4 Retailers on the Rise – Investment Ideas

An improving labor market and rising stock and housing markets have consumers feeling a bit more confident about opening their wallets again – despite rising gas prices. However, that doesn’t mean that all retailers are going to see top-line growth this year. There are always winners and losers in retail, no matter what the economy is doing.

So how do you know which ones to buy and which ones to avoid?

One important item to look at is same-store sales. This metric compares sales across stores open at least a year. This is also known as comp sales.

This is beneficial because it allows investors and analysts to compare sales between different retailers and can alert them to shifts in consumer demand. Total sales growth, while important, will naturally be higher among retailers who are rapidly opening new stores or making acquisitions. Same-store sales ignores this, however, and only focuses on sales at existing stores.

It’s also beneficial in that it excludes the “honeymoon phase” of strong sales typically experienced shortly after stores are opened in new locations.

Same-Stores Sales Rise in May

According to a composite of 12 retailers by the International Council of Shopping Centers, overall sales at stores open at least a year increased +3.2% in May. Unfortunately many retailers have recently stopped reporting monthly sales figures, so this report is becoming less and less important. However, retailers still provide same-store sales figures in their quarterly reports, so make sure to keep a close eye on those numbers.

So which retailers are currently seeing strong increases in same-store sales growth?

Here are 4 retailers on the rise:

Lumber Liquidators (LL)

Q1-13: +15.2%

Q4-12: +13.2%

Q3-12: +12.0%

Q2-12: +12.4%

Lumber Liquidators is the largest specialty retailer of hardwood flooring in North America with over 290 locations. It is a Zacks Rank #1 (Strong Buy) stock.

Conn’s, Inc. (CONN)

Q1-13: +16.5%

Q4-12: +7.0%

Q3-12: +12.6%

Q2-12: +21.5%

Conn’s is a specialty retailer with 70 retail locations in Texas, Louisiana, Oklahoma, New Mexico and Arizona. Its primary products include appliances, furniture and mattresses, consumer electronics and home office equipment. It is currently a Zacks Rank #3 (Hold).

Big 5 Sporting Goods Corporation (BGFV)

Q1-13: +10.5%

Q4-12: +6.5%

Q3-12: +5.2%

Q2-12: +1.0%

Big 5 is a sporting goods retailer with 414 stores in 12 western states. It is a Zacks Rank #1 (Strong Buy) stock.

Cabela’s Incorporated (CAB)

Q1-13: +24.0%

Q4-12: +12.0%

Q3-12: +3.9%

Q2-12: +4.7%

Cabela’s is a specialty retailer focused on hunting, fishing, camping and related outdoor merchandise. It is a Zacks Rank #2 (Buy).

The Bottom Line

When evaluating retail stocks, it’s important to look at a company’s recent same-store sales trends. These 4 are seeing strong demand for their products at existing locations, which should lead to rising earnings estimates and rising stock prices.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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BIG 5 SPORTING (BGFV): Free Stock Analysis Report
CABELAS INC (CAB): Free Stock Analysis Report
CONNS INC (CONN): Free Stock Analysis Report
LUMBER LIQUIDAT (LL): Free Stock Analysis Report
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