Three Retailers With Room to Grow
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Here are a few more of the stocks from my watchlist, particularly retailers. I like the fact that these companies are planning to expand their brick-and-mortar bases. They may also be viewed as adept at finding original avenues whereby to build profits.
Jos. A. Bank (NASDAQ: JOSB) recently announced that it intends to build its store count 33%, to around 800 units eventually, depending on the company’s performance. It noted the steady store traffic at newly opened locations and its strong balance sheet as considerations for the aggressive strategy. This means its substantial cash and short-term investment balance and lack of long-term debt. Sales of tailored clothing, dress shirts, and sportswear are generating rising unit volumes. We surmise that JOSB maintains its inflated gross margins through a mainly proprietary product line. An indication of whether it will pursue enhanced store construction rates in any given year can be found by looking at real estate trends, such as mall construction. Incidentally, the commercial construction cycle typically lags that of the residential building upturn. So, there is the likelihood that many more shoppers will have the opportunity to purchase JOSB’s business and casual clothing conveniently.
The shares, down from previous levels, appear enticing at this juncture. It may appeal to those seeking holdings in the fashion or retail sectors alike.
Costco (NASDAQ: COST) generates revenues from merchandise sales and membership fees. It also boasts a growing number of warehouses or supercenters. Like JOSB, it currently operates approximately 600 units. As a one-stop shopping center, it doubles as a gasoline station, and sales tend to fluctuate a bit on gas prices. And, the centers remain popular: Sales advanced 12% in fiscal 2012, assisted by a 7% comparable-store sales gain. Costco, too, is notable for being nearly unleveraged and should therefore not be inhibited in its expansion pursuits.
COST stock is appropriate for investors with an interest in big box retailers. Certainly, the stock of another closeout specialist recently jumped on strong results, namely Big Lots (NYSE: BIG). BIG had been struggling to compete and its shares were suffering accordingly. But, investors are hoping for a bounceback to occur in coming quarters.
HSN (NASDAQ: HSNI) unique operating model is providing the basis for solid share-earnings growth. In this environment of interactive electronics marked by the proliferation of portable PCs and cellphones it has thrived. In fact, sales by way of the digital channel rose 10% in the latest quarter. Home products are key to its upturn and it sells more of these than any other product category by far.
HSNI offers further upside as a growth stock and is safe enough for most potential investors.
Overall, there has been talk of late that the retail climate is subdued as we approach the holiday season. At the same time, investor caution has probably left certain issues ripe for the picking. Other categories we suggest include supermarkets and certain sportswear/sporting goods retailers; some could well be poised for price appreciation long term, others may be headed for a resurgence.
dctotal has no positions in the stocks mentioned above. The Motley Fool owns shares of Big Lots and Costco Wholesale. Motley Fool newsletter services recommend Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!