While economists expected the resurgence of COVID-19 cases and supply chain bottlenecks to affect consumer activity and retail sales last month, a pickup in activity due to back-to-school shopping and strong sales across most areas resulted in a positive surprise.

Overall retail sales in August were up 0.7% seasonally adjusted from July versus the Dow Jones estimate of a 0.8% decline.

Because retail  sales are expected to be strong in the coming months also, we think it could be wise to bet on fundamentally sound retail stocks Target Corporation (TGT), Caleres, Inc. (CAL), Tilly’s, Inc. (TLYS), and Tile Shop Holdings, Inc. (TTSH). Each of these stocks is rated A (Strong Buy) in our proprietary POWR Ratings system.

Click here to checkout our Retail Industry Report for 2021

Target Corporation (TGT)

TGT is a  general merchandise retailer that offers food assortments, apparel, accessories, home decor products, electronics, seasonal offerings, and beauty and household essentials through its stores and digital channels. As of January 30, 2021, the company operated approximately 1,897 stores. TGT is headquartered in Minneapolis, Minn.

On August 23, TGT announced the return of Bullseye’s Top Toys for the holiday season, which are available at over 160 of The Walt Disney Company’s (DIS) stores at Target’s locations across the country. TGT hopes to provide a unique in-store experience and a stronger online presence by offering a curated toy assortment with more exclusives.

TGT announced The Fall Designer Collection on August 6, featuring more than 180 modern and classic fall wardrobe essentials from four design partners. Ranging in price from $15 – $80, TGT expects to generate  good sales in the current  fall season.

TGT’S total revenue for its fiscal second quarter, ended July 31, 2021, increased 9.5% year-over-year to $25.16 billion. The company’s operating income came in at $2.47 billion, up 7.3% from the prior-year period. Its net earnings were  $1.82 billion for the quarter, representing a 7.5% rise from its year-ago period. Its adjusted EPS came in at $3.64, indicating a 7.9% year-over-year improvement. The company had $7.37 billion in cash and cash equivalents as of July 31, 2021.

TGT surpassed consensus EPS estimates in each of the trailing four quarters. A $24.52 billion consensus revenue estimate for the current quarter, ending October 31, 2021, represents an 8.3% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 13.3% rate per annum over the next five years.

The stock has gained 67.1% in price over the past year and 6.7% over the past three months. It closed Friday’s trading session at $246.67.

TGT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Value, Sentiment, and Quality. Click here to see the additional ratings for TGT (Growth, Stability, and Momentum).

TGT is ranked #2 of 41 stocks in the A-rated Grocery/Big Box Retailers industry.

Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in TGT for a 65% gain. Learn more about the RTR service here.

Caleres, Inc. (CAL)

CAL, which is based in St. Louis, Miss. designs, sources, and markets licensed, branded, and private-label athletic, casual, and dress footwear products for women, men, and children internationally. The company sells its products through its branded retail stores and e-commerce businesses.

On September 13, 20CAL’s Sam Edelman debuted its new Sam Edelman Kids footwear collection designed exclusively in-house for the fall 2021 season. Prices range from $60 – $100. The Sam Edelman Kids FW21 collection utilizes great premium leathers and top-grade materials in a combination of novelty colorways and treatments and expects to witness good sales this fall.

Refined with whimsical florals intermingling with refreshing greens, sandalwood, and heartwoods, CAL’s Sam Edelman brand launched its first-ever Eau de Parfum on August 25, 2021. Made by fragrance designer Raymond Matts and Firmenich Principal Perfumer Frank Voelkl, Sam Edelman expects this scent to generate growing demand in the luxury market with the help of ScentBeauty, the world’s first multi-brand e-commerce platform for fragrance and scent.

