8 Retail Stocks With Booming Online Businesses
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The work-from-home environment in 2020 has also created a boom in online shopping. E-commerce sales were up 10.8% year over year in April compared with 6% growth in March. Online sales accounted for 18% of all retail sales in April, according to Kiplinger. That percentage is up from 12% in February. The health crisis has apparently accelerated the online shift in retail shopping, and investors are now looking to identify the companies giving their online shoppers the best experiences. Here are the eight internet retail stocks with the best customer satisfaction scores, according to the American Customer Satisfaction Index.
Amazon.com (AMZN)
Not only does Amazon.com account for a dominant portion of U.S. online retail sales, but its customers are also the most satisfied. Amazon scored an 83 on ACSI’s 100-point scale of customer satisfaction, higher than any other online retailer. Amazon recently reported impressive 25% first-quarter online sales growth year over year, its highest growth rate in more than three years. For years, Amazon has invested heavily in scaling up its online retail and cloud services businesses, and now it leads the market in both. Amazon’s physical store sales were also up 8% last quarter, despite broad weakness in the retail space.
Etsy (ETSY)
Etsy has been one of the hottest stocks in the market in the last six months, gaining about 70% overall. It’s likely no coincidence that the company has both satisfied customers and booming sales growth. Etsy scored an 82 on the ACSI customer satisfaction scale, up one point from a year ago. Etsy reported 34.7% revenue growth in the first quarter and issued second-quarter guidance well before consensus analyst expectations. The number of active buyers on its platform was up 16.4%, and the number of active sellers was up 26.4% in the first quarter.
Nordstrom (JWN)
Unlike the e-commerce pure-play stocks on this list, mall retailer Nordstrom has struggled with its legacy brick-and-mortar business in 2020. The stock is down about 45% year to date. However, Nordstrom scored an 82 on the ACSI satisfaction scale, up one point from a year ago. Digital sales were up 5% in the first quarter to $1.1 billion, but they still account for only about 52% of total sales. Nordstrom also reported a sizable $521 million net loss in the first quarter, but the company could be positioned for a rebound in the second half of the year.
Costco Wholesale Corp. (COST)
Costco is still among the best online retailers when it comes to customer satisfaction. Unfortunately for investors, Costco’s ACSI satisfaction score is down two points from a year ago to 81, the largest decline of any stock on this list. In its fiscal third quarter, Costco saw a large bump in sales thanks to stockpiling in the early days of the health crisis. Online sales were up 64.5% compared with a year ago. But same-store sales dropped from 9.6% growth in March and early April to a 4.7% decline in the four weeks ending May 3.
Kohl’s Corp. (KSS)
After successfully navigating a challenging environment for physical retailers for years, Kohl’s has taken a nearly 50% hit to its stock price so far in 2020 because of the economic downturn. Overall sales were down 43.5% in the first quarter, but digital sales were up 24% in Q1 and more than 60% in April, suggesting a second-quarter rebound. Much of this new online business could stick around once the economy ramps up, given Kohl’s online customer satisfaction score of 81. Finally, instead of viewing Amazon as the enemy, Kohl’s has embraced Amazon as a partner in its e-commerce push.
Nike (NKE)
Nike has been a market leader in transforming the apparel space to a direct-to-consumer model. Last quarter, Nike reported a 36% increase in online sales. Online sales in China were up more than 30% in the quarter, despite a 5% overall sales drop in the region. Heading into the current quarter, Nike management said more than 80% of its stores in China were reopened following shutdowns, and online sales growth in the region was near triple digits. Not only have online sales helped diversify Nike’s model, but they have helped boost margins as well. Nike’s ACSI customer satisfaction score is 81.
Macy’s (M)
Macy’s has been a bloodbath for long-term investors, losing more than 85% of its value over the last five years. However, the company’s online shopping experience provides a potential light at the end of the tunnel. Macy’s has delayed its first-quarter earnings report until July 1 because of economic disruptions, but it expects to announce a staggering net loss of about $1 billion. But before the outbreak, Macy’s reported holiday quarter online sales growth in the high single digits. In fiscal 2019, sales of items ordered online for in-store pickup increased by 62%. Macy’s ACSI customer satisfaction score is 80.
Wayfair (W)
Wayfair has been one of the biggest economic downturn winners in the market, and the stock has about quadrupled in the last three months alone. Investors shrugged off the online furniture retailer’s widening loss in the first quarter and focused more on its nearly 20% revenue growth in an extremely difficult environment for retailers. However, profitability and margins remain a concern. Adjusted earnings before interest, taxes, depreciation and amortization margins in the first quarter were -5.5%, but Wayfair is targeting 8% to 10% EBITDA margins in the long term. Wayfair’s ACSI customer satisfaction score is 80.
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