Students are returning to the classroom, and this year’s related sales are expected to be especially strong for U.S. retailers. According to Mastercard (NYSE:MA), back-to-school sales throughout America are expected to grow 6.7% from 2019 levels and 5.5% from last year’s numbers. With such a significant boost coming to the industry, new investors who want to profit from the trend are seeking stocks for beginners.
Parents and students are looking for a fresh start. Therefore, spending on items ranging from clothing and sneakers to laptop computers and soccer cleats is expected to be robust. Wall Street is watching sales closely for signs of consumer sentiment and confidence heading into the final quarter of the year.
Some companies are expected to benefit more from back-to-school sales than others. Their shares are also relatively accessible for new investors. With that being said, here are seven stocks for beginners to buy this fall:
- Walmart (NYSE:WMT)
- Nike (NYSE:NKE)
- Dick’s Sporting Goods (NYSE:DKS)
- Costco (NASDAQ:COST)
- Dollar Tree (NASDAQ:DLTR)
- Genesco (NYSE:GCO)
- Apple (NASDAQ:AAPL)
Stocks for Beginners: Walmart (WMT)
Let’s start with the back-to-school leader, Walmart. The world’s biggest retailer is often the first place families go for school shopping. At Walmart locations, kids and their parents can find everything they need for the return to class — from clothing and sneakers to notebooks and pens, and everything in-between.
The company runs numerous back-to-school promotions and sales each year in the lead-up to Labor Day and is successful at attracting consumers. This makes WMT stock ideal to buy around early September.
However, WMT stock has underperformed this year. Since January, the company’s share price has barely moved, up only 1.8% to about $147. Yet analysts feel that Walmart’s stock is overdue for a move higher.
The share price’s anemic performance can be attributed to investors’ concerns about slowing growth and declining online sales as the pandemic retreats. The resurgence of Covid-19 through its delta variant hasn’t helped the stock, either.
However, analysts on the whole remain bullish on Walmart’s stock and its long-term prospects. The median price target on the shares is $170, suggesting a potential 15% gain from current levels.
Sneaker sales tend to spike during the back-to-school season, and Nike is the world’s largest manufacturer of running shoes and sneakers. The company has a 27% share of the global market for athletic footwear.
Nike continues to post earnings that defy analyst expectations. In its most recent quarterly results, Nike announced that its revenue jumped 96% year-over-year (YOY) to $12.3 billion. Earnings per share (EPS) came in at $3.56, up 123% YOY.
NKE stock also pays a dividend, which the company has increased for 19 consecutive years. Additionally, the company is finishing up a $15 billion stock-buyback program.
Nike shares were hovering around $133, then jumped 15% immediately after the company’s Q4 earnings were posted. The stock now trades for about $165 per share, up 24% from levels seen before the fourth-quarter earnings call.
While back-to-school shopping at its retail stores will no doubt accelerate, the company is also aggressively expanding its online sales. Nike CEO John Donahoe has stated publicly that Nike aims to have digital sales that make up 50% of its total business by 2025. Currently, they account for 35% of its total sales.
With a forward price-to-earnings (P/E) multiple of 39, Nike stock isn’t cheap compared to the S&P 500′s average of 22. But this still looks like one of the best stocks for beginners as kids head back to school this fall.
Stocks for Beginners: Dick’s Sporting Goods (DKS)
Of course there’s more to school than reading, writing and arithmetic. Sports and other athletic activities play a big part, too.
Whether a student plays for the school football team or is a member of the swim club, they can find all the apparel and equipment they need at Dick’s Sporting Goods. The company is the largest sporting goods retailer in the U.S. today with more than 850 stores.
Apart from its popularity with parents and young athletes, there are many good reasons to own DKS stock. One such reason is the one-time special dividend of $5.50 per share the company has announced it will pay to shareholders. The news came on the heels of its latest record-setting quarterly results.
The special dividend is one reason why Dick’s stock has rallied 25% since Aug. 24 and now trades around $143. Year-to-date (YTD), DKS stock is up 154%.
The company’s impressive earnings have propelled the share price higher too. Its net sales in the second quarter of this year rose 20.7% from a year earlier to $3.27 billion, fueling record earnings of $5.08 per share.
