A retail screen that screams value
Apr 30 2016, 11:08 ET | By: Clark Schultz
Retail stocks slumped yesterday after a weak read on consumer spending. Notable companies with drops of over 2% included Target (NYSE:TGT), Costco (NASDAQ:COST), Urban Outfitters (NASDAQ:URBN), and Macy's (NYSE:M). Wal-Mart (NYSE:WMT) was down 3% to cut into what's been a sizable gain this year.
The damage was inflicted after the personal consumption expenditures price index (ex-food/energy) gained only 0.1% in March to decelerate from February's level.
SA contributor George Putnam hears all the noise about soft store traffic, but still makes the case that companies with good brands, relatively strong balance sheets, and decent dividends are attractive investments.
A value screen of retail stocks indicates that many chain store names may be oversold due to the intense focus by investors on limp comparable-store sales growth (Y/Y) and F/X pressure - two trends seen by some analysts as reversing this year.
Tailored Brands (NYSE:TLRD), Gap (NYSE:GPS), Buckle (NYSE:BKE), Steinmart (NASDAQ:SMRT), American Eagle Outfitters (NYSE:AEO), Macy's (M), GameStop (NYSE:GME), and Best Buy (NYSE:BBY) all made the cut of having a forward P/E of less than 12, a dividend yield of over 2%, and a balance sheet ratio above the sector average.
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