Not a day goes by without some sort of Retail Armageddon story being aired in the financial media; to some extent this is justified. The coronavirus has hastened the demise of several department stores like Neiman Marcus, J. Crew and Modell’s Sporting Goods, but calling for retail’s demise might be a bit premature. Neiman Marcus and J. Crew emerged from bankruptcy, and it’s possible other retail establishments could follow suit.
Changing the way we do business does not mean the end of business as we know it. Retailers with a strong online footprint, recognized brands, and the ability to adapt to new consumer trends will continue to thrive, even as the pandemic brings an era of increased savings. This is America, we’re always going to feel the urge to have new things from time to time, aren’t we? Today we’re going to look at 5 retail stocks that could emerge as big winners.
Overview: Retail inventory
Retail is one of America’s oldest businesses. Macy’s, a nationwide brand name retailer, has roots dating back to 1852. Retailers are different from other types of consumer goods companies because they supply products to end users themselves. They do not manufacture or distribute products; retailers are a direct-to-consumer business.
Some examples of retail businesses include department stores, discount stores, food and grocery stores, home improvement stores, auto parts suppliers, clothing stores, and pharmacies. There is often a lot of industry overlap between Consumer Discretionary and Consumer Staples among retail businesses.
Retail stocks are also among the oldest stocks occupying our favorite indexes. JCPenney came out of bankruptcy, but they’ve been trading on the New York Stock Exchange since 1927. Amazon dominates this space today as a provider of consumer discretionary and consumer staples, but who needs that? being told to buy Amazon stock?
Despite its dominance, Amazon does not have a stranglehold on consumer spending, and many other companies in the retail sector have room to grow. Some companies are newcomers that have adapted to a rapidly changing environment, but others are institutions with successful business models dating back decades.
Best Online Brokers for Retail Stocks
Retail stocks have been choppy during the COVID-19 pandemic with behemoths like Amazon hitting new highs while department stores Macy’s and JCPenney struggle to survive. Fortunately, finding retail stocks doesn’t require a lot of research. Stocks of popular retailers are readily available at most major brokers. Choosing a broker therefore depends more on your investment style than on the type of stock you are looking for. Most brokers now offer commission-free stock trading, so it has never been cheaper to start trading or investing.
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Features To Look For In Retail Stock
When looking for retail stocks with strong future prospects, consider the following characteristics. Businesses with these characteristics will have a higher chance of success compared to their peers.
- Strong online footprint: Online shopping is here to stay. It was probably happening even without the coronavirus, but a global pandemic has certainly increased the number of consumers ordering their products online. Certain types of shopping will always have high demand for in-person sales, such as clothing and furniture. But a strong online presence is essential to navigate today’s environment.
- Popular brand names: Selling is about trust and consumers trust the brands they know and recognize. Retailers with a wide variety of trusted brands will do well in an economy where consumers are holding back their money a bit more.
- Stable or expanding gross margins: In an uncertain economic environment, controlling costs is crucial. Gross margin refers to profit retained after subtracting cost of goods sold from revenue. Companies with declining gross margins lose sales or see their costs rise. Neither is a good scenario for business.
The disappearance of the retail trade could be exaggerated
Media reports of the retail apocalypse might be a bit of a stretch. Of course, malls and department stores are struggling as consumer trends change and online shopping bleeds once-reliable foot traffic. But retail is going nowhere. Companies in the space may look and operate differently, but getting products directly into the hands of consumers is always going to be big business.
As long as the consumer has money to spend and needs to fulfill, some retailers will thrive. Those who don’t adapt will cease to exist, but that’s the way of life in any industry. Companies on this list not only have the ability to adapt to new trends, but they also have the confidence factor to retain those customers.
questions and answers
In which sector is it best to invest?
The top five industries to invest in in 2022 are environment, social and governance (ESG), healthcare and pharmaceuticals, telemedicine, cybersecurity and cloud computing.
Which industry will grow in 2022?
Five global industries are expected to grow in 2022. These are global airport operations, global hotels and resorts, global travel agency services, global tourism, and global airlines.
Is Apple stock a good buy?
If you are a long-term investor, Apple shares may be a good buy for you. This is because the company has a great track record and will be in business for the long haul.