Although the concept of retail stocks to buy may be a little shaky ahead of a possible recession, under the present juncture, they make plenty of sense. Basically, you don’t need to look far to find evidence of deep-seated concerns. For one thing, the domestic bank failures triggered concerns of a wider financial contagion. With memories of the Great Recession still fresh for many, anxiety represents a natural response.
Also, consumers themselves may bolster demand for retail stocks to buy. Specifically, disruptions to the food and critical goods supply chain will likely spark hoarding behaviors. In addition, researchers noted that the global market for survival tools has increased in recent years. Contributing factors include natural disasters and geopolitical instability. While I’m not suggesting that a majority of Americans are about to become doomsday preppers, the motivation to prepare for emergencies has only increased during the post-pandemic new normal. Therefore, look to these retail stocks to buy for potential upside opportunities.
|DKS||Dick’s Sporting Goods||$137.18|
When prepping for whatever disasters lies ahead, you really can’t get much better from the perspective of retail stocks to buy than Costco (NASDAQ:COST). Featuring a membership-only business model, Costco’s warehouse-style retail locations incentivizes bulk purchasing. Therefore, it’s an effective tool of sorts against inflation. Notably, COST stock managed to swing over 9% higher since the January opener.
To be fair, shares slipped over 12% in the past 365 days. However, for those seeking retail stocks to buy for the long run, COST offers an attractive proposition. First, it features a solid balance sheet, with a cash-to-debt ratio of 1.29. This stat rates higher than 69% of its peers. Operationally, Costco’s three-year revenue growth rate stands at 14%, above 83.21% of its rivals. As well, its book growth rate during the same period is 10.4%.
Finally, Wall Street analysts peg COST as a consensus strong buy. Their average price target comes out to $553.52, implying nearly 12% upside potential.
Grocery Outlet (GO)
A discount closeout retailer, Grocery Outlet (NASDAQ:GO) consists exclusively of supermarket locations that offer deeply discounted, overstocked and closeout products from name brand and private label suppliers. Because of its business model, Grocery Outlet represents music to the ears of emergency (and even doomsday) preppers. Unfortunately, it hasn’t translated well in the market. Since the Jan. opener, GO declined by almost 5%.
Worse yet, in the trailing year, it’s down nearly 16%. Admittedly, Grocery Outlet requires some work regarding its financials as well. Notably, its balance sheet features middling stability – not great, not horrible. For example, its Altman Z-Score is 2.58, which sits in the gray zone of bankruptcy risk. However, its three-year book growth rate pings at 10.9%, above 69.55% of the retail defensive industry. Also, its revenue growth during the same period is 4.5%, which is slightly above sector average.
Lastly, covering analysts peg GO as a consensus moderate buy. Their average price target stands at $30.75, implying over 12% upside potential. Thus, it could make for an interesting example of retail stocks to buy.
Perhaps the world’s most famous big-box retailer, Walmart (NYSE:WMT) represents an easy choice for retail stocks to buy. Unlike Costco above, Walmart offers free-for-all shopping. As well, it specializes in everyday low pricing, bringing in high volumes of customers. And while it caters to a lower-average-income crowd, plenty of rich folks shop there for prepping-related supplies.
Overall, it’s performance in the charts isn’t too bad. In the past 365 days, WMT slipped less than 3%. In contrast, the benchmark S&P 500 index fell more than 13% during the same period. Also, Walmart benefits from solid financials. Notably, the company’s Altman Z-Score pings at 4.61, indicating low bankruptcy risk over the next two years. Operationally, Walmart’s three-year revenue growth rate comes out to 7%, outpacing 61.79% of its peers. Also, its return on equity (ROE) is 15.1%, ranked better than 70.17% of the competition and reflecting a high-quality enterprise.
In closing, analysts peg WMT as a strong buy. Moreover, their average price target hits $163.52, implying over 15% upside potential.
