Three Retail Stocks Recover Through Increased Foot Traffic

Emily Mirabelli

Three retail stocks recover robustly through increased foot traffic as the stay-at-home lifestyle adopted during the worst of the COVID-19 crisis has scaled back with selective economic reopening in states across the country.

A key main reason many of the retail stocks have remained strong, or have rebounded, is their e-commerce platforms have been strong and customers have found it easy to purchase their goods online. However, as more and more stores begin to reopen, it is interesting to see which retailers have the most potent e-commerce presence, and which companies continue their recovery based on increased foot traffic.

FedEx Corp. (NYSE:FDX), Dick’s Sporting Goods (NYSE:DKS) and Ulta Beauty Inc. (NASDAQ:ULTA) are all seeing quite the recovery as consumers enter their brick-and-mortar stores, instead of simply shopping online.

One Investment Expert Points to Increased Foot Traffic for the Retail Stocks Recovery

Investment guru Bryan Perry, leader of several investment publications including Cash Machine, Premium Income Trader, Quick Income Trader and his e-letter, Dividend Investor Weekly, said that investors may want to look at strong brick-and mortar-retailers for potential income.

In the latest edition of Dividend Investor Weekly, Perry delved into a multitude of retail stocks that appear promising, along with an in-depth explanation of what is pushing these equities to a potentially strong recovery.

FedEx Forges Ahead as one of Three Retail Stocks Recovering with Increased Foot Traffic

On Monday, Aug. 10, FedEx’s stock soared 9% to raise its price to $199.98, which is the highest closing price the company has seen since December 2018. The stock price’s gain of roughly $16.45 added about 100 points to the Dow Jones’ transports’ price, pulling ahead of UPS, which added approximately 16 points the transports’ price, according to MarketWatch,.

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Moreover, on Thursday, Aug. 13, FedEx reported it would be starting construction of a new FedEx Ground distribution center this September. The project is expected to be completed in June 2021 and create 285 full-time and part-time jobs.

As of the market’s Aug. 13 close, FedEx price of $203.86 showed a rise of 0.94%. This closing price illustrates the company’s strength, as it topped the end-of-day price on Monday, Aug. 10, which hit its highest point in more than two years.

Dick’s Sporting Goods Is One of Three Retail Stocks Recovering With Extra Foot Traffic

Though Dick’s Sporting Goods revealed rocky fiscal first-quarter results, with store sales down by 29.5%, the company has seen a strong rebound since then, as it reopened its brick-and-mortar stores.

In addition to being a well-known brand, census data on U.S. retail sales, released on July 16, reported that spending on sporting goods had increased by 20.6% year over year in June.

On Aug. 6, the company announced that it would be opening 11 new stores in late-August. The new centers will include four DICK’S Sporting Goods stores, one combination DICK’S and Golf Galaxy location, five DICK’S Sporting Goods Warehouse Sale stores and one OVERTIME outlet store by DICK’S Sporting Goods.

The company announced that the new stores are expected to bring approximately 300 part-time and full-time jobs to communities in 47 states nationwide.

Shares of the company’s stock closed at $46.27 as of Thursday, Aug. 13, showing a 0.28% increase from its $45.89 open.

Wall Street Analyst Predicts Strong Second-Quarter Results in Retail Stocks Recovery

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Dick’s is set to release its second-quarter results on Aug. 26. Sam Poser, a Wall Street analyst with Susquehanna Financial Group, believes that the company will report better-than-expected earnings and will benefit from consumers’ continuing to exercise at home.

“We anticipate 2Q20 results will be much stronger than Street expectations, particularly due to increased demand for high-ticket (albeit low-margin) hardlines product (e.g., bikes, exercise/golf/fishing equipment), which checks indicate continue to sell out,” Poser said.

Ulta Beauty Becomes One of Three Retail Stocks Recovering with Increased Foot Traffic

Ulta Beauty is recognized as the largest beauty retailer in the United States and is leaning on that title to get itself through the pandemic.

On July 20, Ulta’s Chief Executive Officer Mary Dillon said the company plans on increasing its retail footprint.

“Our differentiated operating model, strong brand, dedicated associates and engaging guest experiences continue to reinforce our optimism in long-term opportunities to increase market share and expand our retail footprint over time,” Dillon said in a press release.

According to the statement, Ulta plans to open approximately 30 new stores in fiscal 2020, furthering its plan to ultimately operate between 1,500 to 1,700 Ulta Beauty stores in the United States.

As of the close of trading on Thursday, Aug. 13, the company’s stock priced reached $222.42, up $4.64 from its open.

One Analyst Holds Hope for Ulta’s Second-Quarter Results

The company is set to release its second-quarter 2020 results after the market’s close on Aug. 27, and one Merrill Lynch analyst, Lorraine Hutchinson, said the company is well-positioned.

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“Ulta Beauty is well-positioned to show growth over the coming years, although pre-COVID-19 expectations are unlikely to be met,” Hutchinson said. “The retailer should be able to show a low double-digit EPS growth rate by 2022 and 7% sales growth, along with modest margin leverage and the resumption of a share buyback program.”

The Future for Three Retail Stocks to Recover Through Increased Foot Traffic

COVID-19 has caused many retailers, large and small to branch out to e-commerce platforms and, for many, this business model likely will remain their strongest revenue generator even after the pandemic dissipates. However, there are a few retailers with such a loyal consumer base that they are seeing an increase in sales revenue as consumers choose to leave their homes and visit brick-and-mortar stores.

FedEx, Dicks Sporting Goods and Ulta are all well-known chains and are seeing their sales rise as stores reopen. Furthermore, unlike other retailers, these three are not only seeing a recovery but are expanding their on-site locations, which will not only provide jobs but will also potentially generate even further share price gains if their respective management’s expectations are met.

Patient investors may want to continue to watch these stocks as they release second-quarter earnings and consider purchasing them.

Emily Mirabelli is an editorial staffer with Eagle Financial Publications and a writer for www.stockinvestor.com.

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