China's Cyber Monday makes ours look like just another weekday, but should US retail stocks worry?
It's no secret that Americans like their sales. Ever since the invention of Black Friday – a day when the inside of American retailers take on the look of a war zone – sales have grown steadily, perhaps to their breaking point.
Today China is expected to blow that out of the water. After the Chinese online retailer Alibaba began offering its inaugural November sales (an attempt to replicate America's shopping flurry around the holidays), China's version of Cyber Monday has ascended to overtake the sales of America's two biggest shopping days combined.
And most sales are focused on this one, giant, online retailer.
It's important to mention that a lot of the actual products purchased on Alibaba's websites still come from American companies. And since anyone who's been to a Duane Reade (WAG) in the last week or two knows that the holiday season is imminent – we decided to start compiling lists of promising retail stocks who might be set for a Christmas surge.
Beginning with a universe of about 100 stocks that are specialty retailers, we wanted to look for signs of growing profitability before the holiday shopping season. One of the standard measures of profitability is the ever-popular metric, return on equity (ROE). However there's a big problem with ROE, because a company can boost the statistic by borrowing money.
To get a more holistic measure of how good a company is at generating profits – the Dupont Corporation (DD) came up with a more refined statistic, the Dupont Breakdown:
ROE = Net Profit Margin x Asset Efficiency x Financial Leverage
By taking into account a company's profits, how well it's using assets on hand, and how much it is borrowing; investors can get a more reliable indicator of whether a company is becoming more profitable. A company with an encouraging Dupont breakdown is typically seen as making better use of its resources – which is a potential indicator that the stock may be ready to grow.
We were left with seven companies on our list.
Click on the interactive chart below to view analyst ratings over time.
Do you see investing opportunities in these American retailer stocks? Use the list below to begin your own analysis.
1. ANN INC (ANN, Earnings, Analysts, Financials): Operates as a specialty retailer of women's apparel, shoes, and accessories primarily in the United States. Market cap at $1.6B, most recent closing price at $34.95.
MRQ net profit margin at 5.59% vs. 5.17% y/y.
MRQ sales/assets at 0.686 vs. 0.657 y/y.
MRQ assets/equity at 2.316 vs. 2.46 y/y.
2. AutoZone Inc. (AZO, Earnings, Analysts, Financials): Operates as a specialty retailer and distributor of automotive replacement parts and accessories. Market cap at $15.41B, most recent closing price at $443.49.
MRQ net profit margin at 11.99% vs. 11.71% y/y.
MRQ sales/assets at 0.449 vs. 0.441 y/y.
MRQ assets/equity at -4.085 vs. -4.047 y/y.
3. Conns Inc. (CONN, Earnings, Analysts, Financials): Operates as a specialty retailer of home appliances, consumer electronics, home office equipment, lawn and garden products, mattresses, and furniture in the United States. Market cap at $2.02B, most recent closing price at $56.60.
MRQ net profit margin at 7.08% vs. 5.6% y/y.
MRQ sales/assets at 0.264 vs. 0.253 y/y.
MRQ assets/equity at 1.923 vs. 2.143 y/y.
MRQ net profit margin at 7.83% vs. 6.8% y/y.
MRQ sales/assets at 0.488 vs. 0.467 y/y.
MRQ assets/equity at 2.29 vs. 2.644 y/y.
MRQ net profit margin at 2.9% vs. 2.65% y/y.
MRQ sales/assets at 0.695 vs. 0.643 y/y.
MRQ assets/equity at 3.035 vs. 3.337 y/y.
6. Stein Mart Inc. (SMRT, Earnings, Analysts, Financials): Operates retail stores that offer fashion merchandise for women and men in the United States. Market cap at $643.97M, most recent closing price at $15.0.
MRQ net profit margin at 1.17% vs. 0.82% y/y.
MRQ sales/assets at 0.604 vs. 0.559 y/y.
MRQ assets/equity at 1.895 vs. 1.913 y/y.
MRQ net profit margin at 5.36% vs. 4.69% y/y.
MRQ sales/assets at 0.629 vs. 0.621 y/y.
MRQ assets/equity at 1.62 vs. 1.628 y/y.
(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- ANN INC(ANN, Chart, Download SEC Filings)
- AutoZone Inc.(AZO, Chart, Download SEC Filings)
- Conns Inc.(CONN, Chart, Download SEC Filings)
- Gap Inc.(GPS, Chart, Download SEC Filings)
- Lithia Motors Inc.(LAD, Chart, Download SEC Filings)
- Stein Mart Inc.(SMRT, Chart, Download SEC Filings)
- Tractor Supply Company(TSCO, Chart, Download SEC Filings)
© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.
Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.
Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC.