While the year has been hard on many retailers due to the pandemic and lock downs worldwide, there are certain retailers which lucked out during Covid-19. In many states in the US, ‘non-essentials’ were closed entirely but in certain states, such as California, selective lockdowns were implemented. Companies which provided food and ‘essential’ goods were allowed to stay operating during the lockdowns and in many areas, some of them became the only open stores. And since the holiday season is just around the corner, the time is ripe to invest in these retail stocks:
Chewy Inc (NYSE: CHWY)
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Chewy, Inc. (CHWY) is an American, Florida based online retailer which provides pet products and pet food, it also has a wide selection of more than 45,000 items. It was acquired by PetSmart in 2017 for the amount of $2.35 billion. This was the largest acquisition of an e-commerce business at that time. It also offers express shipping and 24/7 service due to its e-commerce infrastructure. CHWY also has an Autoship subscription program which makes it easier for pet owners to buy.
The pet company recently had large Cyber Week sales on its pet items and this led to impressive deals of up to 50 per cent. With most pet owners forced to stay at home due to the pandemic, a lot of them bought food, toys, and bedding to spoil their pets. According to its Chief Executive Officer, Sumit Singh, “Chewy’s relentless focus on execution and inventiveness resulted in record net sales and another quarter of positive adjusted EBITDA.”
Chewy’s net sales for the third quarter were $1.78 billion which is a 45 per cent increase over the past year and its gross margin of 25.5 per cent expanded by 45 per cent.
BJs Wholesale Club Holdings Inc (NYSE: BJ)
2020 turned into a favourable year for BJ’s investors as it helped it in giving it just the boost it needed. BJ was under a heavy debt before the pandemic and its growth was extremely slow. But since March, pandemic fearing customers have been storming BJ for essentials and items which has caused a massive revenue spike for BJs Wholesale Club Holdings Inc (BJ).
Due to this, BJ has generated as much free cash flow in a single quarter as it previously did in the entire year and this has helped it in reducing its debt and be able to invest in more store openings which will benefit it in the East Coast. BJ has also expanded itself into not just Ohio but also Michigan most recently and the company is also projecting to open further with six new stores in 2021.
BJ’s stocks have doubled since March and now its stock trades at a forward P/E ratio of less than 16. And while its increase in profits by 81 per cent this year may not seem to be much, it is predicted that it will continue to grow at steady rate next year as well and presents as a good long-term investment.
Home Depot Inc (NYSE: HD)
Home Depot, Inc. (HD), is the largest home improvement retailer in the United States. Its headquarters is based in Cobb County, Georgia, along with an Atlanta mailing address. It provides supplying tools, interior decoration material, construction products, services, and several other items. It is also known for its large warehouses which are utilized by service professional tradesmen and DIY homeowners.
HD stock has also been able to create an e-commerce presence in order to keep up with the competition. Since people have mostly been at home due to the pandemic, most have turned towards paying attention to work that needs to be done around the house and have started DIY projects to spend the time.
Currently, Home Depot sells at a price to earnings ratio of 22.8 and a price to sales ratio of 2.349. While that is premium when compared to Lowe’s it also outperforms Lowe’s in a few areas and over the past decade, the gap has widened in favour of Home Depot. It is also selling near its peak P/E and P/S levels.