Source: Unsplash 

Investors’ concerns over the pace of economic recovery due to the resurgence of COVID-19 cases have fostered market volatility. In addition, this month consumer sentiment fell to a pandemic-era low. However, due to solid second-quarter corporate earnings results, the major stock market indexes are hovering near their all-time highs. According to a FactSet research report, more S&P 500 companies than average beat EPS estimates in the second quarter. In addition, several retail companies have strengthened their digital presence, positioning them well to gain in the coming months.

Furthermore, many retailers deal with inflation by passing on higher costs to their customers through price hikes. The consumer price index increased 5.4% in July, and the International Monetary Fund (IMF) warned that inflation could be persistent. So, while investors are worried about rising inflation,  retailers that are passing on higher costs to customers are not expected to be impacted substantially.

So, we think it could be wise to bet on retail stocks Lowe’s Companies, Inc. (LOW), BJ’s Wholesale Club Holdings, Inc. (BJ), and Macy’s, Inc. (M), which have advanced significantly in price since reporting their impressive second-quarter earnings results. They are also favorably positioned to continue soaring in the coming quarters.

Lowe’s Companies, Inc. (LOW)

LOW operates as a home improvement retailer internationally. The Mooresville, N.C. company offers a wide range of construction, maintenance, repair, remodeling, and decorating products. It operates more than 1,974 home improvement and hardware stores and sells its products through its website and mobile application.

The company acquired the STAINMASTER brand in April 2021. It is the most recognized and trusted carpet brand on the market. The acquisition is expected to advance LOW’s Total Home strategy and also expand its product portfolio.

LOW’s net sales for its fiscal second quarter, ended July 30, 2021, was  $27.57 billion compared to $27.30 billion in the year-ago period. The company’s operating income for the quarter increased 6.4% year-over-year to $4.21 billion. In addition, its net earnings rose 6.7% year-over-year to $3.02 billion. Also, its EPS increased 13.6% year-over-year to $4.25.

Analysts expect LOW’s EPS and revenue to increase 24.2% and 2.2%, respectively,  year-over-year to $11 and $91.53 billion in its fiscal year 2022. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has soared 38.9% to close Friday’s trading session at $208.21. Also, it has gained 8.1% since reporting its second-quarter results on August 18.

LOW’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has a B grade for Momentum and Quality. Within the B-rated Home Improvement & Goods industry, LOW is ranked #23 of 65 stocks. Click here to see the additional POWR Ratings for LOW (Growth, Value, Sentiment, and Stability).

BJ’s Wholesale Club Holdings, Inc. (BJ)

BJ operates warehouse clubs on the east coast of the United States and sells its products through its website and mobile app. In addition, it offers perishable, edible grocery, general merchandise, non-edible grocery products, gasoline, and other ancillary services. BJ is based in Westborough, Mass.

The company announced the offering of Citizens Pay on June 3. It is a flexible, buy-now-pay-later payment option that allows members to finance purchases of more than  $99. Chris DeSantis, BJ’s senior vice president, said, “We’re committed to delivering outstanding service to our members, and Citizens Pay will help create more flexibility for them to purchase what they need when they need it.”

BJ’s revenue surged 5.6% year-over-year to $4.18 billion in the second quarter, which ended July 31, 2021. Its income from continuing operations grew 4.1% year-over-year to $111 billion. Its adjusted net income came in at $113.32 million, representing a 5.4% year-over-year increase. And its adjusted EPS came in at $0.82, up 6.5% year-over-year.

For its fiscal year 2023, analysts expect BJ’s EPS and revenue to increase 5.4% and 9.8%, respectively,  year-over-year to $2.90 and $15.82 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has soared 52.6% year-to-date to close Friday’s trading session at $56.90. Furthermore, it has gained more than 8% since its latest quarter earnings release on August 19.

BJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Value.

We have also graded BJ for Growth, Momentum, Stability, Sentiment, and Quality. Click here to access all of BJ’s ratings. BJ is ranked #17 of 40 stocks in the A-rated Grocery/Big Box Retailers industry.

Macy’s, Inc. (M)

Omnichannel retail organization M operates roughly 727 stores across 43 states and through its websites and mobile applications under the Macy’s, Bloomingdale’s, and Bluemercury brands. The Cincinnati, Ohio-based company sells a range of merchandise, cosmetics, home furnishings, and other consumer goods.

The company has announced its all-new store concept, “Bloomie’s,” which will open on August 26, 2021, in Fairfax, Virginia. Bloomies brings the best of Bloomingdale’s to a smaller, highly curated, ever-evolving store concept filled with top brands, a new tech-enabled stylist service model, and a vibrant restaurant experience. The initiative could lead to increased sales for M.

M’s sales increased 58.7% year-over-year to $5.65 billion for the fiscal second quarter, ended July 31, 2021. Its operating income came in at $597 million, versus a $631 million operating loss in the prior year. Its adjusted net income for the quarter came in at $411 million compared to a $251 million adjusted net loss in the year-ago period. Also, M’s adjusted EPS was  $1.29 compared to a $0.81 adjusted loss per share in the prior-year period.

The company’s EPS and revenue are expected to increase 201.4% and 27.5%, respectively, year-over-year to $2.24 and $22.12 billion in its fiscal year 2022. In addition, M surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has soared 256.5% in price over the past year to close Friday’s trading session at $22.39. Also, it has gained 24.1% since reporting its second-quarter earnings on August 19.

It’s no surprise that M has an overall B rating, which equates to a Buy in our POWR Rating system. The stock also has a B grade for Growth, Value, and Quality.

Click here to see M’s ratings for Momentum, Stability, and Sentiment as well. M is ranked #33 of 64 stocks in the A-rated Fashion & Luxury industry.

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LOW shares were trading at $206.21 per share on Monday morning, down $2.00 (-0.96%). Year-to-date, LOW has gained 29.84%, versus a 20.51% rise in the benchmark S&P 500 index during the same period.