A buoyant consumer environment as evident from solid labor market, rise in disposable income and an uptick in confidence index are working in favor of discount retailers. Moreover, the strategy to sell products at discounted prices is helping industry players expand their customer base.
Well talking about discounts, we are into that part of the year when bargain hunters are prowling the streets for great deals. And with only couple of months left for the festivities to begin, discount retailers must be on the verge of finishing the ground work.
For sure, retailers are enhancing omni-channel capacities, introducing new brands, remodeling or refurbishing stores and expanding same-day delivery options to expedite the shopping process this festive season. Early-hour store openings, smart promotional efforts and free shipping on online purchases are other areas where they will be focusing. In short, they will try and make the most of the season that accounts for a sizeable chunk of yearly revenues and profits.
Going by Deloitte, holiday sales are projected to increase 4.5-5% and exceed $1.1 trillion between November 2019 and January 2020. Meanwhile, e-commerce sales are estimated to improve 14-18% to reach $144-149 billion.
3 Prominent Picks
Discount retailers have succeeded in creating a niche despite the rising popularity of online retailers — such as Amazon (NASDAQ:AMZN) — that has compelled many traditional operators to exit. The industry, which is placed in the top 9% of more than 250 Zacks industries, has rallied 19.5% in the past six months, comfortably surpassing the S&P 500’s growth of 5.4%.
Here we have highlighted three discount retailers that carry a favorable Zacks Rank and have outperformed the respective industry.
Target Corporation (NYSE:TGT) , which offers beauty and household essentials, food assortments, apparel and home decor products, is a solid bet with a long-term earnings growth rate of 7.1% and a VGM Score of A. This Zacks Rank #2 (Buy) company has an average positive earnings surprise of 4.6% in the trailing four quarters. Moreover, the stock has surged approximately 35.8% in the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dollar General Corporation (NYSE:DG) , which offers apparel, cleaning products, home decor, health & beauty aids, toys, seasonal items and packaged food, is also a solid pick with a Zacks Rank #2 and a VGM Score of B. The stock with a long-term earnings growth rate of 10.2% has gained roughly 31.5% in the past six months. It has an average positive earnings surprise of 3.6% in the trailing four quarters.
Investors can also count on Burlington Stores, Inc. (NYSE:BURL) , which operates as a retailer of branded apparel products. This Zacks Rank #2 company has a long-term earnings growth rate of 15.9% and a VGM Score of A. The company has an average positive earnings surprise of 8.7% in the trailing four quarters. It has appreciated about 37.4% in the past six months.
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