Displaying items by tag: discount retailers

(New York)

Retail and recession have a complicated relationship. On the one hand, a downturn in the economy will almost always hammer consumer spending, which means the sector is broadly exposed. However, such economic challenges often create huge victors in the space as it becomes a winner-take-all environment. With that in mind, here are some stocks to own, and some not to. In the last recession, it was cost-conscious retailers, like Dollar Tree and Dollar General that surged. High-priced, discretionary merchandise, like Williams-Sonoma and Restoration Hardware, did the worst. This seems likely to play out again, so take a look at Aaron’s, Dollar General, Five Below, National Vision, and Ollie’s Bargain Outlet. 

FINSUM: Hard to argue with this logic, but we would not be surprised if the coming (potential) recession offered some surprises in terms of consumer behavior.

(New York)

Retail has had a great year, but looks to be facing headwinds moving forward as executives and analysts have all downgraded forecasts for the sector. However, one area of retail that looks to remain very hot are off-price stores, or discount retailers. Such retailers are seen as largely immune to ecommerce because of their treasure-hunt experience for customers and their high turnover model, which makes them less susceptible to online retailers. Accordingly, they held up well even during retail’s rout. One stock that looks likely to do well now is Burlington Stores. The reason why is that it is behind leaders TJ Max and Ross in that it has not yet optimized its operating model for the current environment, but is beginning to. This is not reflected in its stock, which means it has a great deal of upside.

FINSUM: Retail is one of the sectors we feel we have special insight into, and we definitely agree that off-price stores are going to hold up well moving forward.