For the last five years we were told over and over that Amazon.com (NASDAQ: AMZN) would ultimately change retail as we know it, and the end for brick-and-mortar chains was right around that corner. Guess what? While the Amazon model surely changed the landscape of retail, mostly for the better, and certainly for the future, the predictions of retail doom were overstated.
A new research report from Jefferies makes the strong case that retail is a solid sector to own now, and Thursday’s huge retail report where sales nationwide jumped by 0.8% last month, twice as high as the consensus forecast, seems to be in line with the Jefferies thesis. In addition, sales growth in April and March were also revised up sharply, partly reflecting changes in how the government calculates the numbers.
The analysts have five favorite stocks to Buy now. All make sense for growth accounts looking to add retail exposure.
This athletic shoe retailer has been on fire and looks to move higher. Foot Locker, Inc. (NYSE: FL) is an athletic footwear and apparel retailer in the US, Europe, Canada and Asia. The company’s banners include Foot Locker, Champs Sports, FootAction, Kids Foot Locker, Lady Foot Locker, SIX:02, Eastbay and Footlocker.com.
Many Wall Street analysts believe that consumers are bearing price increases from the top companies like Nike and Reebok and Adidas. They also say athletic apparel and footwear companies are continuing to see higher gross margins and return-on-invested-capital that some think will be a source of multiple expansion.
Foot Locker investors are paid a solid 2.4% dividend. The Jefferies stock price target is posted at $65, and the Wall Street consensus price target for the stock is at $58.70 The stock was trading Thursday morning at $57.33.
This apparel company could be poised to benefit from continued extra consumer spending. The Gap, Inc. (NYSE: GPS) sells private label merchandise through three main retail concepts — The Gap, Old Navy, and Banana Republic, along with smaller growth labels Athleta and Intermix.
The Gap also sells its products through its company websites. Most of its international stores are Gap locations, concentrated in Western Europe (France, United Kingdom), Japan, China and Canada. The company has more than 3,500 stores worldwide.
The company announced this week that Neil Fiske would take over as president and chief executive of its Gap brand. Fiske had previously been CEO of Billabong, Eddie Bauer, and Bath and Body Works. He will permanently replace Jeff Kerwin, who left the company in February.
Gap shareholders are paid a solid 3.02% dividend,. The Jefferies price target is $45, and the Wall Street consensus is much lower at $32.77. The stock is trading Thursday morning at $32.11.
Michael Kors Holdings
This top retailer looks poised to breakthrough a quadruple top chart formation. Michael Kors Holdings Limited (NYSE: KORS) is an accessible luxury lifestyle brand led by an experienced management team and a famous designer with a presence in more than 85 countries. The company offers two primary collections: The Michael Kors luxury collection and the Michael Kors accessible luxury collection.
The company’s sales inflection remains choppy and sustained improvement is needed to drive the multiple higher. However, across Wall Street estimates for fiscal 2019 are being raised largely because of better comparison estimates. The Jefferies team cites the company’s recognizable brand and the potential for margins to move up. They also believe the stock is cheap.
The Jefferies stock price target is posted at $90, and that compares with the Wall Street consensus target of $72.56. The shares are trading at $66.60 this Thursday morning.
This top retailer has been on fire and posted solid quarterly numbers. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States. It offers private label, exclusive, and national brand apparel, footwear, accessories, beauty, and home products to children, men, and women customers. The company also sells its products online at Kohls.com and through mobile devices.
While retail chains have suffered from internet pressure, Kohl’s has held its own as consumers see the company as a solid discount retailer. In addition, Amazon is growing its partnership with the department store chain. Last summer, the two companies announced that Kohl’s would begin selling Amazon devices, such as the Echo and Fire tablets, at 10 of its stores. Kohl’s is also will be accepting Amazon.com returns at certain U.S. locations.
Investors are paid a 3.73% dividend. The Jefferies stock price target is a stunning $115 and the consensus is posted at $70.88. The stock is trading Thursday morning at $73.88.
This athletic apparel leader has struggled mightily over the last year and may be finally turning the corner. Under Armour, Inc. (NYSE: UAA) bills itself as the originator of performance footwear, apparel and equipment that has revolutionized how athletes dress. Designed to make all athletes perform better, the brand’s innovative products are sold worldwide to athletes at all levels.
The Under Armour Connected Fitness™ platform powers the world’s largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal.
The Jefferies analyst remains very bullish on the company, citing the fact that it has the lowest market capitalization among the top athletic retail stocks; sales and margins are moving higher; and overall better management of the business is a huge positive.
The Jefferies price target for the stock is posted at $29, and the consensus is a stunningly low $15.28. Shares are trading this Thursday morning at $23.52.
Five top picks from Jefferies that all look like bargains compared to some of the over priced momentum stocks. The retail group is heavily shorted and still out of favor, despite posting strong numbers. With the economy and consumer optimism rising, this group could be a great play for the summer and the rest of 2018.