The retail industry is poised to make a strong comeback in the post-COVID-19 world. Brick-and-mortar chain stores are witnessing rising foot traffic, consistent with an increasing number of vaccinated people.

Most companies established some form of digital operation over the past year to keep pace with the evolving retail market. And while retailers suffered significant losses over the past year because most of their physical stores were closed or barely functional, several government bailouts, i.e., last spring’s $2 trillion CARES Act that delivered support to  small- and medium-sized companies, helped them to stay afloat.

Diminishing social distancing requirements are  expected to allow retail chains to regain their business momentum in the near term. And, following months of remote lifestyles, consumers are expected to splurge on outdoor products driven by pent up demand built over the past year.  Also, the U.S. House of Representatives just passed a $1.9 trillion COVID-19 recovery package (which is expected to be passed by the U.S. Senate soon) that provides up to $1400 direct stimulus checks to eligible citizens. This should increase consumer spending soon, driving aggregate demand even more.

Therefore, we think it is wise to invest in budding retail stocks  Foot Locker, Inc. (FL), Zumiez, Inc. (ZUMZ), and Big 5 Sporting Goods Corporation (BGFV). With established retail chains and digital presence, we expect these companies to witness an uptick in sales in the foreseeable future.

Click here to checkout our Retail Industry Report for 2021

Foot Locker, Inc. (FL)

Headquartered in New York, FL operates as an athletic footwear and apparel retailer. The company’s businesses include Foot Locker, Kids Foot Locker, Champs Sports, Footaction and Runners Point. The company operates through two segments — athletic stores and direct-to-customers. The direct-to-customers segment operates the websites for eastbay.com, final-score.com, eastbayteamsales.com and sp24.com.

Last month , FL’s board of directors approved a $275 million capital expenditures program for 2021. The company is expected to invest heavily in improving its digital capabilities and infrastructure and to further streamline its global supply chain. Also, the company declared a quarterly cash dividend of $0.20 per share payable on April 30, 2021.

FL appointed Himanshu Parikh as the Senior Vice President, Chief Information Officer, effective  December 11, 2020. Last November, the company  opened its first Canadian Community Power Store in Vancouver.

The company’s sales for the quarter ended January 30, 2021 were  $2.19 billion, which represents nearly 4% improvement sequentially. Its  non-GAAP net income came in at $163 million for the quarter, up 27.3% sequentially. And its  non-GAAP EPS has increased 28.1% sequentially to $1.55. Its total assets were  $7.04 billion, representing an improvement of 6.9% year-over-year. Also, FL opened 19 new stores during the quarter.

A consensus EPS estimate of $1.02 for the current quarter, ending April 30, 2021, represents an improvement of 252.2% year-over-year. Also, FL surpassed the consensus EPS estimates in three of the trailing four quarters. A consensus revenue estimate of $1.84 billion for the same quarter ending April 30, 2021 represents a 39.9% gain on a year-over-year basis.

The stock has gained 61.8% over the past year and closed yesterday’s trading session at $51.34.

FL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

The stock has a B grade for Value and Quality. We have also graded FL for Growth, Stability, Sentiment and Momentum. Click here to access all of FL’s ratings.

FL is ranked #17 of 33 stocks in the A-rated Athletics & Recreation Industry.

Zumiez Inc. (ZUMZ)

Based in Lynnwood, Washington, ZUMZ operates as a specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through fashion, music, art and culture of action sports, streetwear and other lifestyles. The company operates under the names Zumiez, Blue Tomato and Fast Times. ZUMZ also operates through its e-commerce websites.

In February ZUMZ selected Workday, Inc. ‘s (WDAY) Workday Financial Management, Workday Adaptive Planning, and Workday Prism Analytics to help accelerate its digital finance transformation. In January, ZUMZ released its Holiday 2020 sales’ reports. Its comparable sales increased 1.7% year-over-year for the 10-week period ended January 9, 2021. This was primarily driven by sales from its Hardgoods category followed by Accessories’ segment.

ZUMZ is scheduled to release its fiscal 2020 fourth quarter (ended January 31, 2021) financial results on March 11, 2021 after the U.S. stock markets close. The company’s net sales for the third quarter, ended October 31, 2020, was  $270.95 million, which represents an 8.2% improvement sequentially. Its gross profit increased 11.9% year-over-year to $105.81 million. The company’s net income was $29.14 million for the quarter, up nearly 52% year-over-year. Also, its EPS increased 54.7% year-over-year to $1.16.

A consensus EPS estimate of $2.96 for the fiscal 2021 represents an improvement of 13% year-over-year. Also, ZUMZ surpassed  consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $209.67 million for the quarter ending April 30, 2021 represents a 37.8% gain on a year-over-year basis.

The stock has gained more than 85% over the past year and closed yesterday’s trading session at $46.33.

ZUMZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

The stock has an A grade for Quality and a B grade for Value and Sentiment. We have also graded ZUMZ for Growth, Stability and Momentum. Click here to access all ZUMZ’s ratings.

ZUMZ is ranked #2 of 67 stocks in the B-rated Fashion & Luxury Industry.

Big 5 Sporting Goods Corporation (BGFV)

Headquartered in El Segundo, California, BGFV is a sporting goods retailer in the Western United States. The company’s products include athletic shoes, apparel and accessories, a range of outdoor and athletic equipment for team sports, fitness, camping equipment and snow sport equipment. The company purchases merchandise from sporting goods equipment, athletic footwear and apparel manufacturers and sells private label merchandise under its own trademarks, including Golden Bear, Harsh, Pacifica, and Rugged Exposure. BGFV also operates through its e-commerce platform.

In  February, BGFV entered a new loan agreement with Bank of America Corporation (BAC) as an administrative agent and lender. The agreement has a five-year term. It provides  a secured revolving credit facility of up to $150 million.

The company’s net sales for the fiscal 2020 fourth quarter ended January 3, 2021 were  $290.58 million, which represents 19% improvement year-over-year. Its gross profit increased nearly 33% year-over-year to $102.39 million. BGFV’s  net income came in at $21.02 million for the quarter, up more than 5805% year-over-year. Its EPS increased 4650% year-over-year to $0.95.

A consensus EPS estimate of $0.38 for the quarter ending June 30, 2021 represents an improvement of 1166.7% year-over-year. The consensus revenue estimate of $260.18 million for the quarter ending March 31, 2021 represents a 19.5% gain on a year-over-year basis.

The stock has gained 522.3% over the past year and closed yesterday’s trading session at $13.69.

BGFV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

The stock has an A grade for Growth, Quality, Value and Momentum as well. We have also graded BGFV for Sentiment and Stability. Click here to access all BGFV’s ratings.

BGFV is ranked #1 of 33 stocks in the A-rated Athletics & Recreation Industry.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Click here to checkout our Retail Industry Report for 2021

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FL shares were trading at $50.20 per share on Thursday afternoon, down $1.14 (-2.22%). Year-to-date, FL has gained 24.54%, versus a 0.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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