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Finance

4 Small-Cap Retail Stocks to Buy in August

The retail industry has been one of the biggest beneficiaries of the rapid economic recovery and rising consumer spending. Retail sales increased 0.6% month-over-month in June, surpassing the consensus estimate of 0.4% decline. Over the past few months, increased foot traffic in brick-and-mortar stores amid a strong vaccination drive and pent-up demand for discretionary products has fueled retail sales. Higher shelf prices on account of multi-year high inflation rates have also boosted the sector’s revenues significantly.

While the re-imposition of mask mandates in outdoor spaces might limit retail in-store sales, robust home delivery networks operated by companies since last year should help them maintain their sales levels. Substantial pent-up demand and job growth should drive the retail industry to further growth in the coming months. Indeed, the National Retail Foundation (NRF) expects retail sales to grow between 10.5% – 13.5% to exceed $4.44 trillion in 2021.

Given this backdrop, we believe small-cap retail stocks Guess’, Inc. (GES), Lands’ End, Inc. (LE), Zumiez Inc. (ZUMZ), and Tilly’s, Inc. (TLYS), with exceptional  growth potential, should hit fresh highs soon.

Click here to checkout our Retail Industry Report for 2021

Guess’, Inc. (GES)

Los Angeles-based GES designs, markets, distributes and licenses lifestyle collections of apparel and accessories for men, women, and children. The company sells its products through direct-to-consumer, wholesale, and licensing distribution channels. It has a $1.43 billion market capitalization.

For its fiscal first quarter, ended May 1, 2021, GES’ net revenue increased 99.8% year-over-year to $520 million. The company’s gross profit came in at $211.56 million, up 518.1% from the prior-year period. Its adjusted earnings from operations have been reported at $25.95 million, versus a $108.60 million loss in the prior-year period. GES’ adjusted net income was  $25.95 million, compared to a $108.60 million loss in the year-ago period. Its adjusted EPS was  $0.21, compared to a $1.81 loss per share in the year-ago period. As of May 1, 2021, the company had $395.13 million in cash and cash equivalents.

Analysts expect the company’s revenue to increase 6.6% for the current quarter, ending October 31, 2021, to $606.73 million. The stock surpassed the Street EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a 4.4% rate per annum over the next five years. GES  has gained 113.2% over the past year and 81.7% over the past nine months. It closed yesterday’s trading session at $22.04.

GES’ POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

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The stock has an A grade for Value, and a B grade for Growth and Momentum. In addition to the POWR Ratings grades we’ve just highlighted, one can see GES ratings for Stability, Quality, and Sentiment here.

GES is ranked #23 of 66 stocks in the A-rated Fashion & Luxury industry.

Lands’ End, Inc. (LE)

With a market capitalization of $1.33 billion, LE is a uni-channel retailer of casual clothing, accessories, footwear, and home products worldwide. The company sells its products online through its landsend.com Website and third-party online marketplaces, direct mail catalogs, and retail locations. LE is based in Dodgeville, Wis.

On June 03, 2021, LE chose Manhattan Associates Inc.’s (MANH) Manhattan Active Supply Chain solution to support LE’s Uni-Channel initiative to deliver a seamless, high-quality customer experience across its growing footprint. This, combined with LE’s investment in improving its  technology infrastructure, should enable it to capitalize on the evolution in customer shopping habits.

On May 12, LE and Draper James, a classic American lifestyle brand, introduced a new women’s swimwear collection and unveiled plans to release home and sleepwear collections in Fall 2021. Both the companies are looking forward to continuing this partnership by offering comfort and confidence through swimwear, sleepwear, and home collections that stand for size, inclusivity, effortless style, and contemporary design.

LE’s net sales were  $321.30 million for its fiscal first quarter ended April 30, 2021, representing a 48.1% improvement year-over-year. The company’s gross profit increased 56.9% year-over-year to $147.74 million. Its operating income has been reported at $11.87 million for the quarter, versus  a $24.71 million loss in the prior-year period. LE’s net income came in at $2.64 million, compared to a $20.64 million loss in the year-ago period. Its EPS has been reported at $0.08, compared to a $0.64 loss per share in the prior-year period. As of April 30, 2021, LE had $36.18 million in cash and cash equivalents.

The stock surpassed the Street’s EPS estimates in each of the trailing four quarters. The $393.50 million consensus revenue estimate for the current quarter ending October 31, 2021, represents a 9.3% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at a rate of 20% per annum over the next five years.

