When it pertains to consumer stocks, the Nov. through Dec. holiday shopping period is essential to their success.
And amid staffing shortages and supply-chain disruptions, it is becoming increasingly clear that only the most sustainable retail stocks will have what it takes to push through the challenging environment in the coming weeks ahead.
But while the headlines might be offering a Grinch-like feel recently for some retailers, the fact is that there is a certain group of consumer stocks that are really firing on all cylinders and looking excitedly ahead to the last weeks of the year.
With the holiday season approaching, Here are two of the best consumer stocks to buy.
Abercrombie & Fitch
Abercrombie & Fitch (ANF, $46.16) is a store that was once a powerful force to be reckoned with at malls and high school lunch rooms across America.
The stock went from over $80 per share before the 2008 financial crisis to under $20 a share by early 2009. Even though shares partially recovered as the dust settled, the larger problem ANF faced was not the economic downtrend but the pressures of e-commerce and the ever changing consumer tastes.
So after a gradual bleed for several years and the resulting pain of Covid-19, by late last year, ANF stock was even lower than it was in 2009.
However, the brand’s slow transformation that started 10 years ago in the wake of the financial crisis was kicked right into high gear through this most recent disruption caused by the pandemic. The result is that last year’s loss is not only about to be fully erased this fiscal year but also turned into a large profit of $4.49 per share – more than the tally of all its per-share revenue since 2014 combined.
Investors bid shares up over 15% during a two-day time span this spring as the substance of its recovery began to become clear to Wall Street following the merchant’s first-quarter earnings report.
After that, the firm has continued to make improvements to its operations to make certain this is not a flash in the pan. In late Oct., for example, ANF announced same-day delivery plans as well as a major logistics hub investment in the Phoenix region to guarantee it has the right infrastructure to compete digitally in both the holiday season and the future.
Bath & Body Works
Previously this year, the firm formerly recognized as L Brands spun off its women’s wear into the separate Victoria’s Secret (VSCO) company and renamed itself Bath & Body Works (BBWI, $74.81). BBWI will concentrate on home and body care products under brands such as Bath & Body Works, C.O. Bigelow, White Barn and others.
The idea was to revitalize this company by setting it apart from the apparel-focused VSCO and take advantage of the recent shift to “self-care” among customers that has led to strong spending in the soaps, fragrance and toiletries category.
Admittedly, it is always difficult to tell how exactly a transformation is coming along without a few years of financials as apposed to just a few quarters. But during the time of the spinoff, Bath & Body works has been doing well enough to be worthy of notice.
Specifically, during its second-quarter report back in Aug., it shot up more than 10% in just one session after posting an enormous 43% boost in sales and a substantial profit after a quarterly loss last year. This was a record quarter that surpassed expectations, and was a clear indication Bath & Body Works is on the right track, which should result in long-term success.
Looking ahead, things will calm down and analysts are only expecting about 7% earnings growth next year. And without Victoria’s Secret, there will certainly be a lot more attention and a lot less excuses as time goes by.
Still, when it comes to consumer stocks, the big uptrend in this one hints that Wall Street is not anticipating this turnaround story to result in a failure anytime soon. Shares of BBWI have increased more than 170% in the last year, without showing any signs of slowing down as the holiday shopping season approaches.
Author: Blake Ambrose