Earlier this week, my wife came home from a trip to our friendly neighborhood Target Corporation (NYSE:TGT) store with a stunned look on her face.
“I’ve never seen Target Corporation (NYSE:TGT) that busy,” she exclaimed. “It was insane!”
She then proceeded to describe crowded aisles, full shopping carts, and uncharacteristically long lines at checkout.
So what did everybody there have in common?
School shopping has begun
Though most schools already sent out their official supply lists weeks ago, it’s safe to say frenetic back-to-school shopping is officially under way — a fact of which I was brutally reminded last weekend when I finally came to the realization that my firstborn, 5-year-old daughter will start kindergarten in less than two weeks.
So, in an effort to distract myself from the disturbingly fast pace at which time is flying by, I came up with a list I believe represents the four most promising retailers our stock market has to offer that should be able to benefit from the back-to-school shopping season.
1. Target Corporation (NYSE:TGT)
First, of course, there’s Target Corporation (NYSE:TGT), which fell nearly 4% Wednesday after the company reported less-than-stellar second-quarter earnings, primarily resulting from the high cost of Target’s ambitious expansion into Canada, where the company hopes to operate as many as 124 locations by the time the Chrismas shopping season begins.
As it stands, though, Target Corporation (NYSE:TGT) opened 44 Canadian stores during the quarter, bringing its current total well past the halfway point to 68 locations to help it take advantage of back-to-school shoppers.
But remember, Target Corporation (NYSE:TGT) also has a habit of rewarding long-term shareholders for their patience, and raised its dividend by a whopping 19.4% in June. For those of you keeping track, that marked the 42nd dividend boost by Target in its 46 years since going public in October 1967.
It’s even more incredible, though, knowing Target Corporation (NYSE:TGT) achieved all of that without ever expanding beyond the borders of the United States until earlier this year — a move which, as Wednesday’s earnings showed, undoubtedly comes with risks of its own given the enormous capital expenditures required.
Even so, while Target Corporation (NYSE:TGT) management also warned they see “continued cautious spending by consumers” for the remainder of the year, I’m still convinced the company will be around to reward shareholders for many more school years to come.
2. Best Buy Co., Inc. (NYSE:BBY)
Meanwhile, Best Buy is suffering no such short-term challenges following its own strong second-quarter earnings report, which absolutely crushed expectations and seemed to prove the electronics specialist’s turnaround is firmly intact.
However, Best Buy Co., Inc. (NYSE:BBY)’s strong performance last quarter was propelled primarily by strong sales growth in both appliances and mobile devices, showing that Target Corporation (NYSE:TGT)’s aforementioned cautious spending doesn’t necessarily exist for more focused retailers selling the big-ticket items consumers really want.
Even better, while you can bet Best Buy Co., Inc. (NYSE:BBY) is selling more than its fair share of dorm fridges and microwaves, it also stands to benefit as students around the country increasingly look to purchase new laptops, PCs, and tablets to help further their education.
3. J.C. Penney Company, Inc. (NYSE:JCP)
Next up, during their own less-terrible quarterly earnings report Tuesday, J.C. Penney management was cheered by investors after saying, “the early weeks of the Back to School shopping period were encouraging, especially during the important tax-free holidays and promotional weekend periods.”
As it turns out, former-turned-current J.C. Penney Company, Inc. (NYSE:JCP) CEO Mike Ulman’s efforts to stabilize the business appear to be working so far, even if he is benefiting from the giant inventory overhang bandage torn off by former CEO Ron Johnson in an effort to clean the company’s slate and start anew.
Time will tell whether Ulman’s immediate return to J.C. Penney Company, Inc. (NYSE:JCP)’s old sale-and-coupon-centric model will be effective over the long run, but back-to-school shoppers should certainly help over the short term.