The U.S. retail sector is rebounding from operational disruptions it faced last year. Since the onset of the COVID-19 pandemic, e-commerce retail sales have been on the rise. Furthermore, as social distancing mandates have been eliminated, in-store shopping has gained traction over the past few months.
U.S. retail sales increased 1.7% month-over-month in October, topping the 1.4% market forecast. This marks the sector’s strongest gains since March. In addition, the National Retail Federation (NRF) has predicted seasonal spending will break previous records, forecasting sales to grow between 8.5% - 10.5% versus 2020, during November and December.
Analysts are bullish on the holiday shopping, despite supply worries. Hence, we think retail stocks The Buckle, Inc. (BKE) and The Children's Place, Inc. (PLCE), which beat their earnings estimates in their most recent quarter, could be solid additions to one’s portfolio.
The Buckle, Inc. (BKE)
Kearney, Neb.-based BKE is a casual apparel, footwear, and accessories retailer in the United States. Its offerings include a selection of casual branded apparel, including denim, tops, sportswear, accessories, footwear, and other services.
In September, BKE declared a $0.33 per share quarterly dividend, which was payable on October 29. The move reflects upon the company’s ability to pay back shareholders and its stable cash position.
For its fiscal third quarter, ended October 30, BKE’s sales, net of returns, and allowances increased 27.3% year-over-year to $319.43 million. Its net income improved 49.4% from the prior-year quarter to $62.22 million. Its EPS rose 48.2% from the same period last year to $1.26, topping the $0.92 consensus estimate by 37%.
A $4.55 consensus EPS estimate for the current year (fiscal 2022) indicates a 71.1% year-over-year increase. Likewise, the $1.23 billion consensus revenue estimate for the current year reflects a 36% improvement from the prior year. Also, BKE has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 79.7% in price over the past year and 73.2% year-to-date.
BKE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BKE has a Momentum and Quality grade of A. In the 63-stock, A-rated Fashion Fashion & Luxury industry, it is ranked #19.
Click here to see the additional POWR Ratings for BKE (Growth, Value, Stability, and Sentiment).
The Children's Place, Inc. (PLCE)
PLCE is a children’s specialty apparel retailer that operates through two broad segments--The Children’s Place U.S. and The Children’s Place International. The Secaucus, N.J.-based company’s offerings include apparel, footwear, accessories, and merchandise for children.
On November 18, PLCE announced an additional $250 million repurchase of its outstanding stock. This move should increase shareholders’ value.
On November 9, the company launched its new tween fashion brand, Sugar & Jade, which provides fashion apparel, footwear, and accessories. Regarding the launch, Jane Elfers, President, and CEO said, “We have over four million customers to whom we are immediately marketing this exciting new brand, and we will deploy an "always on" strategy that drives customer acquisition, while also migrating the current The Children's Place customer to Sugar & Jade at the appropriate moment in their purchase journey."
PLCE’s net sales increased 31.2% year-over-year to $558.23 million in its third fiscal quarter, ended October 30. Its adjusted net income rose 310% from the same period last year to $80.81 million. And its adjusted EPS improved 302.2% from the prior-year quarter to $5.43, which beat the $4.40 Street estimate by 23.4%.
Analysts expect PLCE’s EPS to improve 178.2% year-over-year to $2.81 in the current quarter (ending January 2022). Similarly, the Street expects PLCE’s revenue to increase 12.3% from the prior-year quarter to $531.18 million. In addition, PLCE has an impressive surprise earnings history; it has beaten consensus EPS estimates in each of the trailing four quarters.
PLCE’s stock has gained 113.1% in price over the past year and 92.1% year-to-date.
It is no surprise that PLCE has an overall B rating, which translates to Buy in our POWR Rating system. PLCE has an A grade for Momentum and a B grade for Growth, Value, and Quality. It is ranked #22 in the Fashion & Luxury industry.
To see the additional POWR Ratings for Stability and Sentiment for PLCE, click here.
BKE shares fell $2.01 (-3.98%) in premarket trading Friday. Year-to-date, BKE has gained 77.21%, versus a 26.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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