Stocks are the only item that, when they go on sale, people
DON'T want to buy them.
But stock pull backs, like the one we've had so far in 2014,
provide real opportunities for investors.
It's time to think about all those stocks that you've said, "if
only I had bought that a year ago." Because pull backs mean that
investors can suddenly get their favorite stocks much cheaper.
What stocks are on your wish list?
It's time to get that wish list out and go stock shopping.
Retail Was Hot But Now It's Not
A lot of the stocks on my own personal wish list are retailers.
It's been a hot sector the last few years as the niche retailers
have been able to expand both in the United States and
internationally as the global economy improved.
But by the end of 2013, valuations and expectations got too
expensive for my blood. While many of the retailers have growth,
forward P/Es in the 30s and 40s were too high. It looked like the
opportunity to buy had passed me by.
But 2014 is turning out to be very different than 2013. While the
overall market indices have pulled back just 3% to 5%, some
individual sectors, including retail, have been hit much harder.
Many of the retailers have been disappointing on earnings. Some
have also warned about a "challenging" retail environment and have
lowered full year guidance. And then, to top it all off, there's
the awful weather.
Because of the negative perceptions of the sector, some of the
hottest retail stocks have gone on sale.
3 Hot Retail Stocks That Are Now on Sale
2. Tractor Supply
3. Restoration Hardware
It wasn't easy to find three hot retailers that have gotten cheaper
AND have a Zacks Rank of #1, #2 or #3. Many retailers are Zacks
Rank #4 (Sell) or #5 (Strong Sells). But these three companies
currently are Zacks Rank #3 (Hold) stocks.
What they also have in common is a strong distinctive corporate
culture with a strong brand.
lululemon has a "manifesto" that is printed on its shopping bags
and around its stores with phrases like:
"Do one thing a day that scares you"
"Sweat once a day to regenerate your skin."
Tractor Supply's marketing slogan is:
"For Life Out Here"
and it publishes a free quarterly magazine called "Out Here" with
articles about local artisans, craft and home projects and recipes.
Restoration Hardware has a vision statement that says:
"To create an endless reflection of hope, inspiration and love
that will ignite the human spirit and change the world."
Brand is important and these three retailers have it in spades.
1. lululemon athletica inc.
lululemon is a Canadian yoga and athletic wear retailer with stores
in Europe, the United States and Canada.
lululemon's problems are well known. In 2013, it had to recall its
most popular yoga pants because of a quality problem with the pants
being too sheer. Then the CEO resigned and a multi-month search for
a new CEO commenced. Only recently, was new management put in
On Jan 13, lululemon warned on the fourth quarter stating that
comparable store-sales will be in the negative low-to-mid single
digits. EPS guidance was also cut.
"We were on track to deliver on our sales and earnings guidance
through the month of December; however, since the beginning of
January, we have seen traffic and sales trends decelerate
meaningfully," said John Currie, lululemon's CFO.
It warned just after the first polar vortex when half the United
States and Canada was huddled in their homes. Since then, there has
been yet another polar vortex and the bad winter weather has
It's On Sale
At the beginning of 2013, lululemon was trading at 40x forward
earnings. Now, after shares have plunged, it is trading at just
Forward P/E = 20
Fiscal 2013 expected EPS growth: 2.3%
Fiscal 2014 expected EPS growth: 16.7%
Zacks Rank #3 (Hold)
Shares have fallen about 22% in the last month. If you liked
lululemon before, why not buy it at nearly 25% off?
2. Tractor Supply Company
Tractor Supply operates 1,276 stores in 48 states in mainly rural
areas so if you haven't heard of it, you probably live in a big
city. It serves recreational farmers and ranchers as well as
tradesmen and small businesses.
On Jan 28, Tractor Supply did it again, beating the Zacks Consensus
Estimate by 4.6%. It hasn't missed the estimate in 5 years.
So why are shares down big in the last month?
Tractor Supply guided 2014 slightly under the consensus which sent
investors scurrying. However, several analysts believe that Tractor
Supply is just being conservative and that guidance will be raised
later in the year.
Otherwise, the Tractor Supply expansion story is still intact.
It's On Sale
There hasn't been a big pullback in Tractor Supply's shares in 5
years. This is the first opportunity to get in at a lower level in
a long time. The forward P/E has dropped as the stock has slid.
Forward P/E = 24
2014 expected EPS growth: 12.6%
Zacks Rank #3 (Hold)
Shares are down about 15% in the last month. This is your chance.
Buy the dip.
3. Restoration Hardware Holdings Inc.
Restoration Hardware is a luxury furniture and accessories retailer
with retail galleries, the sourcebook and online sales at RH.com.
It operates 70 retail stores and 17 outlet stores.
With housing recovering, especially at the luxury end, furniture
sales have been strong as well. On Dec 12, the company reported
fiscal third quarter results which beat the Zacks Consensus again.
Restoration Hardware re-IPO'd in December 2012 and it has beat
every quarter since. It is not scheduled to report again until
Comparable-store sales soared another 29% with net revenue up 39%.
Yet shares have plunged on fears about the nasty winter weather and
an expensive real estate build out possibly leading to a warning
for the fourth quarter.
Forward P/E = 25
Fiscal 2013 expected EPS growth: - 25%
Fiscal 2014 expected EPS growth: 188%
Zacks Rank #3 (Hold)
Shares are down about 17% over the last month on these fears to
6-month lows. It's a chance to get a top of the line retailer much
cheaper than in 2013.
Look for Buying Opportunities
Pull backs are a chance to get your favorite stocks on the cheap.
These three hot retailers have seen extremely large sell offs. If
you liked these stocks at their all-time highs, you have to like
them even more now that they're on sale.
Want More of Our Best Recommendations?
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She
is also the Editor of the
services. You can follow her on twitter at
LULULEMON ATHLT (LULU): Free Stock Analysis
RESTORATION HDW (RH): Free Stock Analysis
TRACTOR SUPPLY (TSCO): Free Stock Analysis
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