Following months of rising customer foot traffic in retail stores earlier this year, the re-imposition of mask mandates by the CDC amid rising COVID-19 cases will likely shift consumers’ focus back to online shopping. Nevertheless, with most retail companies establishing an online presence last year to remain operational, the latest COVID-19 spike is expected to have a limited impact on this industry.

Retail companies have been benefiting from robust consumer spending thanks to strong job growth. Former Macy’s CEO Terry Lundgren said that prevailing inflation rates should benefit the apparel industry after nearly a decade of stagnant growth.

Overall, retail stocks have been gaining momentum owing to strong consumer spending. This is evident in the SPDR S&P Retail ETF’s (XRT) 51.6% gains year-to-date, versus the broader SPDR S&P 500 Trust ETF’s (SPY) 18.7% returns. Therefore, we think retail stocks Signet Jewelers Limited (SIG), Boot Barn Holdings, Inc. (BOOT), and Tilly’s, Inc. (TLYS), which have gained more than 90% year-to-date, still have plenty of upsides to deliver..

Signet Jewelers Limited (SIG)

Based in Bermuda, SIG sells diamond jewelry, watches, and other products through three segments—North America; International; and Other. It is the world’s largest retailer of diamond jewelry. Its renowned brands are Kay Jewelers, Zales, Jared, H.Samuel, Ernest Jones, Peoples, Piercing Pagoda, Rocksbox Jewelry, and JamesAllen.com.

In the first quarter, ended May 1, 2021, SIG’s sales rose 98.2% year-over-year to $1.69 billion, with eCommerce sales increasing 110.3% from the prior-year quarter to $0.35 billion. Its non-GAAP operating income increased substantially from its  negative year-ago value to $168.90 million, while its non-GAAP EPS stood at $2.23, up 240.3% from the same period last year.

On August 3, SIG announced two structural changes in line with  its growth strategy. It is  extending the $1.50 billion asset-based lending facility by two years (until July 2026). This should enable the company to pursue its capital priorities by making prudent investments. Second, the company has fully outsourced its credit offerings and removed its consumer credit risk from the balance sheet. This has improved SIG’s creditworthiness, as evidenced by  its recent issuer credit rating upgrade from S&P.

On May 18, SIG renewed its partnership with Alliance Data Systems (ADS) in providing private label credit card services. The partnership is expected to maximize consumer satisfaction at every stage of the purchasing process.

Analysts expect SIG’s revenues to rise 27.8% year-over-year to $6.68 billion in the current year. A $7.09  consensus EPS estimate for the current year indicates a 236% rise from the same period last year. In addition, the company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. Shares of SIG have gained 367.1% over the past year and 151.8% year-to-date.

SIG’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of A for Growth, Value, and Momentum, and a B for Quality. Of the 64 stocks in the A-rated Fashion & Luxury industry, SIG is ranked #7.

We have also rated SIG for Sentiment and Stability. Get all SIG ratings here.

Boot Barn Holdings, Inc. (BOOT)

BOOT is a specialty retail chain operator in the United States. The company is based in Irvine, Calif. Its  retail outlets comprise 275 stores across 36 states (as of May 12). It also sells its products through e-commerce sites bootbarn.com, sheplers.com, and countryoutfitter.com.

BOOT’s net sales increased 107.3% year-over-year to $306.33 million in its  fiscal first quarter, ended June 26. This can be attributed to a 139.7% rise in retail sales. Its net income came in at $40.65 million, representing a substantial improvement from its  negative year-ago value. Its EPS rose 6,850% from the same period last year to $1.35. BOOT opened three new stores during this period.

BOOT has targeted 10% growth in new units in the current year. In addition, the company has allocated $33 million - $36 million to fund its capital expenditures this fiscal year.

The Street expects BOOT’s revenues to increase 27.4% year-over-year to $ 1.14 billion in the current year. Its EPS is expected to rise 57.2% from the same period last year to $3.16 in the current  year. Furthermore,  BOOT surpassed the consensus EPS estimates in three out of the trailing four quarters. The stock has gained 256.2% over the past year and 105.1% year-to-date.

It’s no surprise that BOOT has an overall B rating, which translates to Buy in our proprietary rating system. In addition, the stock has an A grade for Growth and Momentum, and B for Quality. It is ranked #35 in the Fashion & Luxury industry.

In addition to the grades we’ve highlighted, one  can view BOOT ratings for Value, Sentiment, and Stability here.

Tilly’s, Inc. (TLYS)

TLYS manufactures and sells specialty retail items, such as casual apparel, footwear, accessories, and hard goods in the United States. Its supply chain includes a retail store chain in more than 30 states and an online website. TLYS is based in Irvine, Calif.

For its fiscal first quarter, ended May 1, TLYS’s net sales grew 111.1% year-over-year to $163.20 million. Its physical store sales rose 171.9% year-over-year to $127.70 million, while its e-commerce sales grew 17.2% from the prior-year quarter to $35.50 million. Its net income and EPS increased significantly from negative year- ago values to $10.96 million and $0.36, respectively.

TLYS paid a $1.00 special dividend  per Class A and Class B share in July to boost shareholder returns. The company’s impressive operating results and cash generation amid the pandemic facilitated such a dividend payout for the fifth consecutive year.

The Street expects TLYS’ revenues and EPS to rise 34.1% and 3,375%, respectively,  year-over-year to $712.51 million and $1.31in the current year. In addition, the company surpassed the consensus EPS estimates in three of the trailing four quarters. TLYS has gained 162.7% over the past year and 94.1% year-to-date.

TLYS has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A  grade  for Momentum, and a B for Growth, Value, Sentiment, and Quality. It is ranked #8 in the Fashion & Luxury industry.

In addition to the grades mentioned above, one can view the TLYS rating for Stability here.

SIG shares were trading at $68.29 per share on Thursday afternoon, down $0.37 (-0.54%). Year-to-date, SIG has gained 151.12%, versus a 19.57% rise in the benchmark S&P 500 index during the same period.

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.

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