Top Retail Stocks for Q1 2021

The retail industry provides a variety of finished goods, both durable and non-durable, to individual consumers and households. The industry also sells services. Products sold by retail companies include apparel, electronics, furniture, kitchenware, sporting goods, books, and toys. Some even sell groceries, pharmaceutical products, auto parts, and gardening supplies. The industry includes traditional brick-and-mortar retailers as well as emerging e-commerce companies. Some of the biggest retail companies include Walmart Inc. (WMT), Amazon.com Inc. (AMZN), and Costco Wholesale Corp. (COST). The earnings and revenue performance of retailers has varied widely during the COVID-19 pandemic. Many heavily focused brick-and-mortar retailers have suffered huge declines, while retailers with a strong e-commerce presence have thrived.

Retail stocks, as represented by the SPDR S&P Retail ETF (XRT), have significantly outperformed the broader market. XRT has provided a total return of 43.9% over the past 12 months, well above the Russell 1000's total return of 23.2%. These performance figures and all statistics in the tables below are as of December 4.

Here are the top 3 retail stocks with the best value, the fastest earnings growth, and the most momentum.

Best Value Retail Stocks

These are the retail stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Source: YCharts

• Big Lots Inc.: Big Lots offers an assortment of merchandise, including consumables, seasonal products, furniture, electronics, housewares, toys, and more mainly through its brick-and-mortar stores. For Q3 FY 2020 ended October 31, Big Lots reported an 18.0% year-over-year (YOY) increase in net sales and a record 17.8% quarterly increase in comparable sales. Net income declined 76.4% YOY, partly due to comparisons to Q3 2019, when earnings were bolstered by a one-time after-tax benefit of $136.6 million.
• Ingles Markets Inc.: Ingles Markets is a regional supermarket chain. It offers products in each of the following categories: grocery, non-foods, perishables, and other.
• Qurate Retail Inc.: Qurate Retail is an e-commerce service provider. The company partners with television networks and e-commerce sites, social media, mobile applications, and similar outlets to provide video and digital commerce services worldwide. Qurate operates brands including QVC, HSN, zulily, and Frontgate, among others. On November 20, the company announced a special cash dividend of $1.50 per share of common stock, totaling $626 million, to be paid on December 7 to shareholders of record as of November 30. Qurate also reported the launch of a share buyback program totaling up to $497 million.

Fastest Growing Retail Stocks

These are the retail stocks with the highest YOY earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Source: YCharts

• Big Lots Inc.: See above for company description.
• Citi Trends Inc.: Citi Trends is an apparel store selling clothing, shoes, beauty products, and accessories. The company also sells home decor and serves customers across the U.S. For Q3 2020, Citi Trends reported an 8.8% YOY increase in net sales and a 6.3% jump in comparable sales. The revenue gains helped the company to post net income of $7.0 million compared with a net loss of $1.1 million in Q3 2019. Despite these improvements, the company said it expected Q4 comparable sales to be flat due to the impact of the COVID-19 pandemic.
• Kaixin Auto Holdings: Kaixin Auto Holdings is a China-based holding company with subsidiaries that operate as used car dealers. The company operates roughly 14 dealerships in 14 cities across China.

Retail Stocks with the Most Momentum

These are the retail stocks that had the highest total return over the last 12 months.

Source: YCharts

• GrowGeneration Corp.: GrowGeneration is a distributor of agricultural products. The company operates retail hydroponic and organic specialty gardening retail outlets. It offers plant nutrition, farming soils, crops, advanced lighting technology, hydroponic and aquaponic equipment, and more. In November, GrowGeneration completed its acquisition of The GrowBiz, the nation's third-largest chain of hydroponic garden centers. Aided by the acquisition, GrowGeneration now operates a total of 36 garden centers. Terms of the acquisition were not disclosed in the press release.
• Overstock.com Inc.: Overstock.com is an e-commerce retailer. The company is focused on offering discounted brand-name merchandise, including bed-and-bath goods, kitchenware, jewelry, sporting goods, electronics, and more.
• CarParts.com Inc.: CarParts.com is an online provider of aftermarket parts for automobiles. The company sells mirrors, engines, headlights, brakes, interior and exterior accessories, tools, wheels, bumpers, and other parts. For Q3 2020, CarParts.com reported a 69.5% YOY increase in net sales and a 105% gain in e-commerce sales. It posted net income of $1.4 million compared to a net loss of $1.4 million for Q3 2019.

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