Dick’s Sporting Goods (DKS)
A popular entry among retail stocks to buy for both sports-related and outdoor apparel and equipment, Dick’s Sporting Goods (NYSE:DKS) may rise as regular folks prep for emergencies. As well, Dick’s benefits handsomely from financial momentum. Recently, its fourth-quarter earnings report generated a beat on the top and bottom lines due to strong demand.
Even better, the performance translates on the charts. Since the January opener, DKS gained nearly 15% of equity value. In the trailing year, it’s up over 28%, a contextually astounding figure. Operationally, Dick’s charges ahead with a three-year revenue growth rate of 8.2%, above 66.86% of the competition. As well, its net margin is 8.43%, above 81.29% of sector peers. Notably, the market prices DKS at a forward multiple of 10.78. As a discount to projected earnings, Dick’s ranks better than 67.32% of the cyclical retail industry.
Turning to Wall Street, analysts peg DKS as a consensus moderate buy. Further, their average price target stands at $162.21, implying over 17% upside potential.
An e-commerce giant as well as a technology stalwart, Amazon (NASDAQ:AMZN) can play various roles. However, for those concerned about prepping for whatever may lie ahead, AMZN ranks as one of the top retail stocks to buy. With such a vast merchant network, you can practically find anything you want on Amazon. Plus, as a Prime member, consumers can order products quickly and conveniently.
Notably, AMZN is on a recovery trek. Over the past 365 days, shares lost a staggering 42% of equity value. However, since the January opener, AMZN popped up more than 14%. Financially, the company requires some work, especially from the damage stemming from 2022’s tech sector fallout. Still, Amazon maintains a decent Altman Z-Score of 3.22. Operationally, it’s still a powerhouse. Its three-year revenue growth rate comes in at 21.9%, beating out 84.35% of its peers. Also, its book growth rate during the same period is 31.8%, outpacing 87.47% of rivals.
Looking to the Street, analysts peg AMZN as a consensus (almost unanimous) strong buy. Their average price target stands at $136.86, implying more than 39% upside potential.
Vista Outdoor (VSTO)
Invariably, whenever you’re talking about retail stocks to buy for people prepping for emergencies, companies like sporting goods manufacturer Vista Outdoor (NYSE:VSTO) will invariably enter the discussion. With self-sufficiency becoming a popular topic on social media, it’s not enough for some folks to just stock up on meals ready to eat (MREs). Rather, they seek certain equipment and accessories to hunt for their protein.
To be sure, it’s a controversial topic and one I’m not going to dive into too deeply. However, VSTO does resonate with many people. While it’s down over 27% in the trailing year, it managed to move up over 6% since the Jan. opener. As well, it features solid operational stats, such as a three-year revenue growth rate of 12.9% and a net margin of 12.63%. Also, the market prices VSTO at a forward multiple of 6.22. As a discount to projected earnings, Vista ranks better than 98.48% of sector peers.
Finally, analysts peg VSTO as a consensus moderate buy. Their average price target stands at $38, implying more than 43% upside potential.
Sportsman’s Warehouse (SPWH)
Easily the most controversial and riskiest name on this list of retail stocks to buy, Sportsman’s Warehouse (NASDAQ:SPWH) is akin to a Walmart for hunters, fish industry workers and shooting sports enthusiasts. For anyone that really wants to take their prepping to the highest level possible, Sportsman’s Warehouse represents a grail retailer. Unfortunately, the market at large doesn’t seem to care just yet.
Since the Jan. opener, SPWH slipped almost 14%. In the trailing year, it’s down nearly 31%, raising questions about viability. Not surprisingly, the company’s balance sheet could use some work. For instance, its Altman Z-Score comes in at 2.74, sitting in the gray zone of fiscal stability. That said, Sportman’s enjoys strong operational stats. Its three-year revenue growth rate pings at 19.6%, outpacing 83% of the competition. Also, it posted a net margin of 6.12%, outranking 72.3% of rivals.
Lastly, Lake Street’s Mark Smith pegs SPWH as a buy, targeting a $15 price tag. If so, this implies upside potential of over 87%.
On the date of publication, Josh Enomoto 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.