2019 has been a stellar year -- to earn nearly double-sized returns from equity shares in good ol’ fashioned Discount Retail stores.
The Zacks Returns Performance chart (below) shows:
Any investor who concentrated solely on Discount Retail store stocks captured a +45% YTD return. For a comparison, the S&P 500 is up +26% YTD.
What is underneath stellar share return performance?
A High and Durable Zacks Industry Rank!
In late November 2019, I see this 10-company strong Discount Retail niche has a #34 out of 253 Zacks Industry Rank. This rank has been no lower than #80 and as high as #9 over the last eight weeks.
That sustained Zacks Industry Rank performance speaks to broad fundamental earnings estimate revision upside, being recognized across the covering analyst community. Showing that, there have been 7 recent upgrades and only 2 downgrades to earnings estimates in the space.
Overlook the Internet’s appeal. Personal shoppers’ experience and familiarity still matter out there. Better in-store prices keep them coming back for more.
Each chain buys in bulk. Then, it passes on the savings to their consuming base. You can’t do that online.
Hidden behind any strong earnings and revenue growth performance is a long-standing base of loyal consumers. Each retail group of brick-and-mortar stores has a sustainable competitive advantage – literally on the ground.
There are unique regional bases for each Discount Retail footprint (inside U.S. geography) with these types of companies.
For example, Burlington is based in New Jersey. Costco is based in Washington state. Dollar General is based in Tennessee. Then, we have Target based in Minnesota, Ross Stores based in California, and Walmart based in Arkansas.
This shows. The regional history of the country’s core retail establishments run deep.
Three top Zacks Ranked Discount Retail picks—
(1) Burlington Stores ((BURL - Free Report) ): This is a Zacks #2 Rank (BUY). The pick has a Zacks A for Growth, too.
Shares entered the year of 2019 at $160. They price at just under $210 now.
This discount retailer’s shares are richly priced now. The forward P/E is 28.8, while the PEG ratio is 1.8. That amounts to a Zacks score of C for Value.
The last EPS surprise was +18.3%. The average of the last 4 surprises was +8.7%.
Founded in 1972, and headquartered in New Jersey, Burlington Stores functions as a retailer of branded apparel products and is also a Fortune 500 company. It operates in the United States and Puerto Rico.
The company offers products such as ladies’ sportswear, menswear, youth apparel, baby furniture, footwear, accessories, home décor and gifts, and coats.
(2) Costco ((COST - Free Report) ): This is a Zacks #2 Rank (BUY). The pick has a Zacks A for Growth, too.
Shares entered the year of 2019 at $200. They price at just over $300 now.
This discount retailer’s shares are very richly priced. The Forward P/E is 35.3, while the PEG ratio is 4.2. That amounts to a Zacks score of C for Value (that is generous!).
The last EPS surprise was +5.9%. The average of the last 4 surprises was +7.2%.
Based in Issaquah, Washington, Costco Wholesale sells high volumes of foods and general merchandise (including household products and appliances) at discounted prices through membership warehouses.
- It is one of the largest warehouse club operators in the United States.
- The company also operates e-commerce websites in the U.S., Canada, Mexico, U.K., Korea and Taiwan.
The company’s warehouses offer an array of low-priced nationally branded and select private labeled products in a wide range of merchandise categories.
(3) Dollar General ((DG - Free Report) ): This is a Zacks #2 Rank (BUY). The pick has a solid Zacks B for Growth.
Shares entered the year of 2019 at $110 or so. The same shares trade at $160 now.
This discount retailer’s shares are richly priced, but cheaper. The forward P/E is 24.2, while the PEG ratio is 2.4. That amounts to a solid Zacks score of B for Value. That’s as good as it gets in this big-box space!
The last EPS surprise was +10.1%. The average of the last 4 surprises was +3.6%.
Founded in 1939 and headquartered in Goodlettsville, TN, Dollar General is one of the largest discount retailers in the United States. The company trades in low priced merchandise typically $10 or less.
The company offer a wider selection of merchandise, including consumable items, seasonal items, home products and apparel. The company's merchandise comprises national brands from leading manufacturers, as well as own private brand selections with prices at substantial discounts to national brands.
The company sells products from America's renowned manufacturers such as Clorox, Energizer, Procter & Gamble, Hanes, Coca-Cola, Mars, Unilever, Kellogg’s, General Mills and PepsiCo.
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