For its  fiscal second quarter, ended July 31, 2021, CAL’s net sales increased 34.7% year-over-year to $675.53 million. The company’s gross profit came in at $322.29 million, representing a 76.5% year-over-year improvement. Its operating earnings was  $62.79 million, compared to a $24.14 million loss in the prior-year period. CAL’s adjusted net income was  $45.97 million, compared to a $21.12 million loss in the prior-year period. Its adjusted EPS came in at $1.19, versus a $0.57 loss per share in the year-ago period. As of July 31, 2021, the company had $54.68 million in cash and cash equivalents.

CAL’s EPS is estimated to rise 138.5% year-over-year to $1.15 in the current quarter, ending October 31, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect its revenue to be $753.48 million for the current quarter, representing a 16.4% rise year-over-year. Its EPS is expected to grow at a 15% rate per annum over the next five years.

The stock has gained 103.9% in price over the past year and 18.8% over the past six months. It ended Friday’s trading session at $22.25.

CAL’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Growth and Momentum, and a B grade for Value, Sentiment, and Quality. Click here to see the additional ratings for CAL’s Stability.

Of the 63 stocks in the A-rated Fashion & Luxury industry, CAL is ranked #4.

Tilly’s, Inc. (TLYS)

TLYS is a specialty retailer of casual apparel, footwear, accessories, and hard goods for young men and women, and children. The company also provides a third-party merchandise assortment across its various product categories and sells its merchandise through its e-commerce website. TLYS is headquartered in Irvine, Calif.

TLYS’ total net sales for its fiscal second quarter, ended July 31, 2021, increased 48.7% year-over-year to $201.95 million. The company’s gross profit came in at $74.73 million, representing a 79.3% year-over-year improvement. Its operating income was  $26.43 million, up 242.8% from the prior-year period. While its net income increased 287.4% year-over-year to $20.40 million, its EPS increased 266.7% to $0.66. As of July 31, 2021, the company had $81.89 million in cash and cash equivalents.

For the current quarter, ending October 31, 2021, analysts expect TLYS’ EPS to be $0.33, up 371.4% from the prior-year period. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The $190.78 million consensus revenue estimate for the current quarter represents a 36% rise from the prior-year period. Analysts expect TLYS’ EPS to grow at a 12% rate  per annum over the next five years.

TLYS gained 91.4% in price over the past year and 16.8% over the past month. It ended Friday’s trading session at $14.53.

TLYS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

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

TLYS is ranked #7 in the Fashion & Luxury industry.

Tile Shop Holdings, Inc. (TTSH)

TTSH is a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories. The company offers marble, travertine, granite, quartz, sandstone, porcelain, glass, cement, wood look and metal tiles. TTSH sells its products through its website and offers delivery services through third-party freight providers. TTSH is headquartered in Plymouth, Minn.

For its fiscal second quarter, ended June 30, 2021, TTSH’s net sales increased 42% year-over-year to $96.19 million. The company’s gross profit came in at $66.43 million, up 42.3% from the prior-year period. Its income from operations was  $7.61 million for the quarter, compared to a $1.79 million loss in the prior-year period. TTSH’s net income came in at $5.49 million for the quarter, compared to a $760,000 loss in the year-ago period. Its EPS was  $0.11, versus a $0.02 loss per share in the prior-year period. The company had $44.75 million in cash and cash equivalents as of June 30, 2021.

TTSH has gained 188% in price over the past year and 9.2% over the past month. It closed Friday’s trading session at $7.92.

It’s no surprise that TTSH has an overall A rating, which equates to Strong Buy in our POWR Ratings system.

The stock has an A grade for Quality, and a B grade for Growth, Momentum, and Sentiment. Click here to see the additional ratings for TTSH’s Value and Stability.

Of the B-rated, 40-stock Specialty Retailers industry, TTSH is ranked #1.

Note that TTSH is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

Click here to checkout our Retail Industry Report for 2021

TGT shares were trading at $239.92 per share on Monday afternoon, down $6.75 (-2.74%). Year-to-date, TGT has gained 37.31%, versus a 15.60% 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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