Retail

Wall Street Very Positive on Retail: 5 Top Stocks to Buy Now

Kohl’s

This top retailer has been on fire and just posted big numbers. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States that offer 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 also will be accepting Amazon.com returns at certain U.S. locations.

Top Wall Street analysts think that the company is a share gainer as its initiatives to drive traffic appears to take hold and will benefit from peer store closings, new brand additions and omnichannel initiatives. Margins are on the upswing, driven by growth in regular priced sales, while cost savings and efforts to right size select boxes are also helping.

Investors receive a 3.51% dividend. The $100 Jefferies price target is well above the consensus target of $65.47. The stock closed on Thursday at $62.75.

Ulta Beauty

If there is any company to own in the retail sector, this may be the one. Ulta Beauty Inc. (NASDAQ: ULTA) is a holding company for the Ulta Beauty group of companies. The company offers cosmetics, fragrance, skin, hair care products and salon services. It offers approximately 20,000 products from over 500 beauty brands across all categories, including its own private label. The company also offers a full-service salon in every store, featuring hair, skin and brow services.

Ulta Beauty operates approximately 970 retail stores across 48 states and the District of Columbia and also distributes its products through its website, which includes a collection of tips, tutorials and social content. The company offers makeup products, such as foundation, face powder, concealer, color correcting, face primer, blush, bronzer, contouring, highlighter, setting spray, shampoos, conditioners, hair styling products, hair styling tools and perfumes.

The analysts have stayed positive despite the roller-coaster ride this year, and noted this in past report:

We see a model with more bend in the cost curve following 3 years of hyper growth. Brand boutique investment has been a cost drag atop heavy infrastructure and corporate spend but we see a shift in 2018 where leverage starts to materialize in earnest as the cost curve bends faster than sales rates moderate.

Jefferies has set its price target at a stunning $300. The consensus price objective is $270.82, and shares closed Thursday at $200.71.

Zoe’s Kitchen

This company has been hit hard and could provide a solid value play for investors the rest of 2018. Zoe’s Kitchen Inc. (NYSE: ZOES) develops and operates fast-casual restaurants serving a menu of fresh, wholesome, Mediterranean-inspired dishes delivered with southern hospitality. Its menu offers meals made from scratch using produce, proteins and other ingredients, including its appetizers, soups, salads and kabobs. Its food, including both hot and cold items, is suited for catering to a range of business and social occasions.

The company serves dishes for various occasions, such as Guilt-Free Girls Night, Game Day Goodies, Shower Sensations and Kids’ Party Pack. As of December 26, 2016, it had operated 201 company-owned restaurants and three franchise restaurants in 20 states across the United States.

Jefferies loves the stock and noted this:

Over 50% of ZOES’ store base also falls within the top two quartiles of states with favorable tax climates, including Florida, Texas, Alabama and North Carolina, and the analyst suspects that additional cash in guests’ pocket s could drive incremental traffic and spend. Last year’s menu innovation has been received very well so far, strengthening brand equity, and more investments in menu, technology, and marketing should keep Zoe’s top of mind.

The Jefferies price target is $20. The consensus target is $14.56, and shares closed trading at $14.61 on Thursday.

These five top companies should see increased business as the benefits of tax reform really start to show up in consumers’ wallets. In addition, last weeks unemployment reading was the lowest since 1969. With more Americans returning to work, that should also help push even more people through the doors.

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