The supposed death of traditional brick-and-mortar retailing at the hands of e-commerce juggernaut Amazon.com Inc. (AMZN) is greatly exaggerated, according to retail analysts at Cowen & Co., a division of Cowen Inc. (COWN), as reported by Barron's. Instead, Cowen is "hopeful but equally cautious" about the retail sector through the end of 2017, as Barron's quotes from a recent research note.

Three discounters, in Cowen's opinion, are attractive precisely because they offer "exceptional value" to consumers: TJX Companies Inc. (TJX), Ross Stores Inc. (ROST), and Costco Wholesale Corp. (COST). They also like luxury goods merchants such as Tiffany & Co. (TIF), as well as traditional stores that "have done a good job blending physical bricks with digital clicks," most notably Nordstrom Inc. (JWN). Meanwhile, struggling department store chains Macy's Inc. (M) and Kohl's Corp. (KSS) could post better-than-expected results if the weather improves during the end of the year, Cowen indicates.

Retail stocks have been beaten down to such low levels amid rapidly diminishing expectations that certain leading players are now attractively priced, Cowen says. Moreover, they believe that valuations of retail stocks are poised to expand in the fourth quarter if they exceed low estimates. Better inventory control, multi-channel sales strategies, and solid U.S. consumer spending are cited as positives for retail stocks by Cowen.

M Chart

M data by YCharts

​Diversified Shopping Portfolio

Within the discount or off-price segment of retailing, TJX offers a diversified portfolio of store brands, including T.J. Maxx, Marshall's, HomeGoods, and Sierra Trading Post. The latter was acquired by TJX in 2012, having been established since 1998 as a leading online clothing discounter. This diversification fits with the blending of "bricks and clicks" that Cowen likes. Moreover, there are now 16 physical Sierra locations in 11 states. Overall, TJX owns seven retail chains, including three e-commerce sites, with over 3,800 stores locations in nine countries, per the company.

Ross operates 1,384 Ross Dress for Less locations in 37 states, the District of Columbia, and Guam. Its 205 dd's Discounts stores in 16 states are designed to appeal a younger demographic, per the company.

Costco, the members-only bulk sales warehouse chain, has been an online seller since 1998, Bloomberg indicates. Now it's venturing into home grocery delivery, partnering with Shipt Inc. of Birmingham, Alabama, and is planning to offer this service in 50 markets with more than 30 million households by the end of the year, according to CNBC. Grocery delivery specialist Shipt, founded in 2014, is now in 71 cities and expanding, per its website.

COST Normalized Diluted EPS (Annual YoY Growth) Chart

COST Normalized Diluted EPS (Annual YoY Growth) data by YCharts

Not Exactly Bargain Basement

The forward P/E ratios on these seven stocks are: TJX, 17; Ross, 18; Costco, 25; Tiffany, 21; Nordstrom, 16; Macy's, 8; and Kohl's, 12. These figures are per Thomson Reuters Corp. (TRI), as reported by Yahoo Finance. Given a forward P/E on the S&P 500 Index (SPX) of 19, per calculations by Birinyi Associates cited by the Wall Street Journal, the first five stocks, which are Cowen's top retail picks, actually are not all that cheap according to this yardstick.

Meanwhile, the price movements for these stocks over the latest one-year and five-year periods through Thursday's close are, respectively: TJX, -1%;, +78%; Ross, +1%, +113%; Costco, +8%, +67%; Tiffany, +24%, +44%; Nordstrom, -9%, -17%; Macy's, -40%, -42%; Kohl's +6%, -14%. This data also is per Yahoo Finance. The S&P 500 is up 17% during the past year, and 72% during the past five years, as a point of comparison. A benchmark for the retail sector is the SPDR S&P Retail ETF (XRT), down 2% during the past year, but up 41% for the most recent five years.

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