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Tickers in this Article: BBY, EBAY, BBBY, GPS
Long-term investors usually avoid investing in fads and seasonal trends. Yet the holiday season is upon us, and retailers get flooded this time of year. For those investors interested in the industry, these retailers might be names to put on your list.

IN PICTURES: Consumer "Fads" That Haven't Faded

Buyer Beware
Mr. Market may be irrational at times but he is not stupid. He knows this is the season for retailers and has likely bestowed some price appreciation on most of them. So even if the quarter turns out to be a blockbuster one, this may already be factored into the price. With the consumer still struggling, many retailers are slashing prices and giving out generous promotions to lure shoppers in. So while sales may improve, pay attention to receivables and cash flow instead of profits. Remember that a retailer can promote sales growth by extended generous credit offers. But, until customers pay their bills, those sales have not been converted into actual cash flow for the business.

Simple Observation
One name to keep an eye on is electronics retailer Best Buy (Nasdaq:BBY). As the largest such specialty retailers of its kind, Best Buy attracts a lot of consumers. Despite the threat of prices from Wal-Mart (NYSE:WMT), Best Buy's selection is hard to match. And for the most part, its prices are just as good if not better than discount department stores. Shares trade for 14-times earnings - not overly cheap or expensive.

Bed Bath and Beyond (Nasdaq:BBBY) is another specialty retailer to consider. Gifts for the home are great around holiday time, and BBBY does an excellent job of merchandising to fit the occasion. The company has a pristine balance sheet with over $1.5 billion in net cash against a market cap of $11.5 billion. Shares trade for 16-times earnings.

Gap, Inc. (NYSE:GPS) shares trade for less than 12-times earnings and yield about 2%. The company's brands include lower-priced Old Navy to its high-end Banana Republic stores. They should all cater very nicely to a wide consumer base this holiday season. Even its higher-end Banana Republic stores are out of reach for many shoppers.

With the continued growth in online shopping this holiday season, don't forget eBay (Nasdaq:EBAY). Over the years the company has morphed from a bid only site to a forum where many online stores exist. Even well-known department stores now use eBay. Unlike brick and mortar retailers, eBay's margins benefit from its virtual store front. Operating margins exceed 20%.

The Bottom Line
Find the stores with great customer service, hard to beat prices and lots of customers. That's your best chance of making successful investments in the industry. (For more, see Analyzing Retail Stocks.)

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