How do I find the best retail stocks to buy? Well, as a numbers
guy, I love to spend my weekend poring over the latest statistics
and figuring out what they all mean. Some, frankly, don't mean
much. Other economic indicators are quite telling -- and last week,
a +9.1% jump in same-store sales for retail stocks was by far one
of the most important figures on Wall Street.
Retailers reported strong sales gains for March, providing more
evidence that consumers feel more confident as the economy
stabilizes. According to Thomson Reuters, same-store sales rose
9.1% in March, boosted by an earlier spring break and Easter week.
These same-store gains were strong across the board - from
discounters to luxury apparel stores. Retailers did not need the
kinds of deep markdowns that were so common in previous months. In
addition, consumers used their cash and debit cards instead of
credit. (Consumer credit usage is now down for 12 of the last 13
Retail Stocks - What's Next?
This improving retail environment may explain why the Institute
of Supply Management (
) said last week that the economic recovery is broadening in the
service sector. The latest ISM non-manufacturing index rose to 55.4
in March, up from 53 in February. Economists were only expecting a
rise to 54, so this was a positive surprise. Overall, 14 industries
reported growth, while only two service sectors contracted.
Rising sales are also being matched by rising inventories. The
Commerce Department announced Friday that U.S. wholesalers'
inventories rose by a higher-than-expected 0.6% in February, the
biggest gain since November. Analysts had expected only a 0.3% rise
in February. Meanwhile, sales outpaced the inventory rise, rising
0.8%, for the 11th straight monthly gain. Sales were strongest for
cars and petroleum products.
With this strength for sales across a variety of sectors, it's
clear that the retail environment is improving. This is good for
the broader economy and for merchants in particular.
Best Retail Stocks to Buy for Earnings Season
To help you get your share of the cash during the recovery, here
are the top five retail stocks to buy right now.
Best Retail Stock to Buy #1 - Amazon.com (
) started as Earth's biggest bookstore, but has rapidly become the
planet's biggest anything store. Relentless expansion has propelled
Amazon.com in countless directions in the quest of bigger sales and
profits. The company's main Web site offers anything from books to
auto parts to groceries! Shoppers can also download digital content
such as games, MP3s and movies to their computers or handheld
devices-including Amazon's innovative portable reader, the Kindle.
Amazon's fourth-quarter earnings leaped by over 70% thanks to
strong holiday sales, and I expect another great performance when
Amazon reports earnings on April 22.
Best Retail Stock to Buy #2 - Deckers Outdoor (
Deckers Outdoor Corp.
) makes and markets the very popular Teva sports sandals and
stylish Uggs boots. I will say that while some shoemakers are
struggling, Teva and Ugg brands distinguish themselves from
numerous competitors by avoiding distribution in off-price outlets.
DECK has been on an incredible run in the past six months, and I
expect this momentum to build as temperatures rise. Deckers
Outdoors has seen an amazing 11 straight quarters of double-digit
sales growth, so this is a great buy for earnings season. But
hurry, because DECK earnings come out in less than a week on April
Best Retail Stock to Buy #3 - Maidenform Brands (
Maidenform Brands Inc
) makes women's intimate apparel, sleepwear and increasingly
popular shapewear. The company sells its products worldwide,
primarily through U.S. discount chain stores and department stores.
Maidenform Brands also sells its well-known brands (such as
Maidenform, Flexees and Lilyette) through some 80 company-owned
outlets and its Web sites. In the fourth quarter, the company's
sales rose 15% and MFB stock saw nice gains. I expect another
strong showing on May 10.
Best Retail Stock to Buy #4 - Priceline.com (
Another online retailer,
) allows buyers to name their own price for everything from airline
tickets to rental cars to cruises. With its patented business
model, the company generates virtually all of its sales from
travel-related services. In the case of airline tickets and hotel
reservations, Priceline.com keeps the difference between the price
paid by the individual and what Priceline.com paid for the ticket
or hotel room. You may not think that travel spending is very high
right now, but the bottom line is that value-conscious consumers
really love Priceline's ability to "haggle" on prices. This has
allowed the website to become an oasis for cash-strapped consumers
and generate huge numbers even during the recession. PCLN stock
skyrocketed 9% in one day alone after fourth-quarter earnings that
showed quarterly profit more than doubled and sales grew 33% over
the last year. Priceline stock could perform that well again when
it reports earnings on May 10.
Best Retail Stock to Buy #5 - Tempur-Pedic International (
Tempur-Pedic International Inc.
) mattresses and pillows are made from visco-elastic foam developed
by NASA during the 1970s to help cushion astronauts during liftoff.
This foam is used to manufacture mattresses, pillows and related
products that are sold in approximately 80 countries. In the fourth
quarter, Tempur-Pedic's sales rose 29% and operating earnings were
up 123%. TPX stock should have a good day on April 20 when
Tempur-Pedic earnings come out.
As of this writing, Louis Navellier owned shares of AMZN,
DECK, MFB, PCLN and TPX in personal or client portfolios.