Still lower gasoline prices, an improving labor market and positive consumer sentiment are enough to drive momentum in the retail space. Therefore, it would be feasible on your part to add a few retail stocks to your portfolio that have solid fundamentals and could provide a sound investment opportunity.
Here we have highlighted one such stock – Michael Kors Holdings Limited KORS – that looks promising with a Zacks Rank #1 (Strong Buy) and has a long-term earnings growth rate of 9.6%. We have analyzed a few basic aspects of the stock that has surged 15.6% in the past one year, outperforming the Zacks categorized Textile-Apparel Manufacturing industry which witnessed a decline of 6.9%.
Growth Drivers
Michael Kors has been constantly deploying resources to expand its product offerings, open new stores, build shop-in-shops and upgrade eCommerce platform. These initiatives have helped the company to counter competition and withstand headwinds such as cautious consumer spending, sluggish mall traffic and fall in tourism along with foreign currency fluctuations and other geopolitical issues.
This is quite evident from the company’s positive earnings surprise streak. Michael Kors posted six-straight quarters of positive earnings surprise, when it reported second-quarter fiscal 2017 results. In the trailing four quarters, the company has outperformed the Zacks Consensus Estimate by an average of 9.5%.
The company in the recent past introduced Michael Kors ACCESS line of smartwatches and fitness trackers, debuted new Wonderlust fragrance, new fall handbag collections and expanded men’s offering. Moreover, Michael Kors enhanced its online penetration, with the launch of digital flagships in most of the European countries. The company has launched digital flagships in France, Switzerland, Spain and Italy. The company also expects to have eCommerce capabilities in 16 additional European countries in spring 2017.
All these initiatives hold promise for the stock and buoys investors’ sentiment.
Other Stocks to Consider
Some other favorably placed stocks in the retail sector include Best Buy Co., Inc. BBY, Tailored Brands, Inc. TLRD and Burlington Stores, Inc. BURL, all flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.9%.
Tailored Brands delivered an average positive earnings surprise of 8.4% in the trailing four quarters and has a long-term earnings growth rate of 17.5%.