With earnings season wrapping up, it’s a good time to look at the winners and losers. Despite the recent market turmoil, good stocks don’t suddenly go bad. When the dust settles (and it will), there will be buying opportunities for savvy investors. And one of the segments that showed renewed strength in 2019 was the retail stocks sector.
Some investors left this sector for dead. However, there are companies that are showing that the “new retail” is not about beating Amazon (NASDAQ:AMZN). Rather, the retail companies that are thriving are finding ways to make their brick-and-mortar presence an advantage rather than an albatross. In turn, this is allowing them to compete in ways that still provide convenience and ease of use.
Moreover, the word that is frequently bantered about is omnichannel. Its meaning can be defined as allowing consumers to purchase what they want, when they want it and to receive it where they want it.
With that, these companies have found a way to add a digital footprint that complements their physical environment. And investors are happily rewarding these companies with some of the larger gains in the market.
That said, here are three retail stocks you should consider adding to your portfolio.
Retail Stocks to Buy: Lululemon Athletica (LULU)
Lululemon (NASDAQ:LULU) pretty much invented the category of athleisure, and it’s become one of the hottest trends in retail. It’s a combination of athletic wear that is also appropriate for a casual office environment. And quite frankly, it pretty much defines the apparel of choice for people like my daughters.
Lululemon became known for its signature yoga pants that targeted high-income women. But the company is expanding into different clothing lines, and has even introduced a menswear line. However, what really has me intrigued is the company’s line of experimental stores.
For example, Chicago’s Lincoln Park neighborhood includes a Lululemon store, health food restaurant, a yoga studio and a gym. It also includes other synergies such as the Beyond Meat (NASDAQ:BYND) burger that is sold at the restaurant.
Overall, this is a great example of a premium brand that is embracing its premium niche and giving their customers a reason other than price to choose the Lululemon brand.
Adding a China stock to my list of retail stocks to buy may seem like a bold choice. But a closer look at JD.com (NASDAQ:JD) should dispel any concerns.
First, the company weathered the coronavirus from China quarantine well. One reason for this was that the company deliberately targeted “second or third” tier cities. And while these cities may not be the most populous cities, they do have the advantage of having a population base that has more disposable income.
Plus, JD has made some technological improvements — including the use of drones and robots — for deliveries. In turn, this not only reduces labor costs, but also removes a psychological concern about handling packages. China also has had a problem with defective or counterfeit products. So to address this, JD.com only sells goods it has acquired.
Furthermore, the company is also expecting to see an increase in revenue from a heavy investment in logistics. One reason for this revenue increase is that third-party companies delivered 40% of the company’s revenue from its logistics division. Having these companies pay JD to ship their products is driving down the company’s operating loss, which is 20% lower from 2019.
Collectively, for these reasons, JD.com is one of the best retail stocks that investors could add to their portfolio.
Best Buy (BBY)
I’ll admit, Best Buy (NYSE:BBY) was not on my original list. But, in the last 48 hours, the company issued a statement about the steps it was taking to prevent the spread of the coronavirus.
The email discussed how it was adding hand sanitizer stations at all entrances and cash registers. Plus, a thoughtful reminder for customers who are feeling poorly or are simply uncomfortable going to a store that they could shop on BestBuy.com. Also, another nice touch was offering to reschedule home deliveries and installations at no additional cost.
Was this self-serving? Of course it was. But it was also timely, and reassuring. It showed that the company was not dismissing the threat, but also continuing to move forward.
Moreover, Best Buy has been left for dead on a couple of occasions. But the company just reported a solid earnings report with comparable store sales rising 3.2%, which helped deliver an increase in revenue and earnings per share that exceeded analysts’ expectations. The recent decline in the company’s stock price has also bumped its dividend yield to 3.14% which is significantly above the industry average of 1.8%.
All things considered, BBY is just another one of the great retail stocks out there to buy.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.