5 Best Retail Stocks to Buy for Earnings Season (AMZN, DECK, MFB, PCLN, TPX)


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 months.)

Retail Stocks - What's Next?

This improving retail environment may explain why the Institute of Supply Management ( ISM ) 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 ( AMZN )

Amazon.com ( AMZN ) 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 ( DECK )

Deckers Outdoor Corp. ( DECK ) 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 19.

Best Retail Stock to Buy #3 - Maidenform Brands ( MFB )

Maidenform Brands Inc . ( MFB ) 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 ( PCLN )

Another online retailer, Priceline.com ( PCLN ) 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 ( TPX )

Tempur-Pedic International Inc. ( TPX ) 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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: AMZN , DECK , ISM , MFB , PCLN , TPX

Louis Navellier

Louis Navellier

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