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Are These The Best Retail Stocks To Invest In Amid Strong Retail Earnings?

Retail stocks continue to take center stage in the stock market today. While the reasons for this attention may be mixed, the industry remains a notable one ahead of the year-end season. After all, with consumer spending at a seasonal high despite rising consumer prices, retailers could have more room to run. Not to mention, other key sectors of the stock market such as the tech industry also seem to be taking a breather.

In theory, the reason for this could be the renomination of Jerome Powell as the Federal Reserve chairman. With Powell set to return for his second term, the Fed will, in theory, be more likely to stick to its tapering plans. At the same time, we could also see similar trends in its interest rate hikes over the mid-to-long term as well. Therefore, with tech stocks, among other growth sectors, likely to feel the brunt of all this, investors are understandably spooked. Meanwhile, as mentioned earlier, even with inflation and higher costs being passed to consumers, retailers continue to hold strong.

This is evident in companies such as Burlington (NYSE: BURL) and Target (NYSE: TGT). On one hand, Burlington posted solid results, topping its pre-pandemic levels in terms of total revenue. According to Burlington CEO Michael O’Sullivan, the economy moving towards a “more inflationary environment” will likely continue to attract consumers to the company’s off-price offerings. On the other hand, Target saw an earnings per share of $3.03 on revenue of $25.65 billion last week. Notably, the company cites strong seasonal sales from Halloween and back-to-school shoppers. These are but two instances of the hot retail industry now. With that said, check out these top retail stocks that just reported earnings before today’s opening bell.

Top Retail Stocks To Watch Ahead Of December 2021

Dick’s Sporting Goods Inc.

To begin with, we have Dick’s Sporting Goods, a retail company that focuses on athletic and sports apparel. The company is a leading omnichannel retailer with an extensive assortment of authentic and high-quality sports equipment, footwear, and accessories. DKS stock has enjoyed gains of over 130% in the past year alone. Today, the company has just reported its third-quarter financials.

Diving in, it reported a record quarter, with net sales of $2.75 billion, increasing by 13.9% compared to a year earlier. Notably, e-commerce sales increased by 97% year-over-year. Dick’s also says this quarter was driven by strong sales and gross margin rate expansion, resulting in a net income of $316.5 million, or $2.78 per diluted share. The company also ended the quarter with $1.37 billion in cash and cash equivalents and has no outstanding borrowings under its $1.85 billion revolving credit facility.

With that being said, Dick’s also raised its full-year 2021 earnings per diluted share guidance to $12.88 to $13.06. It also expects a top-line revenue of $12.19 billion for the quarter, a 27% change from a year ago. Given the strong quarter, would you consider adding DKS stock to your portfolio right now?

retail earnings (DKS stock)
Source: TD Ameritrade TOS

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Best Buy Co. Inc.

Following that, we have Best Buy, a multinational consumer electronics retailer. It enriches the lives of its customers through technology, by leveraging its unique combination of tech expertise and human touch to meet their needs. It has over 1,000 stores and about 100,000 employees in the U.S. and Canada. Despite reporting great earnings today, BBY stock is down by 14% in premarket trading. Could this be an opportunity for investors to buy the dip?

Diving in, revenue for the quarter was $11.91 billion, with its domestic segment making a significant chunk of this revenue at $10.98 billion. It also reported GAAP diluted earnings per share of $2.00 for the quarter, increasing by 35% year-over-year. Best Buy also says that it is looking forward to a strong holiday season and believes that it is well-positioned to capitalize on it. Besides, the company says that it has reached its fastest small-package online shipping times ever as its same-day delivery was up by 400% and it has nearly doubled the products delivered within one day compared to last year.

The company also announced that it has acquired Yardbird, a leading direct-to-consumer company that specializes in premium outdoor furniture. This would expand Best Buy’s outdoor living selection. Yardbird offers an incredible selection of outdoor furniture, from lounge seating to dining sets and fire tables. All things considered, is BBY stock worth watching today?

BBY stock
Source: TD Ameritrade TOS

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American Eagle Outfitters Inc.

Another name to consider among the top retail stocks today would be American Eagle Outfitters (AEO). For the most part, it is a leading global specialty retailer that offers high-quality, on-trend clothing. Aside from that, AEO also markets accessories and personal care products via its American Eagle and Aerie brands. For a sense of scale, the company operates a network of stores spanning the U.S., Canada, Mexico, and Hong Kong. Additionally, AEO’s e-commerce division also supports shipping to 81 countries worldwide.

Overall, AEO would be among the retailers that have and continue to thrive in the current market. Since its pandemic era low, AEO stock is currently sitting on gains of over 290%. Even so, the company does not seem to be slowing down on the operational front anytime soon. By and large, this is evident in its latest quarterly earnings report posted earlier today. For starters, AEO posted an earnings per share of $0.76, marking a massive year-over-year surge of 137%. It also raked in a record total revenue of $1.27 billion for the quarter, topping Wall Street’s estimates of $1.23 billion.

All in all, CEO Jay Schottenstein cites “strong demand” across AEO’s portfolio as a key growth driver for the quarter. Moreover, he also highlights that the company’s acquisition of Quiet Logistics continues to help it weather supply chain issues. Looking forward, the company believes that it can achieve an operating income of over $600 million this fiscal year. Should this be the case, AEO would be performing well ahead of its $550 million 2023 target. Given the current momentum in AEO, would you consider AEO stock a top stock to watch?

AEO stock chart
Source: TD Ameritrade TOS

This article originally ran on stockmarket.com.

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