9 Best Retailer Stocks to Add to Your Portfolio Right Now

NEW YORK (TheStreet) -- Retail earnings kicked off this week with Macy's (M) reporting disappointing earnings and sales due to the harsh winter, troubles at the West Coast port delaying inventory shipments and fewer tourists at its flagship stores. Retail troubles continued at J.C. Penney (JCP) and Kohl's (KSS) with both department store chains missing sales estimates.

Despite disappointing results, both Macy's and Kohl's are rated "buy," while J.C. Penney is a "sell," according to TheStreet Ratings.

As retail earnings continue over the next two weeks, find out which other retailers investors should buy.

The stocks on this list are apparel retailers, rated "buy" with a B+ or better rating. Find out which stocks to buy and when you're done, be sure to check out which online retailers to sell from your portfolio.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year. Note: Year-to-date returns are based on May 13, 2015 closing prices.

DSW Chart DSW data by YCharts

9. DSW Inc. (DSW)
Market Cap: $3.1 billion
Rating: Buy, B+
Year-to-date return: -5.9%

DSW Inc., together with its subsidiaries, operates as a branded footwear and accessories retailer in the United States. The company operates through two segments, DSW and Affiliated Business Group.

"We rate DSW INC (DSW) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • DSW INC has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DSW INC increased its bottom line by earning $1.69 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($1.88 versus $1.69).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 12.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DSW has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.

 

 

SSI Chart SSI data by YCharts

8. Stage Stores Inc. (SSI)
Market Cap: $642 million
Rating: Buy, B+
Year-to-date return: -4.8%

Stage Stores, Inc. operates as a specialty department store retailer in small and mid-sized towns and communities in the United States. Its merchandise portfolio comprises moderately priced brand name and private label apparel, accessories, cosmetics, footwear, and home goods.

"We rate STAGE STORES INC (SSI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, attractive valuation levels and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • STAGE STORES INC has improved earnings per share by 43.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, STAGE STORES INC increased its bottom line by earning $1.17 versus $0.79 in the prior year. This year, the market expects an improvement in earnings ($1.29 versus $1.17).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 75.8% when compared to the same quarter one year prior, rising from $24.86 million to $43.72 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 6.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 35.80% is the gross profit margin for STAGE STORES INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.32% is above that of the industry average.

 

URBN Chart URBN data by YCharts

7. Urban Outfitters (URBN)
Market Cap: $5.3 billion
Rating: Buy, B+
Year-to-date return: 14%

Urban Outfitters, Inc., a lifestyle specialty retail company, engages in the retail and wholesale of general consumer products. The company operates in two segments, Retail and Wholesale.

"We rate URBAN OUTFITTERS INC (URBN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 11.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • URBN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, URBAN OUTFITTERS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 38.02% is the gross profit margin for URBAN OUTFITTERS INC which we consider to be strong. Regardless of URBN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, URBN's net profit margin of 7.94% compares favorably to the industry average.

 

CATO Chart CATO data by YCharts

6. Cato Corp. (CATO)
Market Cap: $1.1 billion
Rating: Buy, A-
Year-to-date return: -6.7%

The Cato Corporation, together with its subsidiaries, operates as a specialty retailer of fashion apparel and accessories in the Southeastern United States. It operates through two segments, Retail and Credit.

"We rate CATO CORP (CATO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 153.84% and other important driving factors, this stock has surged by 45.41% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CATO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CATO CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CATO CORP increased its bottom line by earning $2.13 versus $1.86 in the prior year. This year, the market expects an improvement in earnings ($2.20 versus $2.13).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 139.4% when compared to the same quarter one year prior, rising from $3.82 million to $9.15 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 10.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CATO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, CATO has a quick ratio of 1.56, which demonstrates the ability of the company to cover short-term liquidity needs.

 

 

GPS Chart GPS data by YCharts

5. The Gap Inc. (GPS)
Market Cap: $16.2 billion
Rating: Buy, A-
Year-to-date return: -8.4%

The Gap, Inc. operates as an apparel retail company worldwide. It offers apparel, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Athleta, and Intermix brand names.

"We rate GAP INC (GPS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 2.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, GAP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $1,015.00 million or 34.97% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.86%.
  • 38.45% is the gross profit margin for GAP INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.77% trails the industry average.

 

BWS Chart BWS data by YCharts

4. Brown Shoe Co. (BWS)
Market Cap: $1.3 billion
Rating: Buy, A
Year-to-date return: -5.9%

Brown Shoe Company, Inc., a footwear company, retails and wholesales footwear worldwide. The company operates through two segments, Famous Footwear and Brand Portfolio. It offers licensed, branded, and private-label casual, dress, and athletic footwear products to women, men, and children.

"We rate BROWN SHOE CO INC (BWS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, solid stock price performance, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 163.9% when compared to the same quarter one year prior, rising from $6.16 million to $16.24 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 164.28% and other important driving factors, this stock has surged by 26.85% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BWS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that BWS's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.

 

 

ROST Chart ROST data by YCharts

3. Ross Stores (ROST)
Market Cap: $20.8 billion
Rating: Buy, A
Year-to-date return: 7.4%

Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brand names in the United States. It primarily offers apparel, accessories, footwear, and home fashions.

"We rate ROSS STORES INC (ROST) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 48.76% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ROST should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ROSS STORES INC has improved earnings per share by 17.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ROSS STORES INC increased its bottom line by earning $4.42 versus $3.87 in the prior year. This year, the market expects an improvement in earnings ($4.80 versus $4.42).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 14.0% when compared to the same quarter one year prior, going from $217.95 million to $248.53 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ROST's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.48 is very weak and demonstrates a lack of ability to pay short-term obligations.

 

 

 

FL Chart FL data by YCharts

2. Foot Locker Inc. (FL)
Market Cap: $8.5 billion
Rating: Buy, A+
Year-to-date return: 9.2%

Foot Locker, Inc. operates as an athletic shoes and apparel retailer. The company operates in two segments, Athletic Stores and Direct-to-Customers.

"We rate FOOT LOCKER INC (FL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 31.78% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, FL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • FOOT LOCKER INC has improved earnings per share by 24.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, FOOT LOCKER INC increased its bottom line by earning $3.56 versus $2.85 in the prior year. This year, the market expects an improvement in earnings ($3.94 versus $3.56).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 20.7% when compared to the same quarter one year prior, going from $121.00 million to $146.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 6.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FL's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, FL has a quick ratio of 1.50, which demonstrates the ability of the company to cover short-term liquidity needs.

 

TJX Chart TJX data by YCharts

1. TJX Cos. (TJX)
Market Cap: $44.7 billion
Rating: Buy, A+
Year-to-date return: -3.9%

The TJX Companies, Inc. operates as an off-price apparel and home fashions retailer in the United States and internationally. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX Europe.

"We rate TJX COMPANIES INC (TJX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, revenue growth, notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • TJX COMPANIES INC has improved earnings per share by 14.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TJX COMPANIES INC increased its bottom line by earning $3.15 versus $2.95 in the prior year. This year, the market expects an improvement in earnings ($3.27 versus $3.15).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 6.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, TJX COMPANIES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $1,196.03 million or 24.98% when compared to the same quarter last year. In addition, TJX COMPANIES INC has also modestly surpassed the industry average cash flow growth rate of 20.86%.

 

 

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