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According to the National Retail Federation (NRF) forecast, 183.4 million Americans will participate in this holiday season’s shopping spree, up 1.4 million from last year. From November to December, this would bring in between $979.5 billion and $989 billion in retail sales, at an expected annual growth of 3.5%. But against seasonal trends, which companies also show strong fundamentals for long-term exposure? To ask that is to ask which companies hold a competitive advantage that is unlikely to be disrupted.
Abercrombie & Fitch Company (NYSE: ANF)
Shortly after beating Q1 earnings forecast ending May 4th, ANF stock reached an all-time high price of $193.34 in June. Following multiple market corrections, ANF shares are now priced at $148.50 against the 52-week average of $133.99 per share. However, having yielded 63% returns year-to-date, the trendy apparel company still provides solid retail stock exposure. Abercrombie targets well-off young adults, but it doesn’t quite fall into the luxury category. Instead, the focus is on stylish quality as the middle ground for people with discretionary income. At the same time, Abercrombie retained the older demographic as it shifted to a new product design, alongside marketing, once Fran Horowitz took the reins in February 2017. One of these design decisions was the “Curve Love” lineup for larger body sizes, showing that the company is becoming more inclusive and widening its reach.On Tuesday, the company released its Q3 earnings ending November 2nd, showing record $1.2 billion in net sales, up 14% year-over-year. Abercrombie’s operating income increased 30% to $179 million at the same time as operating margin increased by 170 bps to 14.8%. Suffice to say, Abercrombie & Fitch beat all quarterly earnings per share (EPS) this year, having raised the full year outlook to 14% – 15% net sales growth.At the current price of $148.50, ANF stock is aligned with the bottom forecast of $149 per share. The median ANF price target twelve months ahead is $188.43, with a high ceiling forecast of $220 per share.
Dollar General Corporation (NYSE: DG)
At the end of August, DG’s Q2 earnings fell short of expectations, causing a sharp drop in stock price. Year-to-date, DG shares yielded negative returns at 46%. From a 52-week high of $168, DG stock is now priced at $75.26 per share. The question is, does this deep discount point to further devaluation, or is it a jumping ramp to rise from the bottom? The latter would be an ideal scenario for any stock trader. The fact is, Dollar General beat all quarterly earnings since Q4 ‘23, with the exception of the last one. But that one was only with a negative 5% surprise, at $1.7 reported vs $1.79 EPS forecasted.Dollar General employs everyday low price (EDLP) strategy within small-box store formats, typically in urban and rural areas that lack the presence of larger retail chains. Even though its selection of consumables may be lower, their prices are typically lower. This appeals to consumers hit the hardest by inflationary pressure over the last four years.At a forward price-to-earnings (P/E) ratio of 11.48, the popular discount retailer has a debt-to-equity ratio of 0.96, both of which point to strong upside potential. The company is expected to deliver Q3 earnings on December 5th.Currently priced at $75.26, DG stock is trading below the bottom forecast of $80 per share. The median DG price target is $98.89 while the high forecast is $125 per share.
Amazon.com, Inc. (Nasdaq: AMZN)
If any company holds a durable competitive advantage, it’s Amazon. This makes it the safest retail exposure covering cloud computing (AWS), online streaming, video gaming, e-commerce and even space with its Project Kuiper for broadband satellite constellation.Amazon is also known to be at the edge of automation efforts, as a constant measure to cut costs and boost profits. Given the company’s operating cash flow of $112.7 billion reported in Q3, which is up 57% YoY, it is fair to say Amazon has ample reserves to spend on R&D towards full automation.To counter cheap Chinese competitors like Temu, Amazon also launched Haul as a mobile-only discount alternative. Amazon’s ad-supported tier for Prime Video has also shown success, having expanded its subscriber base to over 200 million users worldwide by Q3 2024With such strong and expanding market positions, AMZN stock should be viewed akin to a safe haven asset. Currently priced at $205.51, AMZN stock is above the bottom forecast of $197 per share. The median AMZN price target is $239 while the top forecast is $285 per share. More By This Author:HP Stock Drops Amid Weak PC Sales, Market ChallengesGoogle Antitrust Fallout: Should GOOGL Holders Be Worried?Trump’s 25% Tariff on Mexico and Canada Hits General Motors Stock Hard
