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4 Retailers Scoring Decent Holiday Numbers Despite Pandemic

Zacks.com logo Zacks.com 1/21/2021

Despite the ongoing coronavirus pandemic, 2020 holiday season turned out to be a blissful one. The shopping season traditionally accounts for a sizeable chunk of yearly revenues, and thus retailers left no stone unturned to make the most of it. Taking into account consumers’ product preferences and growing inclination toward online shopping, due to greater stay at-home and work-from-home trends, retailers replenished shelves with in-demand merchandise and ramped up investments in digitization.

Companies stepped up omni-channel capabilities and adopted ways to enhance delivery and payment systems. To this end, companies’ same-day and last-mile delivery services, and buy online and pick-up-in-store facilities bode well. In fact, companies’ initiatives to expand delivery options and contactless payment solutions have been a boon amid the pandemic.

To beat the COVID-19 blues, retailers kicked off holiday shopping deals earlier this year with an extended promotional period to avoid rush at stores, given the health concerns. Customers also consolidated their trips and majorly shopped at big-box stores that provide a differentiated product range under one roof. Customers purchased everything they needed, be it holiday gifts and toys, food, home décor, activewear or other essentials.

According to the data released by National Retail Federation, holiday retail sales, excluding automobile dealers, gasoline stations and restaurants, grew 8.3% year over year to $789.4 billion. The retail trade group also highlighted that online and other non-store sales surged 23.9% to $209 billion during the festive season, defined as Nov 1 through Dec 31.

A report by Mastercard SpendingPulse indicates that holiday retail sales, excluding automotive and gasoline — from Oct 11 through Dec 24 — increased 3%. Meanwhile, online sales surged 49%, and made up approximately 19.7% of overall retail sales, up from about 13.4% in 2019. While online spending on apparel jumped 15.7%, online jewelry sales shot up 44.6%. Again, furniture and furnishings experienced online sale growth of 31%. Markedly, online home improvement sales zoomed about 79.7%.

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4 Retailers Who Raised a Toast

Target Corporation TGT: Amid a challenging retail backdrop, Target posted sturdy holiday sales, courtesy of a reinvented approach to the busiest time of the year. This Minneapolis, MN-based company offered more deals this festive season and extended Price Match Guarantee. This Zacks Rank #2 (Buy) company informed that comparable sales in the combined November/December period increased 17.2%, backed by 12.3% jump in average ticket as consumers consolidated trips. Comparable traffic grew 4.3%. While store-originated comparable sales rose 4.2%, comparable digital sales soared 102% driven primarily by the company's same-day fulfillment services. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Markedly, this general merchandise retailer continued to gain market share in all five of its core merchandising categories owing to robust demand. We note that Home registered comparable-sales growth in the low-20% range during the November/December period. Comparable sales in Hardlines also surged in the low 20% range, reflecting mid-20% gain in Electronics. In Food & Beverage, comparable sales growth was in line with the company average, while Beauty & Essentials registered increase in the low teens. Apparel posted comparable sales growth in the high-single digit range.

Zumiez Inc. ZUMZ: In spite of tough retail conditions, Zumiez performed well during the holiday season. This specialty retailer of apparel, footwear and accessories informed that similar to trends witnessed around Black Friday in November, sales in the off-peak weeks in December were robust. Notably, the Lynnwood, WA-based retailer reported comparable sales growth of 1.7% for the ten-week period (ended Jan 9, 2021). For the 10-week period, the company’s stores remained open for about 95% of the potential operating days, including significant closures in Europe and Eastern Canada.

This Zacks Rank #2 company is striving to expand e-commerce and omni-channel platforms to provide consumers with the facility of quick and easy access to its products and brands. In this regard, the company has considerably enhanced customers’ experience by integrating its physical and digital networks. This enables customers to access inventories through all channels, alongside availing facilities like buy online, pick up in store and reserve online and pay in store.

Five Below, Inc. FIVE: This extreme-value retailer for tweens and teens posted sturdy holiday sales results that exceeded management’s expectations. The company registered strongest comparable sales increase for the festive season since 2011. Undeniably, the company’s focus on enhancing merchandise assortment, improving supply chain, strengthening digital capabilities and delivering better WOW products bode well. Five Below highlighted that net sales for the holiday Period — from Nov 1, 2020 through Jan 2, 2021 — surged 21.1% to $722.3 million. Impressively, comparable sales for the holiday shopping season rose 10.1%.

Management guides fourth-quarter fiscal 2020 net sales between $835 million and $840 million. This suggests an improvement of 21.5-22.2% from the year-ago period. This Zacks Rank #2 company forecast comparable sales increase of about 11%. Coming to the bottom line, the company anticipates earnings in the range of $2.08-$2.12 per share for the final quarter.

Signet Jewelers Limited SIG: This diamond jewelry retailer registered strong holiday performance in spite of significant macro hurdles. Signet gained from enhanced digital and fulfillment capabilities, better marketing approach, banner portfolio differentiation, and a robust merchandising strategy. The company's preliminary same store sales rose 5.6% year over year for the nine-week period ended Jan 2, 2021. Markedly, e-commerce sales were up 60.8% during the period. We note that Signet expects same store sales to be up 4-5% during the fourth quarter of fiscal 2021. Moreover, total sales are expected in the bracket of $2.10-$2.12 billion.

The company’s expanded digital and fulfillment capabilities were one of the key highlights during the holiday season. New capabilities include virtual selling, Buy Online Pick-up In-Store (BOPIS), Ship from Store (SFS), quick and effective customer care assistance as well as better website navigation, curation and visualization. Well, these efforts helped this Zacks Rank #3 (Hold) company enhance conversion rates alongside boosting customers shopping experience. Moreover, the company’s differentiated banner value propositions and ability to capture broader customer base acted as significant tailwinds. These drove positive same store sales across all US banners.

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