Growth Expert's Top Retail Ideas for the Xmas Season

10/29/2019 5:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

It’s beginning to look a lot like Christmas — at least in the eyes of retailers. According to the National Retail Federation, holiday sales in November and December are estimated to be 4% higher than last year, notes Mike Cintolo, editor of Cabot Top Ten Trader.

Target (TGT) is in a great position to be one of the biggest beneficiaries of the expected spending spree. The stock has changed character in recent weeks after a great Q2 earnings report, which topped analysts’ forecasts by 12%, while revenue walloped estimates by more than $100 million.

Same-store sales growth also beat, coming in at 3.4% versus the 3% analysts had expected. And earnings forecasts are calling for a 14% hike in earnings this year.

The back story here is that, over the past two years, the company has remodeled itself with successful private label brands and alliances with high-end designers, with management pulling all the right levers.

On that front, investors (and consumers) are hopeful regarding Target’s recent announcement that it will handle the digital platform and fulfillment of the resurrected online presence of Toys “R” Us, which fits in nicely with the firm’s new specialized in-store space dedicated to online sales and pick-up. Buying on dips is recommended.

Like Target, discount retailer TJX Companies (TJX) is breaking out the eggnog in anticipation of the coming holiday sales season. But this is more than just a general industry play — TJX, which owns and operates Home Goods, T.J. Maxx and Marshall’s — has delivered positive same-store sales growth for 23 years.

The company has beaten Wall Street’s earnings estimates the last two quarters, and TJX is set to report its third quarter results on November 19, with analysts expecting earnings per share of $0.66, an estimate that has edged up a bit in the last month. Revenues are forecasted to come in at $10.3 billion.

Wall Street analysts are positive on the shares, citing TJX’s investment in its e-commerce presence, the increase of in-store traffic (up 20 straight quarters), and the company’s ability to turn its fast-fashion inventory into rapid sales. A modest 1.6% yield puts a nice bow on the overall package. Nibbling here or (preferably) on weakness makes sense.

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