The company has raised its outlook for the current fiscal year, saying it now expects full-year earnings of $11 to $11.45 per diluted share. It forecasts annual revenue growth between 18% and 20%.
Growing kids can be ravenous and need a lot of sustenance to keep up with school work and sports. And for parents who are trying to keep their brood nourished on a budget, there’s no better place to shop than Costco. From sandwich meat and mustard to juice boxes and granola bars, parents turn to the warehouse club for all their back-to-school food needs.
And yet, Costco is not just a grocery retailer. The company also sells a wide range of useful products for the return to classes, from tablets and smart phone accessories to sneakers and books. Enterprising parents can find a wide range of products they need at the Seattle-headquartered big box retailer.
COST stock has performed reasonably well this year, keeping pace with the S&P 500 index around a 20% YTD return. Currently at levels around $454 per share, Costco’s stock price has been on an upward trajectory with little interruption since early March.
The share price is nearing its all-time high of $460.62 per share. The company posted blockbuster double-digit sales growth during the pandemic and appears able to maintain its momentum as Covid-19 restrictions are eased.
For its most recent fiscal third quarter ended in May, Costco reported that its sales rose 22% YOY. And the company just announced that its sales in July increased more than 16%. Not too shabby.
Stocks for Beginners: Dollar Tree (DLTR)
Students often need a lot of little things for school, from glue sticks and pencil sharpeners to erasers and boxes of tissues. This is where Dollar Tree can be a real lifesaver.
The discount retailer operates more than 15,000 store locations in the U.S. and Canada. Most items on its shelves sell for a dollar, making it a great place for parents to load up on the little things that their children need to succeed in the classroom.
Operating under both the Dollar Tree and Family Dollar brands, the company has expanded in recent years to also sell some food items.
DLTR stock has been on a downward trend lately. Since the start of the year, the company’s share price has slumped 16% to $90 per share. The end of the pandemic has put pressure on the stock, much to the chagrin of shareholders. But a strong back-to-school sales season could be just what the stock needs to begin an upward reversal.
The company’s most recent earnings were mixed and left Wall Street unimpressed. Dollar Tree reported stronger earnings than expected, but sales were worse than predicted for this year’s second quarter. EPS was $1.23, better than the $1.01 expected by analysts. However, sales came in at $6.34 billion, short of the $6.44 billion that analysts were looking for.
Genesco might not be a household name, but many of its brands are well-known to consumers. The specialty retailer owns shopping mall fixtures including Johnston & Murphy and Journeys Shoes.
GCO stock was hurt in 2020 because the majority of Genesco stores are situated within shopping malls that were largely forced to close by the pandemic. However, many of the company’s brands have strong same-store sales and growing margins. And like other companies listed here, Genesco is working to expand its ecommerce business.
With many retail locations reopening, people returning to malls and potentially robust back to school shopping, GCO stock has been on fire. The share price has risen 108% YTD to its current share price around $63.
Wall Street analysts have singled out Genesco as a top cyclical stock and great way for investors to play the economic recovery. Whether the stock can maintain its momentum through the end of the year remains to be seen, but strong demand for its products during the back-to-school season definitely won’t hurt.
Stocks for Beginners: Apple (AAPL)
School is increasingly wired and connected, and Apple, the largest consumer electronics company on Earth, plays a big part in education for children of all ages. The Silicon Valley company’s tablets, computers and smartphones are staples among today’s student body.
The company does a brisk business when classes return as parents shop for the latest phones and devices needed to keep their young ones connected. The pandemic accelerated the switch to online learning, further bolstering sales of Apple products that are used by students to keep up in today’s wired world.
AAPL stock has been breaking out lately, up 5% over the past month and up 24% over the last six months to its current price around $154 per share. Investors seemed to take a break from the stock a year ago, but now have rediscovered the iPhone maker.
Apple is currently in the midst of a super cycle perpetuated by the switch to fifth generation (5G) wireless tech. As a result, now is a great time for investors to take a position in Apple stock. The company is also diversifying into streaming and other new areas — including a potential Apple car, if rumors are to be believed.
On the date of publication, Joel Baglole held long positions in AAPL, NKE and MA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.