Retailers To Buy Into Earnings

The retail sector has not been the place to be in 2016. Earnings have been dismal for most companies, which has caused those stocks to lag and in some cases fall 10% plus after an earnings report. The SPDR Retail ETF (XRT) is just up over 2% on the year, while the S&P 500 is up close to 8%. Lack of consumer demand and competition from online giant Amazon are forcing retailers to get creative in order to get people in the door.

Amazon (AMZN - Free Report) simply continues to eat the average retailer’s lunch, putting a dent in earnings for a majority of stocks in the space. The good companies have adjusted to the Amazon threat and beat the odds. Loyalty programs and other incentives bring traffic to the store, which is the first step in competing against Amazon.

Below I list four top ranked companies that have adjusted and look poised to outperform in the fourth quarter. The stocks all are Zacks Ranked #1 (Strong Buy) or #2 (Buy) and have rising earnings estimates.

Tillys (TLYS - Free Report) is a Zacks Rank #1 (Strong Buy) that is a specialty retailer in the action sports industry selling clothing, shoes and accessories. The company offers one of the largest assortments of brands and merchandise from the top players in the surf, skate, motocross and lifestyle apparel industries available both in stores and online at The company was founded in Southern California in 1982 and has grown to 225 stores in 33 states.

Tillys has a market cap of nearly $300 Million with a Forward PE of 20. The stock sports a Zacks Style Score of “A” in both Value.

Q2 earnings were reported on August 24th, with the company seeing $0.05 versus the -$0.03 expected. Revenue came above expectations at $136.4 Million verse $133 Million. The company also guided Q3, saying they expect to come within the range of $0.07-0.13 verse the $0.10 expected. Same store sales were up 0.9% and the company saw an improvement on margins, which ticked up to 28.5% verse the 28.1% seen last year. Investors rewarded the stock with a 17% up move in just a day.

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David P. Goldsmith 3 years ago Member's comment

You are leaving $GOOGL out of the ER play? $PCLN I totally understand but #Google? I have to disagree here because people buy @ GOOGL

Michele Schneider 3 years ago Contributor's comment

XRT is a great indicator for me and a part of my stock Modern Family. We are watching JC Penney as well.