2 Retail Stocks That Should Be Part of Your Growth Portfolio
29 Outubro 2021 - 8:08AM
Finscreener.org
After a challenging
pandemic-fueled year in 2020, retail stocks have gained momentum
year to date and are poised to outperform the broader markets going
forward. While these companies will be impacted by supply chain
disruptions, an increase in consumer spending and the upcoming
holiday season should act as near-term tailwinds for stocks such as
Lululemon (NASDAQ:
LULU) and The Buckle Inc.
(NYSE: BKE)
Let’s take a look at the positive
trends that should drive the stock prices of Lululemon and The
Buckle higher in the future.
The Buckle Inc.
Valued at a market cap of $2.1
billion, The Buckle operates as a retailer of casual apparel,
accessories and footwear in the U.S. The company ended fiscal 2021
(ended in January) with 443 retail stores in 42 states in the
United States.
The Buckle has a resilient
business model and it reported a net loss in just a single quarter
amid COVID-19. This loss of $12 million was reported in fiscal Q1
of 2021 that ended in May when The Buckle was impacted by store
closures. In the next three quarters, its profits rose to $34.7
million, $41.6 million and $65.6 million respectively.
BKE stock is down 17% from its
52-week high, allowing investors to buy the stock at an attractive
multiple. Wall Street expects the company to increase sales by
32.6% to $1.2 billion in fiscal 2022, while adjusted earnings are
forecast to rise by 62% year over year to $4.29. We can see the
mid-cap retailer is valued at a forward price to sales multiple of
1.7x and a price to earnings ratio of 9.7x which is really
attractive, given it also pays investors a dividend of $1.32 per
share.
Last year, The Buckle increased
dividends by 20% and increased payouts by another 10% this April,
offering investors a forward yield of 3.23%. It also pays an
end-of-the-year special dividend which amounted to $2 per share in
2020. This increased its effective yield to a very tasty
12.6%.
So, while BKE stock is down 8.2%
in the last decade, it has more than doubled returns after
adjusting for dividends. Similarly, its stock has gained 98% since
October 2016 but has surged by 217% if we include
dividends.
Lululemon is valued at a market cap of $60
billion
A Canada-based retail giant,
Lululemon Athletica has gained 658% in the last five years and
close to 3,000% since its IPO in 2007. The
company has managed to increase
sales from $2.64 billion
in fiscal 2018 to $4.4 billion in fiscal 2021 (ending in January).
Its operating income has risen from $494 million to $849 million in
this period.
In the fiscal second quarter of
2022 that ended in July,
Lululemon’s sales grew by
61% year over year to $1.5 billion.
Comparatively, its earnings rose by 140% to $1.59 per share. In Q3,
the company expects sales to rise between 27% and 30%.
According to a Piper Sandler
survey, Lululemon is the fifth-most popular clothing brand in its
demographic, allowing it to compete with heavyweights including
Nike (NYSE: NKE).
Amid COVID-19, Lululemon managed to easily expand its
direct-to-consumer vertical that accounted for 61.4% of total sales
in Q2 of fiscal 2021. As its retail stores reopened this year,
digital sales accounted for 41.2% of total revenue in Q2 of
2022.
Another key driver of its
top-line is the expansion of the men’s business. In the last two
years, sales from Lululemon’s men’s segment has risen at an annual
rate of 31% compared to the 25% rise in its women’s segment. In
fiscal 2022, Lululemon expects to double sales from the men’s
clothing business while expanding international sales as well going
forward. Right now, sales from outside North America account for
14% of total revenue.
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