work at Apple, he also listed education, privacy rights, the environment and human rights as important issues for him and the company.
No longer can companies stay on the sidelines. Even the NFL is starting to understand that.
Home Depot (HD)
It continues to benefit from a strong housing market, both new and resale. InvestorPlace’s Nicholas Chahine recently recommended investors buy HD stock on its recent dip. Chahine reminded investors that its share price is actually lower than it was four years ago.
In April, I recommended Home Depot and six other retail stocks that were performing exceptionally well due to e-commerce gains during the pandemic. I continue to like it as a long-term hold. Nothing reflects America’s economic health better than a thriving HD.
Sometimes, it pays to stay out of certain fights. For example, in April, religious leaders in Georgia, where Home Depot is based, called on people to boycott its stores over its silence on the issue.
“We believe that all elections should be accessible, fair and secure and support broad voter participation. We’ll continue to work to ensure our associates, both in Georgia and across the country, have the information and resources to vote,” a Home Depot spokesperson said in a statement to Newsweek.
As a big believer in paying retail workers a living wage, I would prefer Home Depot pay its employees more, but it’s up to the company and its staff to decide if voting’s an important issue or not.
Either way, most people are still going to shop there.
Retail Stocks to Buy: Costco (COST)
Costco doesn’t make the top 10 holdings of the Parnassus Core Equity Fund Investor Shares (MUTF:PRBLX), but it does manage to make the top 25 with a weighting of 2.3%.
Costco is definitely a beacon of light if it’s woke to pay your employees more than your competition. But, of course, it has always prided itself on doing what’s right for its employees.
In the company’s most recent conference call, Chief Financial Officer Richard Galanti discussed wages. For a total of 52 weeks during the pandemic, it paid its in-store staff an additional $2 per hour. That ended in the second week of Q3 2021. In its place, Costco made permanent a $1 per hour increase.
As retailers struggle to recruit employees, Costco’s history as an excellent employer should do well to keep it busier than most.
Go to the Costco website, and you can find out all about the company’s position on sustainability, climate change, diversity, etc.
As far back as 2012, I’ve been singing the praises of Costco. I will continue to do that as long as it remains committed to providing its members with “quality goods and services at the lowest possible prices,” while also respecting the need of its employees to earn a living wage.
As woke companies go, I would think Costco’s right up there because it walks the talk.
The Shelton Green Alpha Fund (MUTF:NEXTX) invests in stocks with above-average growth in the green economy. As of March 31, Tesla was the fund’s fifth-largest holding at 3.9%.
You might recall that Tesla CEO Elon Musk did a u-turn in 2019 when he announced it was closing all of its stores and moving to an online-only sales process. That decision lasted less than two weeks.
By March 11, 2019, Tesla reversed course, telling employees that it would keep some stores open and raise vehicle prices to make up for the costs of running the stores that remain open.
“For the most part, the roughly 10% of Tesla sales locations we closed recently don’t pass the Sherlock Holmes test. Meaning, most of these stores are in such difficult or obscure locations, only Sherlock Holmes could find them!” Musk stated at the time in an email to employees.
Where I live in Halifax, there isn’t currently a store — a total of 19 in Canada — but last October, rumors started making the rounds that one would soon open. That hasn’t happened yet. Until then, if I want to buy a Model Y, I have to go to Quebec (the nearest province with a store) to pick it up.
As part of its efforts to keep up with demand, Tesla is opening 52 new service centers worldwide in 2021. That would bring the total to 518. Despite opening 52 this year, the company’s pace of delivery growth far exceeds the growth in service centers. As a result, expect the pace of openings to accelerate in 2022 and beyond.
Retail Stocks to Buy: Disney (DIS)
The 1919 Socially Responsive Balanced Fund (MUTF:SSIAX) is an actively managed fund that selects undervalued securities that also happen to be conducting business in a socially responsible manner. Walt Disney is the fund’s seventh-largest holding with a 1.6% weighting.
A recent opinion piece by Deseret News had the headline “Disney’s ‘Wokeness’ Beats Wickedness.” It seems some Christians wanted to boycott the company for celebrating “Pride” month. I’m not sure how many American retail and hospitality businesses would survive without all the great work of LGBTQ+ employees. I really don’t. And, I’m straight.
Of course, it might not even matter.
In March, Disney announced that it would close 60 of its North American retail stores in 2021 (20% of the global total) to focus on e-commerce. Here in Canada, Disney is closing all 18 locations by the end of this summer. In addition, the company has no Canadian e-commerce site, so it is completely exiting the market.
In the end, most investors are looking to buy Disney because of Disney+, its video streaming service that has gained more than 70 million net new subscribers over the past year. By the end of fiscal 2024, it plans to boost its subscriber base from 103.6 million today to as many as 260 million worldwide.
That’s a freight train that can’t be stopped.
SVB Financial (SIVB)
The last of the funds to pick retail stocks from is AB Sustainable Global Thematic Fund (MUTF:ATEYX). I will choose two from the fund, which identifies sustainable investment themes, and then selects 30-60 companies participating in these areas.
SVB Financial is the second-largest position of the fund’s 60 holdings. It has a weighting of 2.80% as of May 31, 2021.
I’ve included a bank in a group of retail stocks because, despite the company’s foray into venture capital investing and lending, at heart, it is still a banking institution with deposits taken and received at its branches. In the case of SIVB, it has branches and offices in 40 states and seven countries.
In early January, I said that SVB Financial was one of the 10 best stocks to buy on the Nasdaq in 2021.
“Flat out, Silicon Valley Bank puts most banks of any size to shame. Off to a quick start in 2021 and up 11.2%, it’s managed to deliver an annualized total return of 23.5% over the past decade, more than double Bank of America’s (NYSE:BAC) total return over the same period,” I wrote on Jan. 12.
In the past six months, it’s up 49.4%, 1,126 basis points higher than BAC over the same period.
SIVB is a stock to buy and hold for 10 or more years.
Retail Stocks to Buy: Nike (NKE)
The second of two retail stocks from ATEYX, Nike is the fund’s 21s largest holding at 1.86%.
It is in the middle of a transformation that will generate more revenue from its digital business and company-owned stores. As of the end of May, Nike’s direct-to-consumer business (DTC) accounted for 40% of sales, with the rest from its wholesale partners. By the end of 2025, it expects DTC to account for 60% of its overall sales.
A lot of good things have happened at Nike in the past year.
Its North American business had its first $5 billion quarter in Q4 2021. The Jordan Brand hit $5 billion in annual revenue in 2021, and women’s revenue grew 22% in the fourth quarter.
CEO John Donahoe wants to grow Nike’s total addressable market rather than take market share. This means it will continue to focus on initiatives such as its SNKRS app, which saw monthly active users increase by almost 80% in the fourth quarter.
If you think Nike is all about retail today, wait five years. Then, it will be nothing but DTC.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.