LE has rallied 366.9% over the past year and 152.4% over the past nine months. It ended yesterday’s trading session at $40.25.

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LE’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.

LE has an A grade for Growth, Sentiment, and Momentum. In addition to the POWR Ratings grades we’ve just highlighted, one can see LE’s ratings for Value, Stability, and Quality here.

LE is ranked #14 in the Fashion & Luxury industry.

Zumiez Inc. (ZUMZ)

With a $1.13 billion market capitalization, ZUMZ operates as a specialty retailer of apparel, footwear, accessories, and hardgoods for young men and women. The Lynnwood, Wash., company operates through its e-commerce websites.

ZUMZ’s net sales for the four weeks ended May 29, 2021, increased 42.4% year-over-year.

On February 26, 2021, ZUMZ selected Workday, Inc.‘s (WDAY) Workday Financial Management, Workday Adaptive Planning, and Workday Prism Analytics to help accelerate its digital finance transformation. ZUMZ will leverage a high-volume analytics platform that blends financial results with workforce and operational data to provide better business insights and improve planning processes to help drive faster, informed decisions. This should enable ZUMZ to better anticipate and react to changing market conditions.

ZUMZ’s net sales came in at $279.07 million for its fiscal first quarter, ended May 1, 2021, representing a 102.6% improvement year-over-year. The company’s gross profit increased 334.7% year-over-year to $103.17 million. Its operating profit has been reported at $34.28 million for the quarter, compared to a $27.85 million loss in the prior-year period. Its net income came in at $26.39 million, versus  a $21.10 million loss in the prior-year period. ZUMZ’s EPS has been reported at $1.03, versus a   loss of $0.84 in the year-ago period. The company had $81.50 million in cash and cash equivalents as of May 1, 2021.

ZUMZ surpassed the Street’s EPS estimates in each of the trailing four quarters. The $293.39 million consensus revenue estimate  for the current quarter ending October 31, 2021, represents an 8.3% rise from the prior-year period. Analysts expect the stock’s EPS to grow at a 15% rate per annum over the next five years.

ZUMZ has gained 92.2% over the past year and 51.1% over the past nine months. It closed yesterday’s trading session at $44.40.

ZUMZ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Momentum and Quality, and a B grade for Value and Sentiment. To see additional POWR Ratings for ZUMZ’s Growth and Stability, click here.

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ZUMZ is ranked #5 in the Fashion & Luxury industry.

Tilly’s, Inc. (TLYS)

With a market capitalization of $452.20 million, TLYS in  Irvine, Calif., is a specialty retailer of casual apparel, footwear, accessories, and hardgoods for young men and women, and boys and girls. The company also provides a third-party merchandise assortment across its various product categories and sells its merchandise through its e-commerce website.

TLYS’ net sales for its fiscal first quarter ended May 1, 2021, increased 111.1% year-over-year to $163.16 million. The company’s gross profit has been reported at $54.84 million, which represents a 3340.3% year-over-year improvement. Its operating income came in at $14.87 million for the quarter, compared to a  $28.40 million loss  in the prior-year period. TLYS’ net income was  $10.96 million, versus a $17.40 million loss in the year-ago period. Its non-GAAP EPS came in at $0.36, compared to a $0.59 loss per share  in the prior-year period. The company had $81.02 million in cash and cash equivalents as of May 1, 2021.

Analysts expect the stock’s EPS to improve 228.6% for the current quarter, ending October 31, 2021, to $0.23. The stock surpassed the consensus EPS estimate in three of the trailing four quarters. Analysts estimate its revenue to be $170.04 million for the current quarter, which represents a 21.2% year-over-year improvement. TLYS’ EPS is expected to grow at a 12% rate  per annum over the next five years.

TLYS has gained 147.4% over the past year and 131.6% over the past nine months. It closed yesterday’s trading session at $14.87.

It’s no surprise that TLYS has an overall A rating, which translates to Strong Buy in our POWR Ratings system.

The stock also has an A grade for Momentum and Sentiment, and a B grade for Growth and Value. Click here to see the additional POWR Ratings for TLYS’ Stability.

TLYS is ranked #9 in the Fashion & Luxury industry.

Click here to checkout our Retail Industry Report for 2021


GES shares were trading at $22.19 per share on Tuesday afternoon, up $0.15 (+0.68%). Year-to-date, GES has declined -1.12%, versus a 18.49% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…

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