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Investors have been somewhat cautious about the retail sector amid concerns that inflation continues to have a major impact on consumers and affect the level of discounts in key categories. “Retailers know that shoppers have become price sensitive and are looking for Great promotions and discounts. “Retailers have therefore increased the number of products on sale, hoping that more shoppers will open their wallets ahead of Black Friday,” LSEG director Jharonne Martis said ahead of the key shopping period.
Contrary to the sense of caution, early data for the Christmas shopping period has been solid. During the first 23 days of November, online sales increased 6.8% from the corresponding period a year earlier. In particular, several analysts have highlighted that Mattel’s (MAT) Barbie toy line is a hot seller during the early part of the holiday shopping season. On the other hand, traffic reports indicate that Walmart (WMT) may be exceeding expectations for the first part of the holiday season. Meanwhile, Black Friday tracking showed that Five Below (FIVE) saw solid traffic throughout the day. Bank of America expects an acceleration of Five Below (FIVE) through Christmas. “With inflation persistently high, consumers are increasingly looking for value and shopping closer to needs,” said analyst Jason Hass. On that point, Target (TGT) recently highlighted that two-thirds of its toy assortment is priced under $25 this year. Haas believes the launch of Five Beyond (products range from $6 to $25) better positions it in the gifting category this year. Five Below (FIVE) also stands out for having one of the most differentiated offerings in retail. The retailer is also expected to see a greater impact from licensed properties this holiday season following a string of successful summer movies, including Barbie, Super Mario, Transformers and Spiderman. The general view on FIVE is that it is on a planning path towards solid returns.
19 of 21 Wall Street analysts have a Buy or better rating at Five Below (FIVE). Five Below (FIVE) is due to report earnings on November 29. Analysts expect the discounter to post revenue of $728 million, comparable sales growth of 1.3% and earnings per share (EPS) of $0.23. Heading into earnings day, the last 19 analyst revisions to Five Below’s (FIVE) EPS have been downward.
Value games: In terms of quantitative analysis, retail stocks with the highest Alpha Quant Search Ratings include Build-A-Bear Workshop, Ulta Beauty (ULTA), Dick’s Sporting Goods (DKS), Abercrombie & Fitch (ANF), and Gap . (GPS). Retail stocks with the highest valuation scores include Big 5 Sporting Goods (BGFV), Express (EXPR), Lands’ End (LE), and Qurate Retail (QRTEA). Seeking Alpha analyst Nickle Lyu called Crocs (CROX) a great value pick earlier in the week, while Gustavo Larraga Tapia pointed to an attractive entry point in Bath & Body Works (BBWI).
