5 Best Retail Stocks to Buy Now

In this article, we will discuss the 5 best retail stocks to buy now. If you want to read our discussion on the retail industry, go directly to the 10 Best Retail Stocks to Buy Now.

5. The TJX Companies, Inc. (NYSE:TJX)

Number of Hedge Fund Holders: 55

The TJX Companies, Inc. (NYSE:TJX) is a Framingham, Massachusetts-based off-brand department store brand. The company has emerged as one of the best retail stocks in the recent past.

On October 25, Kimberly Greenberger at Morgan Stanley increased the price target on The TJX Companies, Inc. (NYSE:TJX) from $77 to $80 and reiterated an Overweight rating. The analyst observed that the operating margins of the “off-price retailers” have gone down to pre-pandemic levels owing to the difficult macroeconomic environment. This has generated a debate over the long-term EBIT outlook for companies. However, Greenberger thinks that The TJX Companies, Inc. (NYSE:TJX) will be able to recapture the EBIT margin in FY23, and the overall growth opportunity is underappreciated by the market. The analyst also increased the company’s EPS forecasts for FY24.

Greenberger also added that recent fieldwork revealed that The TJX Companies, Inc. (NYSE:TJX) has a strong assortment of branded products across all categories that will play positively for the stock in the long run. The TJX Companies, Inc. (NYSE:TJX) offers an annual forward dividend yield of 1.51% as of November 18.

4. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 69

Costco Wholesale Corporation (NASDAQ:COST) is a Washington-based membership-only big-box retailer. The company leads as the biggest retailer in the world in numerous selected categories.

In a research note issued on October 28, Simeon Gutman at Morgan Stanley stated that 2023 could be a special year for Costco Wholesale Corporation (NASDAQ:COST). The analyst formed this opinion after meeting with CFO Richard Galanti and other members of the executive leadership team. Gutman highlighted that the overhang related to excess inventory is slowly diminishing as Costco Wholesale Corporation (NASDAQ:COST) is working on enhancing unit growth and gaining market share. This is the basis of the growth story for one of the best retail stocks. The analyst has given Costco Wholesale Corporation (NASDAQ:COST) an Overweight rating with a target price of $525.

Cooper Investors shared its outlook on Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2022 investor letter. Here’s what the firm said:

“The US economy continues to run hot – the labour market is extremely tight and a number of executives we spoke to described their challenges in retaining staff and preventing competitors from poaching talent. Industrial companies in particular continue to see record backlogs, with the easing of logistics and supply chain constraints only just starting to have an impact on deliveries and lead times.

In terms of inflationary pressures, the vast majority of our holdings have been able to leverage strong market positions and stakeholder relationships to push pricing through in 2022 such that minimal impact to earnings has occurred. Clearly this is not a lever than can be pulled indefinitely but the more experienced management teams have kept some of their powder dry. Our meeting with management at Costco in Seattle was memorable for several reasons but one was their latent ability to increase member pricing which they have not done in over 5 years (and thus likely to do in 2023)…

…To conclude we’ll return to our meeting with Costco mentioned earlier. The business quality is no secret after decades of incredible execution, but the meeting gave us renewed conviction around Value Latencies in terms of the runway for growth, the focus on enhancing customer value, Costco’s vast buying power (it purchases 30% of the world’s jumbo cashews as one example) and management’s feral focus on the business model and cost discipline.”

Costco Wholesale Corporation (NASDAQ:COST) was held by 69 hedge funds as of Q3 2022.

3. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 68

Walmart Inc. (NYSE:WMT) is an Arkansas-based retail giant with 10,500 stores and 210 distribution centers spread across 24 countries. The company employs 2.3 million people globally.

Walmart Inc. (NYSE:WMT) has emerged as one of the best retail stocks based on the Everyday Low Prices (ELDP) philosophy. Experts believe that the market has overreacted to the development of lowering Q4 profit guidance by the company. Meanwhile, the significant reduction in long-term debt during the third quarter is a positive development for Walmart Inc. (NYSE:WMT). The company is expected to attract more mid to high-end consumers looking to save on groceries during economic uncertainty. On October 18, a report issued by Corey Tarlowe at Jefferies reported that consumer discretionary spending is very strong. The analyst increased the target price for Walmart Inc. (NYSE:WMT) from $161 to $165 and maintained a Buy rating.

Here’s what Leaven Partners said about Walmart Inc. (NYSE:WMT) in its Q3 2022 investor letter:

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Walmart (NYSE:WMT), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%^[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”

Fisher Asset Management raised its stake in Walmart Inc. (NYSE:WMT) by more than 1500% during Q3 2022.

2. The Home Depot, Inc. (NYSE:HD)

Number of Hedge Fund Holders: 89

The Home Depot, Inc. (NYSE:HD) is an Atlanta, Georgia-based retail giant that sells appliances, construction materials, tools, and services related to home improvement.

In a research note issued on October 31, Steven Zaccone at Citi assigned The Home Depot, Inc. (NYSE:HD) stock a Buy rating with a target price of $340. The analyst thinks that despite the macroeconomic uncertainty, the fundamentals of hardline retail are still positive in the short term. Zaccone believes that retailers like The Home Depot, Inc. (NYSE:HD) have pricing power and operate in the need-based categories. Hence, the company is in control of its margins, given its strong positioning. Experts anticipate The Home Depot, Inc. (NYSE:HD) to grow its market share and enhance sales productivity, making it one of the best retail stocks to buy now.

Diamond Hill Capital shared its bullish stance on The Home Depot, Inc. (NYSE:HD) in its Q2 2022 investor letter. Here’s what the firm said:

“The Home Depot, Inc. (NYSE:HD) is a high-quality operator in the home improvement industry. Macroeconomic concerns, particularly the rise in mortgage rates, caused the share price to pull back and trade at a greater discount to our estimate of intrinsic value. We believe Home Depot is well positioned to continue gaining share due to its premium real estate locations, strong operations and recent investments in its supply chain. We like Home Depot’s exposure to the professional customer and believe in its ability to take market share in this segment as we believe home improvement spending has the potential to remain resilient in upcoming years.”

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