As spring weather starts to break across parts of the country, the COVID-19 vaccine rollout shows promising signs and stimulus payments begin to make their way to millions of Americans, there are reasons for optimism.
Still, for some retailers, looming port delays and ongoing shifts in consumer spending patterns remain viable threats to their growth strategies. Meanwhile, others — mainly those that play in the outdoor and athletic space as well as comfort brands — are thriving in otherwise unpredictable times.
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Here, a look at three of the stocks market watchers are upbeat about headed into spring.
The parent to Coach, Kate Spade and Stuart Weitzman has seen its share price gain more than 80% since early November and is now trading at 15 times fiscal year two price-to-earnings ratio, according to Cowen analysts. (That’s compared to an 11x 3-year average.)
“While valuation could be viewed as lofty, TPR remains our top pick for 2021 as we believe top line and margins will continue to grow even under a COVID-19-off environment,” the analysts wrote in a Thursday report, adding that the luxury conglomerate benefited from COVID-19 related spending shifts — from dining and travel towards accessories — and that they expect its growth to be fueled by the latest government stimulus bill that promises direct payments to individual Americans.
“Logo comeback trends that are favorable to TPR’s categories, and [there is] strong demand in China despite lack of tourism,” Cowen’s market watchers, including Oliver Chen and Max Rakhlenko, added. “We have also grown more confident in management’s strong and agile execution at Coach and outlet [stores], which justifies the recent multiple revision.”
Tapestry announced in October that it named Joanne Crevoiserat its permanent chief executive officer. Crevoiserat has served as the company’s interim CEO since July 2020 following the resignation Jide Zeitlin, who stepped down that same month citing personal reasons.
When the company reported second-quarter results in February, it logged profits of $323 million, or adjusted earnings per share of $1.15, compared with the prior year’s $304 million, or earnings per share of $1.10. Analysts had predicted earnings of $1.01 per share. Revenues declined 7% to $1.69 billion but still topped Wall Street’s forecasts of $1.63 billion.
Cowen this week raised it price target for TPR stock to $46 from $42.
Dick’s Sporting Goods
The sporting goods retailer had been one of the early beneficiaries of pandemic-induced craze surrounding outdoor activities such as hiking and running. Now, as the United States continues its march toward a new normal, analysts suggest the company remains well-positioned — perhaps even more so as an exodus from big cities towards suburbs seems to also bode well for Dick’s. (It remains to be seen how permanent some geographical trends are.)
“Dick’s offers an excellent experience across its stores and digital channels [and] has built an integrated shopping experience that creates a seamless consumer journey,” wrote Jane Hali & Associates analysts this week of the retailer’s omnichannel prowess.
The analysts forecasted that Dick’s will see ongoing boosts from “hard-lines with higher-priced tickets” as consumers continue to invest in at-home workout and outdoor equipment.
“While athleisure remains key to the apparel market, Gorpcore [a crossover of streetwear and outdoor gear] has also become popular with consumers,” the wrote, adding that the trend that includes utilitarian, functional and outdoors-inspired gear is also a boon to Dick’s.
The retailer this week also logged better-than-expected fourth-quarter financial results: For the three months ended Jan. 30, Dick’s recorded profits of $225 million, or earnings of $2.43 per share, versus the prior year period’s profits of $113.3 million, or earnings of $1.32 per share. Wall Street had predicted earnings of $2.28 per share. Revenues grew 19.8% to $3.13 billion, beating analysts’ estimates of $3.07 billion.
Among the big box chains to cinch the “essential retailer” designation early in the pandemic — which allowed it to keep its stores open despite broader shutdowns —Target has remained a favorite among market watchers over the course of the global health crisis. (Like Walmart, Target was allowed to continue to operate its physical stores during COVID-19 lockdowns albeit with reduced hours and capacity limitations.)
Ahead of COVID-19, the company already had a leg up on omnichannel and was an early adapter of the ‘”stores as a distribution center” approach to retail. Those strategies, as well as its 2017 acquisition of same-day delivery platform Shipt, have helped insulate the company from disruption and set it up for a sunny spring, according to analysts.
“Target was one of the top winners in FY20 and we believe is one of the best positioned retailers to lock-in majority of [its] $9 billion of market share growth [it gained last year],” Cowen analysts wrote this week, adding that shares may trade range-bound in the near term until the retailer reports Q1 EPS in May.
Similarly, the current consensus among 29 analysts polled by CNN is that Target’s stock is a “buy.”
Meanwhile, Jane Hali & Associates also granted Target shares an “outperform” rating, noting short-and-long term positive trends related to its omnichannel strength and a “consumer-focused assortment across categories.”
When Target reported Q4 results early this month, it topped estimates across the board posting earnings per share of $2.67 compared with forecasts of $2.54. Revenues came it at $28.34 billion versus the $27.48 billion analyst expected.