It’s hard to discuss the retail sector without mentioning Amazon (NASDAQ:AMZN). The e-commerce giant continues to redefine retail. And companies that have been slow to adapt to the changing landscape are struggling. But a funny thing happened on the way to the retail apocalypse. Many retail stocks have been having a great 2019. The retail sector has grown 40% for the year with the SPDR S&P Retail ETF (NYSEARCA:XRT) up over 11% for the year.
And the companies that are succeeding are doing so without abandoning their brick-and-mortar presence. Rather, they’re finding a way to use a perceived weakness as a compelling strength. Summed up in a word, that strength is omnichannel.
Omnichannel is about giving customers what they want, when they want it, delivered where they need it. Notice that the price is not listed. That’s because the new retail is about convenience more than price. And that’s where some of these retailers are realizing they have an opportunity.
Here are three retail stocks that have been having a great 2019 and look primed to carry that strength into 2020.
Target continues to hit the mark
To talk about Target (NYSE:TGT) in the context of compelling retail stocks is becoming as cliché as Amazon. But no list of powerful retail stocks would be complete without mentioning Target. This is a company that analysts smirked at when they first discussed their plan to have consumers buy online and pickup at the store. But it worked in a spectacular fashion. And it has propelled Target stock to grow over 97% for the year. And to put that growth into even more perspective, that is up over 15% since November.
In addition to what the company is doing online, the company is not conceding in-store growth. The company launched a partnership with Disney (NYSE:DIS) to have a “store in store” Disney experience within the footprint of 25 Target locations. Target also introduced a private label grocery brand “Good & Gather” that is targeted to health-minded consumers. Not only will this help Target compete with Walmart (NYSE:WMT) in the grocery space, but it also is a pre-emptive strike against Amazon’s own foray into groceries.
And let’s not forget that Target continues to issue a compelling dividend. Their most recent dividend of 66 cents per share was paid in December. Target has increased their dividend for the last 51 years at an average rate of 0.04%. Target’s current dividend yield is 2.05%.
Williams-Sonoma continues to bet on innovation
Williams-Sonoma (NYSE:WSM) is one of the largest e-commerce retailers in the United States. Long known for its direct mail catalogs, the company is successfully pivoting to an online strategy that is paying off handsomely. In its most recent quarter, the company reported that 57% of total revenue came from e-commerce growth. One online initiative the company is undertaking is its focus on a machine-learning search engine along with enhanced speed to create a faster, more compelling e-commerce experience.
WSM stock is up over 45% for the year. With the stock currently over 8% above its consensus price target, some analysts are suggesting that momentum for the stock may be slowing. However, the overall trend for the stock looks bullish, particularly when looking at the stock compared to its moving averages.
Plus, Williams-Sonoma is developing a positive reputation as a dividend stock. The company has issued dividend increases for the past 9 years. It is also increasing its dividend at an average rate of 0.10%.
Five Below is betting on the discount market
When it comes to discount chains, there’s been a lot of buzz about a stock like Dollar General. But let’s not overlook the story of Five Below Inc. (NASDAQ:FIVE). Five Below has a simple strategy: sell items at $10 or below and target the teen and pre-teen market. The stock is up nearly 20% for the year. In fairness, it is down nearly 10% since reaching its all-time high in May 2019.
Five Below has a plan to grow revenues and earnings by 28% every year for the next five years. That would equate to revenue of $1.86 billion and EPS of $3.15 in the company’s current fiscal year.
However to do this the company is relying on an aggressive growth strategy. The company is planning to open new stores and raise its total footprint to 2,000 stores across the United States at some point. One of the reasons why investors are not counting out Five Below is that its CEO Joel Anderson previously held the same title for Walmart.
8 Retail Stocks to Own For the Long Haul
There are more than 500 national retailers traded on the NYSE and the NASDAQ. Given the sheer number of big box stores, warehouse clubs, restaurant chains, and other retail stores listed on public markets, it can be hard to identify which retailers will outperform the market.
Fortunately, some of Wall Street's top analysts have already done most of the work for us.
Every year, analysts issue approximately 4,200 distinct recommendations for retail companies. Analysts may not always get their "buy" ratings right, but it's worth taking a hard look when several analysts from different brokerages and research firms are giving "strong-buy" and "buy" ratings to the same retailer.
This slide show lists the 8 retail companies with the highest average analyst recommendations from Wall Street's equities research analysts over the last 12 months.
View the "8 Retail Stocks to Own For the Long Haul".