4 Discount Stocks To Set Retail Earnings On Fire This Season

Though the earnings season has reached its tail end, the main chunk of releases from the Retail-Wholesale sector is yet to come. In the past few days, several bigwigs — including Home Depot (NYSE:HD) , TJX Companies (NYSE:TJX) and Urban Outfitters (NASDAQ:URBN) — reported results.

In the next few days, a number of retailers, including the Discount Store operators, are going to post their quarterly results. The companies in the industry are likely to have benefited from the ongoing efforts to develop omni-channel capabilities, which include technological updates and store remodels. The players have also been benefiting from efforts to gain a bigger market share on attributes such as price, products and speed to market. Results for this earnings season are expected to reflect gains from brand enhancement efforts, an off-price model and innovative customer-friendly moves like same-day delivery.

Moreover, better pricing, effective inventory management, and merchandise and operational initiatives have been working in favor of the industry players. These factors have been boosting revenues for the companies for quite a while now.

However, players in this space have been grappling with higher freight, shrink, distribution and occupancy expenses, marketing expenses, and SG&A deleverage in addition to increased markdowns, which have been weighing on margins. Furthermore, higher costs incurred for strengthening store base, expanding digital ecosystem and improving delivery capabilities might have impacted the companies. Apart from this, a potential increase in trade tariffs due to the U.S.-China trade war might affect near-term performances of some companies in the industry.

Per the latest Earnings Trends, the Retail-Wholesale sector’s current-quarter revenues are expected to increase 8.6%, while earnings are likely to inch up 0.2%.

Our Picks

With the Zacks Stock Screener, four Discount Store stocks have been identified, which are poised to beat the Zacks Consensus Estimate this earnings season. Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dollar General Corporation (NYSE:DG) is one of the largest discount retailers in the United States. The company trades in low-priced merchandise (typically $10 or less), including consumable items, seasonal items, home products and apparel. The company, which is expected to report results on Dec 5, has a positive earnings surprise of 3.6%, on average, over the trailing four quarters. The Zacks Consensus Estimate for its third-quarter fiscal 2019 earnings is pegged at $1.38 per share, suggesting growth of 9.5% from the year-ago reported quarter. This Goodlettsville, TN-based company has an Earnings ESP of +2.34% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores Inc. (NYSE:BURL) , which has an Earnings ESP of +0.44% and a Zacks Rank #2, is also a solid bet. The Burlington, NJ-based retailer of branded apparel products in the United States is expected to report earnings on Nov 26. It offers fashionable merchandise — including women's ready-to-wear apparel, accessories, footwear, menswear, youth apparel, coats, toys, gifts, baby, home, and beauty products. It delivered a positive earnings surprise of 8.7%, on average, over the trailing four quarters. The Zacks Consensus Estimate for the company’s third-quarter fiscal 2019 earnings is pegged at $1.41 per share, suggesting 16.5% growth from the prior-year quarter’s reported number.

Ross Stores Inc. (NASDAQ:ROST) is an off-price retailer of apparel and home accessories primarily in the United States. The company offers apparel, accessories, footwear and home fashions. Currently, it has an Earnings ESP of +1.78% and a Zacks Rank #2. The Zacks Consensus Estimate for the company’s third-quarter fiscal 2019 earnings is pegged at 97 cents per share, suggesting growth of 6.6% from the year-ago reported figure. The Pleasanton, CA-based company delivered a positive earnings surprise of 2.5%, on average, over the last four quarters. It is scheduled to report results on Nov 21.

Costco Wholesale Corporation (NASDAQ:COST) , one of the largest warehouse club operators in the United States, is scheduled to report earnings on Dec 12. It sells high volume of food and general merchandise (including household products and appliances) at discounted prices through membership warehouses. It currently has a Zacks Rank #2 and an Earnings ESP of +1.01%. The Zacks Consensus Estimate for the company’s first-quarter fiscal 2020 earnings is pegged at $1.71 per share, indicating growth of 6.2% from the year-ago reported figure. The Issaquah, WA-based company delivered a positive earnings surprise of 7.2%, on average, over the trailing four quarters.

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