With many of the sectors suffering right now and negativity surrounding global debt and the future of the economy, retail has been a surprisingly bright spot. The sector has reached its highest levels since 2004, a tremendous achievement in this state of weakened economy. Many had feared that the second quarter would bring reversals for retails but instead the opposite has been true. Given the few other options that have displayed this kind of strength, it’s possible that in lieu of typical safe havens like gold and dollars, investors might consider retail. That said, given earnings and share price increases, there are several companies that, given their current share prices and expected rate of progress look exceptionally appealing.
Target (TGT)-Not only did shares of Target advance 6.6 percent today but the company exceeded the expectations of analysts with their latest earnings report, proving that they have recrowned themselves as among the top dogs in their field in the highly competitive market. June net sales were $6.26 billion according to the company, an increase of 5.7%. June comparable-store sales increased 4.5 percent, at the high end of its expectations. Additionally, the company is still trading at the low-end of its 52-week pricing and is somewhat cheap with its 11.2 P/E ratio.
Macy’s (M)- With a 6.8 percent sales gain, Macy’s shares have been pushing higher, but thought the stock is up, it’s still a steal compared to other competitors. At 10.4 times expected forward earnings and better year-over-year earnings growth, than competitions like J.C. Penney, Macy’s is fast gaining appeal among the increasingly stable retail stocks. It’s been upgraded by Moody’s thanks to an improved balance sheet and strategic execution and growth. Same-store sales for the company in the first quarter were 7.4 percent higher, displaying the company’s ability to adapt to a inhospitable landscape and tough competition. Their improvements have spanned across demographics and their online sales have risen impressively. If that keeps up, shares of Macy’s could continue to climb, especially considering the added benefits of a rich cash flow to minimize debt and maximize value to the share holders while driving up dividends 100 percent.
J.C. Penney (JCP)- This one might come as a surprise today since shares of the company sunk, but J.C. Penney still has potential. Though underwhelming earnings and a higher price tag than Macy’s, could offset investors, the lower price to. Prices dropped today after the company announced earnings that while higher, failed to meet analyst expectations. Considering they appear to be headed in a positive direction, though the pace is slower than investors would like, their newest addition could help contribute to stronger sales and earnings next quarter. Rob Johnson, formerly of Apple (AAPL) has been hired to be the company’s new CEO. Prior to Apple, Johnson logged years a high level retail executive at Target and has seen success in both of these endeavors. As a result of that expectation, shares of JCP have become more expensive but the most recent drop could make the stock appealing again, especially if Johnson is able to deliver. J.C. Penney at this price though remains a riskier choice than many of the others in its field.
Urban Outfitters (URBN)-Urban Outfitters was up close to 6 percent in trading yesterday after being upgraded by Morgan Stanley before the bell, but does that mean the company is a buy? UO has been struggling over the course of the year, down 14 percent when the rest of the sector is up around 13. That dichotomy doesn’t look great and to boot, Urban Outfitters still isn’t so cheap. It’s trading in the middle of the range of its 52-week price and in spite of the upgrade to “overweight” and an increase of fiscale 2012 earnings to $1.98 per share, Urban Outfitters is still trading with a 20.1 P/E ratop. On average analysts expect a fiscal 2012 profit of $1.93 per share. Those who are more enthusiastic are confident that the Philadelphia company's chief executive’s growing focus on merchandising and and the addition of new talent to the store brands should help boost fourth quarter sales. There appears to be more evidence among other retailers that, like Target and Macy’s for instance, that they will thrive in the remainder of 2011.
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