Forget Lululemon, Buy These 3 Retail Stocks for the Upcoming Holiday Season

The holiday shopping season has kicked off and retail outlets are optimistic that business during this period could be strong enough to fill in the pandemic-infused shortage. This season shoppers are likely to flock to home improvement merchandise since people have been homebound in the pandemic and most celebrations are likely to be indoors as well. Accessories and technical gadgets are also likely to be high in demand this festive season. However, the apparel market is likely to remain subdued for some time…

Athletic apparel seller, Lululemon (LULU), has seen tepid response from customers due to the closure of gyms and fitness centers during the pandemic. The stock dropped 20.1% since the beginning of September after its second quarter results. Revenue for the first half of the year declined 6.6% year-over-year as the loss from store closures eclipsed e-commerce sales growth. Higher operating costs also dragged down net profit. Moreover, LULU is a premium athleisure brand, and shoppers might restrain themselves from splurging in this economic slowdown.

At this juncture, investors can consider other retail stocks which have promising futures. Three such stocks are Best Buy Co., Inc. (BBY), Five Below, Inc. (FIVE), and Williams-Sonoma, Inc. (WSM). These retailers have a strong online presence and are positioned to benefit from the current situation due to their product mix. Most of their merchandise is extremely useful to people during an extended stay at home period.

Best Buy Co., Inc. (BBY)

BBY is one of the prominent technology retailers across the United States, Canada, and Mexico. The company primarily sells mobile phones, computing peripherals, networking products, wearables, tablets, e-readers, and more. BestBuy, Best Buy Express, Geek Squad, Best Buy Health, CST, GreatCall, Magnolia, and greatcall.com are some of the brands through which BBY sells its products. The retailer has over 1,000 large-format and 56 small-format stores.

In October, BBY partnered with Accenture (ACN) to accelerate its technology innovations. Over the next five years, both companies plan to focus on technology strategy, information security, technology risk management, and product development.

During the second quarter that ended August 2020, BBY’s enterprise revenue surged 3.9% year-over-year to $9.9 billion. In the last seven weeks of the second quarter, Enterprise sales climbed nearly 16% after stores opened. Due to the pandemic, most goods that are used at home like computing, appliances, and tablets were the largest sales drivers for the quarter. BBY’s EPS for the quarter surged 85% year-over-year to $1.65.

The street estimates revenue for the third quarter to rise 11.1% year-over-year to $10.8 billion. Meanwhile, analysts expect EPS to climb 43.4% to $1.62 for the third quarter.

On a year-to-date basis, BBY climbed 35.1% to close yesterday’s trading session at $118.65, 5.3% below its 52-week high at $124.89. Over the past six months, the stock has gained over 50.9%.

How does BBY stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

A for Overall POWR Rating

The stock is also ranked #2 out of 36 stocks in the Specialty Retailers industry.

Five Below, Inc. (FIVE)

FIVE operates in the United States as a specialty value retailer selling personal and home accessories. Personal accessories include jewelry, scarves, gloves, branded cosmetics, and trendy garments, and home décor merchandise includes lamps, frames, posters, candles, incense, lighting, and linen. FIVE also sells sports and fitness goods. The company operates across 38 states with nearly 1,000 stores. The retailer caters mostly to tweens and teens with their trendy merchandise.

Earlier this month, FIVE announced a…

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