If you’re looking to buy retail stocks for a post-pandemic bounce, you’re already a little late to the game.
The SPDR S&P Retail ETF, symbol XRT, has risen 44.25% year to date, and 152.94% over the past year. A large part of this increase is likely due to two factors. First, many retail stocks were already having difficulty even before the pandemic, and they fell even further during the general market selloff in early 2020. Second, as the stock market is forward-looking, investors began to pile into the sector long before the pandemic ended, anticipating a general reopening at some point. However, many of these stocks still have room to run, considering their beaten-down valuations in 2019 and 2020.
- Stock price as of April 30, 2021: $16.58
Macy’s has bounced back along with the retail sector as a whole, but it may have further to run because it is in the process of reinventing itself.
The venerable retailer, known for its Thanksgiving Day Parade in New York City, is continuing to close mall-based stores and open more Market by Macy’s locations, designed to move the company’s merchandise to where customers are. Management also hopes to move away from its traditional department store model by rapidly growing its e-commerce business as well. Although the stock is well above its 52-week low, it still remains about 25% below its 52-week high.
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- Stock price as of April 30, 2021: $139.91
Walmart, the world’s largest retailer, might still offer plenty of opportunity for investors.
Unlike many other retail stocks, Walmart remains down about 3% year to date in 2021. Over the past year, the stock is only up about 15%. Part of the reason for this underperformance is that investors are impatient. Walmart announced that it was going to dramatically ramp up capital spending in 2021, to a whopping $14 billion, and that might hold back near-term results. However, given the company’s long-term success, its investment in its own future seems like a bet that long-term investors might want to make.
- Stock price as of April 30, 2021: $3,467.42
Amazon stock had a big 2020, jumping 73.71%, but its 2021 has been relatively lackluster thus far, gaining just 6.42%. However, half of those gains came on April 29, 2021, as the company reported blowout earnings, with sales surging 40%. Even more, the company forecast higher revenues than expected for the upcoming second quarter, which should give the stock a continued tailwind, as long as Amazon can deliver.
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L Brands (LB)
- Stock price as of April 30, 2020: $65.90
Can a stock that is up 454% over the past year really be called a value? According to some Wall Street analysts, the answer is yes, if that stock is L Brands.
Part of the reason is that L Brands is just starting to reclaim the ground it lost from 2016 to 2020, when the stock was in a persistent downtrend. In fact, even after that amazing one-year gain, L Brands stock is still about 34% below its all-time high of $100.22, set in November 2015. Investors have been piling into the stock because it seems as if shoppers are returning to its stores.
In March 2021, the company reinstated its dividend and raised its future guidance. It has also indicated it will spin off its underperforming Victoria’s Secret unit by August, which could act as an additional catalyst for the stock.
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Bed Bath & Beyond (BBBY)
- Stock price as of April 30, 2021: $25.32
Bed Bath & Beyond is another retail stock that has had a tremendous run over the past year but that is still looking to reach its old highs. Year to date, the stock is up over 42%, and has leapt over 300% in just the past year. However, long-term investors are still in the red, as the company’s five-year return — even after the recent huge gains — is negative 46.38%.
The recent momentum may be sustainable, however. In addition to the reopening of the economy in response to the coronavirus vaccines, the company is benefiting from the changes made since Target’s former chief merchandising officer Mark Tritton was installed as CEO in 2019. Expanded e-commerce, an improved supply chain, store renovations and the divestiture of non-core assets have all been helping the company perform.
- Stock price as of April 30, 2021: $132.62
Nike stock has had nearly the opposite trajectory of many of the retail names on this list. While the company has a great five-year track record, returning about 125% to investors in a poor overall retail environment, Nike stock has actually slipped thus far in 2021, trading down over 6%.
For long-term believers in the Nike brand, this could represent a buying opportunity. In addition to the strength of its brand and its loyal customer following, Nike seems poised to benefit from its increasing shift to direct-to-consumer sales. Over the past decade, Nike’s DTC sales have more than doubled, from 16% to 35% of total revenue. Coupled with its 100 million-plus member rewards program, Nike will likely continue to remain a dominant force in the field.
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Home Depot (HD)
- Stock price as of April 30, 2021: $324.00
Home Depot is a champion long-term stock, and there’s no reason to believe that its fortunes will change anytime soon. The company certainly got a boost during the pandemic, as stay-at-home orders compelled many homeowners to spend on updating and/or repairing their homes.
Now, America is in the midst of a housing boom, and this could continue to fuel gains in the stock. Although the company is theoretically cyclical in nature, it’s posted returns of 47.27%, 70.12% and 141.80% over the past one, three and five years, respectively. Analyst estimates and price targets have been rising as of late, and the company reported better-than-expected earnings in its most recent quarter.
Ross Stores (ROST)
- Stock price as of Apr. 30, 2021: $130.94
Ross Stores is a bit of an oddity in the retail space, and that uniqueness has served the company well. Unlike many of its retail peers, the company’s stock has posted outstanding gains over the prior one-, three- and five-year periods, returning 43.37%, 59.85% and 130.68%, respectively. The stock seems likely to continue to be a long-term winner, but analysts suggest that it may tread water for a bit, on the back of its recent huge gains. Although the average analyst rating remains “buy,” the median price target is right about at current levels.
- Stock price as of April 30, 2021: $58.66
Kohl’s didn’t suffer quite as much as many other retail names over the last five years, actually posting a positive return of 32.28%. Early 2020 was rough, however, with the stock trading down more than 60%. But that set up an incredible bounce back, and the stock has risen 217.44% over the past year, including a 44.02% year-to-date pop.
The stock could certainly use a breather, but analysts forecast higher prices down the road. The median analyst price target shows a more than 10% gain over the next year, on the back of rising earnings estimates.
Simon Property Group (SPG)
- Stock price as of Apr. 30, 2021: $121.74
If you can’t decide on a single retail stock and are looking for more of a “catch-all” investment, Simon Property Group might grab your attention. This real estate investment trust owns, manages and develops various types of retail-based properties, such as regional malls, outlet centers and community/lifestyle centers. The stock pays a hefty dividend yield of 4.27% and has mirrored the trajectory of many retail stocks over the past five years.
Specifically, while the company’s stock has shot up 42.73% year to date and 82.30% over the past year, it’s still down 39.49% over the past five years. Retail analysts have an average “hold” rating on the stock, but if you believe retail will trend up overall, SPG is likely to follow it upwards. In the meantime, you can sit back and earn a sizable dividend on your investment.
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