Despite supply chain disruptions, high inflation, and the resurgence of COVID-19 cases, the holiday season has fostered optimism among retailers. And experts believe this optimism will persist for some time. According to National Retail Federation’s (NRF) Chief Economist Jack Kleinhenz, the 2021 holiday season appears to be on track to exceed the NRF’s retail sales growth forecast of between 8.5% and 10.5%. And investors’ interest in the retail industry is evident in the VanEck Vectors Retail ETF’s (RTH) 7.6% gains over the past three months versus the SPDR S&P 500 ETF’s (SPY) 3.2% returns.
Furthermore, retailers’ online segments are thriving, owing to increased demand, massive discounts, and the sheer convenience they offer ahead of Christmas and New Year.
Therefore, we think it could be wise to bet on fundamentally sound retail stocks Best Buy Co., Inc. (BBY), Ulta Beauty, Inc. (ULTA), Genuine Parts Company (GPC), and Williams-Sonoma, Inc. (WSM). These stocks are currently trading below their 52-week highs.
Best Buy Co., Inc. (BBY)
BBY retails technology products in the United States and Canada. The Richfield, Minn.-based company operates in two segments: Domestic and International. It has more than 1,000 stores and approximately 100,000 employees.
On November 23, 2021, BBY acquired Yardbird, a leading direct-to-consumer company that specializes in premium outdoor furniture. This is expected to boost the company’s sales as consumers are afforded a wider variety of goods from which to choose.
BBY’s revenue came in at $11.91 billion for its fiscal 2022 third quarter, ended October 30, 2021, compared to $11.85 billion in the previous period. Its operating income came in at $670 million, up 19.4% year-over-year, and its non-GAAP EPS was $2.08, compared to $2.06 in the year-ago period.
Analysts expect BBY’s revenue to be $52.16 billion in its fiscal year 2022, representing a 10.4% year-over-year rise. The company’s EPS is expected to increase 27.7% year-over-year to $10.10 in the current year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 3.9% in price to close yesterday’s trading session at $106.68. It is currently trading 24.9% below its 52-week high of $141.97, which it hit on November 22, 2021.
BBY’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
BBY has an A grade for Momentum and a B grade for Value and Quality. It is ranked #13 of 44 stocks in the Specialty Retailers industry. Click here to see the additional POWR Ratings for Growth, Stability, and Sentiment for BBY.
Note that BBY is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Ulta Beauty, Inc. (ULTA)
ULTA operates as a retailer of beauty products in the United States. The Bolingbrook, Ill.-based company runs approximately 1,264 retail stores across 50 states and distributes its products through its website, ulta.com, and mobile applications.
On December 2, 2021, Dave Kimbell, the company’s chief executive officer, said, “The Ulta Beauty team delivered outstanding results again this quarter. For the third quarter, we delivered record sales and earnings, increased our market share, and expanded our Ultamate Rewards loyalty program to nearly 36 million members. This strong third quarter performance reflects the strength and resiliency of the Beauty category, the power of the Ulta Beauty differentiated model, and the impact of our winning culture and team.”
ULTA’s net sales increased 28.6% year-over-year to $2 billion in its fiscal third quarter, ended October 30, 2021. Its net income came in at $215.29 million, up 187.8% year-over-year. And its EPS also increased 198.5% year-over-year to $3.94.
Analysts expect ULTA’s revenue and EPS to increase 38.9% and 259.7%, respectively, year-over-year to $8.55 billion and $16.76 in its fiscal year 2022. It surpassed the EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 49.2% in price to close yesterday’s trading session at $407.70. It is currently trading 2.4% below its 52-week high of $417.85, which it hit on November 16, 2021.
ULTA has an A grade for Quality and a B grade for Sentiment. Within the same industry, it is ranked #18. Click here to see the additional POWR Rating for Growth, Momentum, Value, and Stability for ULTA.
Genuine Parts Company (GPC)
Atlanta, Ga.-based GPC distributes automotive replacement parts, industrial parts, and materials. The company distributes automotive replacement parts for imported vehicles, hybrid and electric vehicles, trucks, SUVs, motorcycles, and recreational vehicles. Also, it operates across the U.S., Canada, France, Australia, and internationally.
On October 21, 2021, Paul Donahue, the Chairman, and CEO of GPC, said, “The GPC team was largely able to manage through supply chain disruptions, allowing us to deliver quality customer service. In addition, we further improved our balance sheet and generated strong cash flow which allows for the ongoing deployment of capital for growth and productivity investments, bolt-on acquisitions, the dividend and share repurchases.”
GPC’s net sales came in at $4.82 billion for the third quarter, ended September 30, 2021, up 10.3% year-over-year. The company’s adjusted net income increased 14.2% year-over-year to $270.48 million. And its adjusted EPS came in at $1.88, representing a 15.3% year-over-year rise.
Analysts expect GPC’s revenue to increase 13.3% year-over-year to $18.73 billion in its fiscal year 2021. Its EPS is expected to grow 27.3% year-over-year to $6.71 in the current year. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 36.2% in price to close yesterday’s trading session at $133.79. It is currently trading 3.8% below its 52-week high of $139.11, which it hit on November 22, 2021.
GPC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. GPC has a B grade for Quality, Sentiment, and Stability. Within the Auto Parts industry, it is ranked #2 out of 66 stocks. Click here to see GPC’s Growth, Momentum, and Value ratings.
Williams-Sonoma, Inc. (WSM)
WSM, in San Francisco, operates as an omnichannel specialty retailer of various products for the home. It currently has 581 stores across several countries and e-commerce websites in the Middle East, the Philippines, Mexico, and South Korea.
On November 10, 2021, WSM announced the launch of its new shipping membership program, Williams Sonoma Reserve, and a new recipe app, Williams Sonoma Recipes. Williams Sonoma President, Ryan Ross, said, “Williams Sonoma Reserve and the Williams Sonoma Recipes app provide our customers new ways to engage with our brand and our coveted recipe content.”
WSM’s net revenues increased 16% year-over-year to $2.05 billion in its fiscal third quarter, ended October 31, 2021. Its operating income came in at $330.27 million, up 20.3% year-over-year, and its net earnings increased 23.7% year-over-year to $249.52 million.
For its fiscal year 2022, WSM’s revenue and EPS are expected to grow 22.8% and 58%, respectively, year-over-year to $8.33 billion and $14.28. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 72% in price to close yesterday’s trading session at $182.92. It is currently trading 18.1% below its 52-week high of $223.32, which it hit on November 22, 2021.
WSM has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Quality. WSM is ranked #7 of 61 stocks in the Home Improvement & Goods industry. Click here to see the additional POWR Ratings for WSM (Growth, Value, Momentum, Stability, and Sentiment).
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BBY shares were trading at $106.24 per share on Wednesday morning, down $0.44 (-0.41%). Year-to-date, BBY has gained 8.47%, versus a 26.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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