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The retail sector has been under siege in recent years as more and more consumers head to their computers rather than their local malls to do their shopping. This shift has led investors to flock to the industry disruptor itself — Amazon.com Inc. (NASDAQ:AMZN). The company’s strength in e-commerce and the firm’s prime ecosystem have made AMZN one of the top retail stocks to buy.
However, while Amazon is responsible for the demise of many brick-and-mortar retailers, that doesn’t mean the firm is the only pick in retail. There are still plenty of retail stocks worth buying and holding onto that aren’t Amazon. Firms that have been able to overcome the shift toward e-commerce and even thrive in a challenging environment are good stocks to consider if you’re adding retail to your portfolio.
Retail Stocks to Buy: Walmart (WMT)
Discount retailer Walmart was one of the many big-box stores that struggled when Amazon came on the scene. However, despite tough competition, WMT is still one of the best retail stocks to buy. The firm has managed to change with the times, upping its online game, keeping its physical stores running efficiently and staying up-to-date on changing consumer trends.
Walmart’s online turnaround has been two years in the making — the firm pledged to spend $2 billion to improve its online presence, a move that appears to be paying off. WMT’s most recent earnings report showed that the company’s online sales were on the rise and that Walmart’s decision to sacrifice margins in order to match Amazon’s shipping policies was not in vain.
Perhaps even more important, though, has been WMT’s focus on future growth. With discount grocers like Aldi and Lidl threatening to grab some of Walmart’s discount-loving customer base and companies like Amazon creating their own online grocery shopping business, WMT has been focusing on building out its own low-cost click and collect grocery service.
Retail Stocks to Buy: L Brands (LB)
L Brands is another good pick because of the firm’s loyal following.
Under the LB umbrella are popular women’s brands like Victoria’s Secret and Bath & Body Works. Sentiment surrounding the stock has been relatively negative in recent weeks because although Victoria’s Secret helped LB stock through tough times in the retail industry, the company’s decision to remove swimwear from the brand hurt has hurt its sales.
While it’s true that retail customers can be a fickle bunch, Victoria’s Secret has a particularly strong following, and although sales were weaker in the most recent quarter due to the removal of swimwear, comps will get much easier in the quarters to come once that part of the line is completely out of the equation.
Another reason that LB is one of the better retail stocks to buy is the firm’s hefty 4.7% dividend yield — a rare find within the space.
Retail Stocks to Buy: TJX Companies Inc. (TJX)
Discount retailer TJX has seen its share price plummet nearly 5% over the past month as investors worried about the firm’s weaker-than-expected first-quarter revenue figures. However, I’d say that the dip in TJX stock is an excellent buying opportunity.
The firm has proven itself to be a tightly run ship, with management managing the rising cost of labor very efficiently. Not only that, but TJX is in a wonderful position as conditions in the retail industry continue to deteriorate for brick-and-mortar stores. Because TJX sells discounted brand-name products, the firm has benefited massively from the inventory issues that big brands have had over the past few years.
The market’s fear about TJX stock is overdone, and investors who buy the stock now have the potential to make a quick 15% on their investment by the end of the year if management’s forward guidance is anything to go by.
Retail Stocks to Buy: Ulta Beauty (ULTA)
While most brick-and-mortar stores are struggling to stay afloat, companies like beauty superstore Ulta are capitalizing on consumers’ desire to have shopping “experiences.” While the trend toward online shopping has massively depleted foot traffic for most brands, it appears that consumers still want to shop for beauty products in person.
It’s a true testament to Ulta’s management team that the stock has risen more than 30% in the last year while fellow retailers struggle to break even.
That that bodes well for the company’s future. Ulta’s margins are impressive and the company’s commitment to offering customers an experience — be it a makeup trial or salon visit — has helped the cosmetics retailer thrive in a difficult environment.
As of this writing, Laura Hoy was long AMZN stock.