The holiday shopping season officially kicks off on Black Friday and the event is expected to yield big rewards for retailers. Some shoppers even camp out in front of stores and in parking lots to be the first in line to take advantage of deep discounts offered by retailers, who hope that sales will be enough to lift their profits into the black. While the day is a boon for deal-hungry shoppers, the holiday shopping frenzy can also be a prime opportunity for investors to shore up their retail stock holdings.
Retail Stocks: The Black Friday Standouts
A strong holiday sales forecast could prove to be the ultimate gift for a retail sector that’s experienced a bumpy year. Numerous bankruptcy filings have plagued retailers recently, including Fred's, Gymboree, and Payless Shoes.
- Black Friday kicks off the holiday shopping season and it is time for investors to eye opportunities in the retail sector.
- Amazon is outpacing other retailers and the company reached the $1 trillion market cap level.
- Target, Walmart, and Best Buy are rolling out deals ahead of the holidays.
- Bargain hunters might want to take a look at JC Penney or Big Lots shares.
But retail sales have been steadily rising since 2000, according to the Federal Reserve Bank of St. Louis, so investors may want to consider some of the market's top trending retail stocks. These are the seven stocks that could see a boost through Black Friday and beyond. All data below are current as of Oct.11, 2019.
Amazon (AMZN) isn’t a cheap buy compared to some of the other stocks included here, but it’s still a contender for Black Friday investing. After an astronomical climb through the retail ranks, Amazon has emerged as the dominant force in online shopping. The stock continues to outpace its retail competitors and even reached the $1 trillion market cap in 2019.
Walmart (WMT) has launched an active campaign to keep pace with Amazon, introducing a streamlined return process, an online grocery shopping service, and competitive free shipping on qualified orders. With 51% of holiday shoppers focusing their budget on online shopping, Walmart may see a huge payoff from expanding its online presence on Black Friday.
- Average volume: 5,558,000
- Market cap: $342 billion
- P/E ratio (TTM): 27.20
- EPS (TTM): $4.42
- Dividend and yield: $2.12 (1.77%)
While some retailers drop hints to shoppers about what they'll be offering during their Black Friday deals, Best Buy (BBY) sometimes takes a different strategy. The retailer recently kicked off its Black Friday sales early, advertising sale prices on certain big-ticket items at the beginning of November. That may be a worthy approach, as the company looks to cut costs, optimize brick-and-mortar square footage, boost online sales, and stabilize its revenue stream.
- Average volume: 2,641,000
- Market cap: $18.30 billion
- P/E ratio (TTM): 12.57
- EPS (TTM): $5.53
- Dividend and yield: $2.00 (3.00%)
Dick’s Sporting Goods
Dick’s Sporting Goods (DKS) can best be described as a survivor in the retail sector. While competitors like Sports Authority and Sports Chalet have folded, Dick’s has continued to grow slowly but steadily, while generating a solid profit in the process. The retailer is among several that have pledged to start its Black Friday deals early, opening up its doors to shoppers on Thanksgiving.
- Average volume: 2,250,000
- Market cap: $3.60 billion
- P/E ratio (TTM): 12.0
- EPS (TTM): $3.29
- Dividend and yield: $1.10 (2.80%)
Target (TGT) is a staple of Black Friday and the holiday shopping season, and it’s actively investing millions to revamp its stores and online presence. Walmart is considered the retailer's biggest competitor. Each year, the two go to bat against each other, trying to entice shoppers in with big deals, with each trying to be the first to release their Black Friday ads.
- Average volume: 5,473,000
- Market cap: $57.10 billion
- P/E ratio (TTM): 18.50
- EPS (TTM): $6.00
- Dividend and yield: $2.64 (2.40%)
JC Penney (JCP) has been losing steam, with the stock continuing a downward slide since 2011. The retailer has shuttered some of its lower-performing stores as well as some fulfillment centers in order to cut down costs. But with a new CEO taking the helm as of October 2018, the company is banking on turning things around. If you’re looking for a bargain buy, however, this stock fits the bill.
- Average volume: 11,500,000
- Market cap: $317 billion
- P/E ratio (TTM): N/A
- EPS (TTM): $-0.88
- Dividend and yield: N/A
Big Lots (BIG) doesn’t get as much attention as other big-name retailers, making it the potential dark horse of the holiday shopping season. The company, which announced a new CEO in September 2018, relies heavily on one segment: retail closeout. Although growth has been stagnant, it is still a retailer to watch on Black Friday.
- Average volume: 1,410,000
- Market cap: $866 million
- P/E ratio (TTM): 7.20
- EPS (TTM): $3.09
- Dividend and yield: $1.20 (5.73%)
The Bottom Line
A solid holiday shopping season may be a boon for retailers and for investors who know where the deals are to be found. Comparing your retail stock options and understanding the risks can help you decide which investments should be added to your "nice" list this year.