The U.S. retail industry is in a state of change. Consumers are increasingly shopping online, favoring the convenience of delivery rather than taking a trip to a store.
Many retailers are struggling to adapt, having relied too heavily on malls for traffic. Some retail bankruptcies have already occurred, and more are likely to follow as the trend toward Internet retail seems unstoppable.
But not all retailers are doomed. We still view many retail stocks favorably, although investors must be selective and focus on stocks that offer a combination of value, growth, and/or dividends.
This article will discuss our top 10-ranked retail stocks, according to the Sure Analysis Research Database. The stocks are ranked according to expected total returns over the next five years, listed in order of lowest to highest.
Top Retail Stock #10: Genuine Parts (GPC)
- Annualized 5-Year Expected Returns: 9.1%
Genuine Parts has retail exposure under its core NAPA automotive parts brand. It also has an industrial parts group and a business products segment. Its global span reaches throughout North America, Australia, New Zealand and Europe and is comprised of more than 3,100 locations.
In the most recent quarter, revenue of $4.9 billion increased 2.3% and reached a company record. This included a 1.6% comparable sales gain and 2.7% from acquisitions. However, these gains were partially offset by 1.5% in forex translation losses as well as a 0.5% decline from the disposition of the Grupo Auto Todo business in Q1.
Top Retail Stock #9: Nordstrom Inc. (JWN)
- Annualized 5-Year Expected Returns: 9.5%
Nordstrom Inc. is a department store that sells clothes, shoes, and accessories. In some of its stores the company also offers items from the home furnishing and the wedding products categories. Nordstrom is currently valued at $5.3 billion. Nordstrom generates annual revenue of approximately $16 billion.
The company has a high-quality property portfolio. While Nordstrom is still highly reliant on malls, approximately 95% of its stores are located in malls rated A or better. Furthermore, all of Nordstrom’s stores are cash-flow positive.
Top Retail Stock #8: eBay Inc. (EBAY)
- Annualized 5-Year Expected Returns: 10.3%
eBay Inc. is a multinational e-commerce giant. The core eBay property brings buyers and sellers together in auction and fixed-price formats to buy and sell a wide variety of items worldwide. As of June 30th, eBay had 25 million active sellers, 182 million active buyers, and gross merchandise volume of $22.6 billion for the quarter.
The company provides several services including online auction style sales, instant shopping, online classified advertisements, online event ticket trading and other services. eBay has a market capitalization of approximately $34 billion, and generated $10.7 billion in revenue in 2018.