3 Top Retail Stocks to Buy in April

NASDAQ: ORLY | O'Reilly Automotive Inc. News, Ratings, and Charts

ORLY – Retail sales are gradually recovering from a setback in February, driven by aggressive COVID-19 vaccination programs and the federal government’s disbursement of direct recovery checks to U.S. residents. As physical retail stores resume operations, while strengthening their e-commerce presence, we believe O’Reilly Automotive (ORLY), Kohl’s Corporation (KSS), and DICK’S Sporting Goods (DKS) are well-positioned to grow significantly in the coming months. Let’s take a closer look at these companies.

The retail industry is poised to make a robust recovery this month, following a sharp pullback in February owing to the harsh weather conditions in the U.S.’ Southern states. The accelerated reopening of the nation’s economy, allowing brick-and-mortar companies to return to near full-capacity operation, has been driving the retail space. Moreover, the government is currently ahead of its vaccination schedule; 40% of U.S. adults have now been vaccinated. Also, approximately 127 million $1400 fiscal recovery checks were deposited as of March 25.

Furthermore, retail companies have strengthened their e-commerce operations and have also been opening new stores, hopefully making them more resilient amid the current worry around the potential for a fourth wave of COVID-19 infections. According to the National Retail Federation (NRF), the world’s largest retail trade association, U.S. retail sales are expected to grow in the range of 6.5% — 8.2% in 2021 to hit $4.33 trillion.

We think it is wise to bet on O’Reilly Automotive, Inc. (ORLY), Kohl’s Corporation (KSS), and Dick’s sporting goods Inc. (DKS). These retails companies have managed to stage  impressive recoveries in their last-reported quarters.

Click here to checkout our Retail Industry Report for 2021

O’Reilly Automotive, Inc. (ORLY)

ORLY is an established auto parts retailing company. Its product line includes new and remanufactured automotive hard parts and accessories. From operating a single store unit in 1957 to now operating more than 5,594 stores across 47 U.S. states and 22 ORMA stores across Mexico, the company has come a long way. It sells its products to both do-it-yourself (DIY) and professional service provider customers.

ORLY  is scheduled to release its financial results for the fiscal 2021 first quarter (ended March 31, 2021) on April 28. Its sales surged 13.9% year-over-year to $2.83 billion for the fourth quarter ended December 31, 2020. Its gross profit has increased 11.1% year-over-year to $1.47 billion. ORLY’s net income came in at $3.93 billion for the quarter, up 20.9% year-over-year. Moreover, its EPS increased 27.1% year-over-year to $5.40.

Analysts expect ORLY’s EPS to improve 32.7% year-over-year to $5.27 for the quarter ended March 31, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Also,  its  revenue estimate of $2.81 billion for the quarter ended March 31, 2021 represents a 13.3% rise year-over-year. The stock has gained 76.8% over the past year and closed Thursday’s trading session at $507.82.

ORLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

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

ORLY is ranked #32 of 67 stocks in the A-rated Auto Parts industry.

Kohl’s Corporation (KSS)

Leading omni-channel retailer KSS has more than 1,100 stores spread across 49 states. The company is focused mainly  on delivering products to the middle-income segment group and sells moderately priced private label and national brand apparel, footwear, accessories, beauty and home products. Its private brands include Apt. 9 and Croft & Barrow, among others, while its exclusive brands include Jennifer Lopez and Simply Vera Vera Wang.

For the fiscal 2020 fourth quarter, ended January 30, 2021, even though KSS’ total revenue declined by 10.1% year-over-year, it has increased 54.3% sequentially to $6.14 billion. Its non-GAAP net income increased 12.3% year-over-year to $346 million. Also, its non-GAAP EPS came in at $2.22 for the quarter, up 11.6% year-over-year.

The company’s EPS and revenue are expected to increase 96.6% and 53.4%, respectively, for the current quarter, ending April 30, 2021. KSS also surpassed consensus EPS estimates in three of the trailing four quarters.

KSS announced the availability of Cole Haan’s—one of America’s most iconic footwear brands and specialty athleisure brands—FLX footwear across its retail stores and online from March 2021. The company also announced on February 8, 2021 that it will be partnering with Eddie Bauer to bring premium-quality performance outerwear and outdoor apparel for the entire family to its customers nationwide in the Fall of 2021.

On March 29, KSS made a cash tender offer to buy back up to $1 billion worth of its outstanding senior notes due over the next five years. This move allows the company to significantly reduce its debt and interest burden, suggesting its pursuit   higher earnings potential and a stronger balance sheet. The stock has rallied 199.6% over the past six months to close Thursday’s trading session at $58.31.

Its POWR Ratings reflect this promising outlook. KSS has an overall B rating, which equates to Buy in our POWR Ratings system.

The stock has a B grade for Quality and Value also. In addition to the POWR Rating grades we’ve just highlighted, one can see KSS ratings for Sentiment, Stability, Growth, and Momentum here.

KSS is ranked #22 of 66 stocks in the B-rated Fashion & Luxury industry.

Dick’s sporting goods Inc. (DKS)

DKS is an omni-channel sporting goods retailer that offers an assortment of sports equipment, apparel, footwear and accessories through its specialty retail stores, primarily in the Eastern United States. It offers its products to its customers through retail stores and online. The company also owns and operates Golf Galaxy, Field & Stream and other specialty concept stores.

DKS’ $3.13 billion in net sales for the fiscal 2020 fourth quarter ,ended January 30, 2021, represents a 19.8% year-over year rise. Its gross profit has increased 43.6% year-over-year to $1.05 billion, while its net income for the quarter was  $219.61 million, up 214.5% year-over-year. Its non-GAAP EPS increased 84.1% year-over-year to $2.43.

For the current quarter, ending April 30, 2021, analysts expect DKS’ EPS and revenue to increase 156.7% and 46.2%, respectively. Moreover, it surpassed the consensus EPS estimates in three of the trailing four quarters.

On March 16, 2021, DKS introduced VRST, a first-of-its-kind men’s athletic apparel brand. VRST is expected to be one of  only two brands sold exclusively at the company to have its own ecommerce and digital platforms. It joins  CALIA by Carrie Underwood. The company also opened three new retails stores and one warehouse store in March. The stock has gained 345.8% over the past year to close last Thursday’s trading session at $79.27. It is currently trading just 2.3% below its 52-week high of $81.12.

It’s no surprise that DKS has a B overall rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality and Momentum, and a B grade for Growth. Click here to see the additional POWR Ratings for DKS (Value, Sentiment, and Stability).

DKS is ranked #15 of 33 stocks in the A-rated Athletics & Recreation industry.

The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Click here to checkout our Retail Industry Report for 2021

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ORLY shares were trading at $509.91 per share on Monday afternoon, up $2.09 (+0.41%). Year-to-date, ORLY has gained 12.67%, versus a 9.04% rise in the benchmark S&P 500 index during the same period.

About the Author: Ananyo Guha Niyogi

Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...

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