Will These U.S. Retail Stocks See More Rising Profits As E-Commerce Sales Grow?

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Includes: ANN, EPS, JWN, PLCE, RL, UAA
by: Kapitall

Summary

H&M is adding more online stores to meet the global demand for e-commerce.

Global e-commerce sales are projected to jump 20.1% this year to $1.5 trillion.

In the US, e-commerce sales totaled $263.3 billion in 2013.

Hennes & Mauritz AB (OTCMKTS: HNNY), better known as H&M, released its second-quarter earnings on Wednesday, and the fashion retailer reported a 25% year-over-year increase in net profit as its online stores in France and the US started to generate revenue.

H&M is in the middle of a strong push into the online space, which the Swedish company notably took up a notch last August with the opening of its US online store. CEO Karl-Johan Persson said that H&M would soon be expanding its web presence with the launch of new online stores in Spain, Italy, and China later this year and the addition of eight to ten online stores in 2015. The markets for the online stores will be announced at a later date.

Considering global e-commerce sales are projected to jump 20.1% this year to $1.5 trillion, it's clear why H&M is rapidly expanding its international portfolio of online stores. Furthermore, worldwide e-commerce sales are estimated to reach a staggering $2.36 trillion by 2017. Persson noted as much in an interview cited in The Wall Street Journal, stating, "E-commerce is growing in most markets, and I expect that to continue for many years so the potential is huge."

Meanwhile, in the US, e-commerce sales totaled $263.3 billion in 2013. That figure is projected to rise to $304.1 billion this year and $440.4 billion in 2017.

H&M's strategy for enlarging its web presence inspired us to look for investment opportunities among retail stocks that also sell their wares online. We began with a group of US retail stocks that then screened for stocks with rising diluted normalized earnings per share ((NYSEARCA:EPS)) for the past three consecutive years. EPS is the amount of profit allocated to each outstanding share of a company's common stock. Diluted normalized EPS is lower and more conservative than normalized EPS.

Click here for the full, interactive chart.

1. Ann, Inc. (NYSE:ANN): Operates as a specialty retailer of women's apparel, shoes, and accessories primarily in the United States. Market cap at $1.89B, most recent closing price at $40.38.

Diluted normalized EPS increased from 0.06 to 1.64 during the first time interval (52 weeks ending 2012-01-28 vs. 52 weeks ending 2011-01-29). For the second time interval, diluted normalized EPS increased from 1.64 to 2.1 (53 weeks ending 2013-02-02 vs. 52 weeks ending 2012-01-28). And for the last time interval, the EPS increased from 2.1 to 2.19 (52 weeks ending 2014-02-01 vs. 53 weeks ending 2013-02-02).

2. Nordstrom, Inc. (NYSE:JWN): Offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. Market cap at $12.9B, most recent closing price at $67.89.

Diluted normalized EPS increased from 2.75 to 3.14 during the first time interval (52 weeks ending 2012-01-28 vs. 52 weeks ending 2011-01-29). For the second time interval, diluted normalized EPS increased from 3.14 to 3.56 (53 weeks ending 2013-02-02 vs. 52 weeks ending 2012-01-28). And for the last time interval, the EPS increased from 3.56 to 3.71 (52 weeks ending 2014-02-01 vs. 53 weeks ending 2013-02-02).

Click here for the full, interactive chart.

3. The Children's Place Retail Stores, Inc. (NASDAQ:PLCE): Operates as a children's specialty apparel retailer in North America. Market cap at $1.06B, most recent closing price at $48.36.

Diluted normalized EPS increased from 2.95 to 2.99 during the first time interval (52 weeks ending 2012-01-28 vs. 52 weeks ending 2011-01-29). For the second time interval, diluted normalized EPS increased from 2.99 to 3.08 (53 weeks ending 2013-02-02 vs. 52 weeks ending 2012-01-28). And for the last time interval, the EPS increased from 3.08 to 3.22 (52 weeks ending 2014-02-01 vs. 53 weeks ending 2013-02-02).

4. Ralph Lauren Corporation (NYSE:RL): Engages in the design, marketing, and distribution of lifestyle products. Market cap at $13.62B, most recent closing price at $153.54.

Diluted normalized EPS increased from 5.79 to 7.23 during the first time interval (52 weeks ending 2012-03-31 vs. 52 weeks ending 2011-04-02). For the second time interval, diluted normalized EPS increased from 7.23 to 8.23 (52 weeks ending 2013-03-30 vs. 52 weeks ending 2012-03-31). And for the last time interval, the EPS increased from 8.23 to 8.46 (52 weeks ending 2014-03-29 vs. 52 weeks ending 2013-03-30).

5. Under Armour, Inc. (NYSE:UA): Designs, develops, markets, and distributes a range of apparel and accessories using synthetic microfiber fabrications in the U.S. and internationally. Market cap at $12.26B, most recent closing price at $57.51.

Diluted normalized EPS increased from 0.33 to 0.46 during the first time interval (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). For the second time interval, diluted normalized EPS increased from 0.46 to 0.6 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31). And for the last time interval, the EPS increased from 0.6 to 0.75 (12 months ending 2013-12-31 vs. 12 months ending 2012-12-31).

Click here for the full, interactive chart.

Conclusion

All the stocks on this list have grown their earnings per share for three straight years in a row, and, the US economy's contraction in the first quarter of 2014 notwithstanding, these early-adopting e-retailers are poised to take the largest share of the $1.5 trillion mentioned above. Moreover, the 57.3% projected growth in this sector year-over-year through 2017 will add substantially to EPS for these companies going forward.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Kapitall is a team of analysts. This article was written by Mary-Lynn Cesar, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

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