4 Top Large-Cap Stocks Are the Best Way to Play the Retail Rebound

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Target

This stock remains a solid and safe retail total return play now. Target Corp. (NYSE: TGT) is one of the largest discount retailers in the United States, operating roughly 1,800 Target stores across the country. The company sells merchandise in its Signature Categories Style, Baby, Kids and Wellness, as well as other products in both physical Target stores and online at Target.com.

Since 2017, Target has poured tons of money into its e-commerce offerings, overhauling its stores and refreshing its inventory to better compete against Amazon. Target has even embraced the same-day delivery concept and is expanding retail floor space for toys as it looks to scoop market share after the closing of Toys “R” Us.

Solid numbers and a very positive recent analysts day had the Merrill Lynch analysts noting that they believe the company’s ability to moderate fulfillment costs through its “stores as hubs” model should drive margin improvement in fiscal 2020. They also feel the valuation is compelling at current levels.

Target shareholders are paid a stellar 3.36% dividend. The $100 Merrill Lynch price objective on the shares is well above the $85.73 consensus target. The stock closed most recently at $76.18.

Walmart

The giant retailer is still on sale after trading sideways for much of this year. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets, as well as Sam’s Club locations, in the United States, and it has a growing e-commerce business (including Jet.com). Internationally, Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.

Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce sites in 11 countries. With fiscal year 2017 revenue of nearly $486 billion, Walmart employs approximately 2.2 million associates worldwide.

The company announced in the summer plans to acquire a 77% stake in India e-commerce retailer Flipkart in a $16 billion debt and cash transaction. The deal dramatically expands Walmart’s presence in India, where online retail is growing quickly and Flipkart is a leader.

Walmart shareholders are paid a 2.16% dividend. Merrill Lynch has set its price target at $120. The posted consensus target is $109.07, and the shares were last seen trading at $98.37.

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These four large-cap retailers look to have good upside to the Merrill Lynch price targets and pay dependable dividends. With unemployment low and the workforce growing, it’s a good bet they will continue to post solid results.