Two retail stocks rebound in the face of the COVID-19 crisis as they have found ways to meet customer needs during challenging times.
Two months ago, Best Buy (NYSE:BBY), Target (TGT:NYSE), Walmart (NYSE: WMT) and Home Depot (NYSE:HD) found success in providing alternative shopping methods to shoppers, including at-home delivery, curbside pickup, and of course, e-commerce platforms. Now, Best Buy and Home Depot are leading the recovery-stock pack as they continue to rally nicely off of their March lows.
The Beginning of Best Buy’s Retail Stock Rebound
To appreciate Best Buy’s rebound lets quickly review where the company was at the beginning of the pandemic. In March, the company witnessed a 30% drop in value but quickly began to find its footing by April, as shares of the retail company rose 34.6%.
On May 21, Best Buy reported first-quarter earnings for the fiscal quarter ended May 2. While pandemic damage in the company’s revenue was still apparent in the earnings report, it beat analysts’ expectations. Its revenue fell to $8.56 billion from $9.14 billion a year earlier, which still beat the estimated revenue of $8.16 billion.
Chart Courtesy of www.StockCharts.com
Betting on Best Buy is Still Safe as one of two Retail Stocks Rebounding Well
In late July, Best Buy released a better-than-expected update on its finances and plans to announce its fiscal second-quarter results on Aug. 25.
The latest results showed that through July 18, its quarter-to-date sales increased roughly 2.5% from the same period last year and domestic sales climbing approximately 2%. The most impressive statistic from this update was its spike in online sales. During this same period, the company’s online sales shot up a staggering 225% year over year.
Best Buy began to reopen its doors on June 15, and from that date until the July 18 update, the company’s sales grew approximately 15% compared with last year.
In the same period as above, June 15 through July 18, Best Buy’s online sales grew about 185% compared to the same time last year. The impressive numbers are a testament to the company’s e-commerce platform even as its doors are now open.
A Brief History of Home Depot’s Continued Retail Stock Rebound
Much like Best Buy, Home Depot (NYSE:HD) found itself swept up in the pandemic pandemonium, as shares of the company pulled back and the stock fell 14% in March.
However, after the retail company released its first-quarter financial report before the market’s open on May 19, it was clear that there was hope for the home-improvement company. The report for the company’s fiscal 2020 first quarter, which ended May 3, showed a 10.7% decline in net income to $2.25 billion compared to $2.51 billion in the first quarter a year earlier.
Though its net income fell, which was to be expected, its first-quarter revenue beat analysts’ projections. Zacks Consensus Estimate projected Q1 revenue of $27.23 billion, which would’ve indicated growth of more than 3% compared to the same period last year. Home Depot surpassed the projected 3% growth and reported a 7.1% rise in revenue growth to $28.26 billion from $26.38 billion in Q1 last year.
Investment guru Hilary Kramer, who leads several advisory services, including Value Authority, had previously labeled Home Depot as a pent-up demand story, and unsurprisingly she was right.
“HD is a little different because it’s more of a pent-up demand story as people stuck at home push the button on deferred maintenance and renovation projects,” Kramer said.
Home Depot Plans Expansion as it Continues to Rebound
As part of the retail company’s rebound, on Tuesday, Aug. 4, Home Depot announced that it plans to open three new distribution centers over the course of the next 18 months, with the hope of satisfying customer demand for flexible delivery and pick-up options.
According to Home Depot’s press release, the $1.2 billion expansion is estimated to bring roughly 1,000 new jobs to the Atlanta area, both full-time and part-time positions.
Stephanie Smith, senior vice president of Home Depot’s supply chain development and delivery, said that retail has evolved greatly and that through investing in an expansion, the company will be able to better meet its customers’ needs.
“We’re investing to meet the changing delivery needs of our DIY and Pro customers, whether they’re at home, at their job sites or picking up in the store,” Smith said.
Home Depot stock was up by 0.1% the same day, following the company’s expansion announcement. Moreover, shares of Home Depot have actually spiked nearly 22% since the beginning of the year.
As of the market’s Aug. 6 close, shares of the company were up 0.71% with a closing price of $269.37, after opening at $266.60.
Chart Courtesy of www.StockCharts.com
As it appears, news of the expansion seems to have investors intrigued ahead of the companies second-quarter earnings report which is slated to come out on Aug. 18.
Future Looks Bright for Best Buy and Home Depot, as Retail Stocks Rebounding Nicely
While pandemic fear continues to subside, there is still unease among consumers and investors alike. Currently, it is hard to gauge how stocks are going to do in the long run, as was evidenced in Home Depot’s small stock price rise following its expansion announcement.
However, the continued rebound that these two retail stocks are making is proof that there is hope for stability in the market. Each of these companies found themselves in a “win some and lose some” situation, but ultimately ended up advancing with better-than-expected first-quarter results, and slow but sure growth since then.
For investors who are ready to get back into the market, but are seeking a sense of security, these two stocks may be worth looking into as their March-to-now timeline shows a consistent rebound.
Emily Mirabelli is an editorial staffer with Eagle Financial Publications and a writer for www.stockinvestor.com.