Five Below, TJX Companies, and Walmart are the 3 Best Retail Stocks to Buy in May 2024, according to Wall Street analysts. The retail sector has been under pressure due to price inflation and persistently high interest rates. Consumers have withheld purchases of discretionary items owing to macro uncertainty.
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However, this year is expected to be a better year for retailers, as inflation is showing signs of cooling and the Federal Reserve is expected to cut interest rates later in the year. Moreover, consumer spending is picking up pace as per the latest retail sales stats for April 2024. Even so, it is difficult to sort retail stocks that have garnered analysts’ Strong Buy consensus and reasonable share price appreciation potential due to near-term pressures. With this background in mind, let’s understand why these three retailers are still holding their ground amidst the turbulence.
#1 Five Below (NASDAQ:FIVE)
Five Below is an American chain of specialty discount stores with most of its items priced at $5 or below. The retailer offers a variety of merchandise including games, fashion accessories, sporting goods, candy, hobbies, stationary, books, etc. In the past year, FIVE shares have lost 30.3%.
For the three months ending February 3, 2024, Five Below’s net sales jumped 19.1% year-over-year, while earnings per share (EPS) grew by 19%.
For Q1 FY24, net sales are forecasted to be between $826 and $846 million, with comparable sales growing between 0% and 2%. Meanwhile, diluted EPS is projected between $0.58 and $0.69. at the same time, full year Fiscal 2024 net sales are forecasted between $3.97 and $4.07 billion and EPS between $5.71 and $6.22 is expected.
Five Below is slated to open 225 to 235 new stores in FY24 and convert approximately 200 stores to the Five Beyond (higher price and margins) format while also expanding two distribution centers. The company is also undertaking enhanced shrink mitigation (reducing theft) techniques to drive growth and profitability.
Is Five a Good Stock to Buy?
With 11 Buys and three Hold ratings, FIVE stock has a Strong Buy consensus rating on TipRanks. The average Five Below price target of $203.93 implies 57.4% upside potential from current levels.
#2 TJX Companies Inc. (NYSE:TJX)
TJX Companies operates a chain of off-price apparel and home fashion stores across the U.S. and internationally. The retailer runs brick-and-mortar stores offering goods at 20%-60% discounts. Some of its famous branded stores include T.J. Maxx, Marshalls, HomeGoods, and T.K. Maxx.
TJX rewards shareholders with regular quarterly dividends of $0.38 per share, reflecting an above-average yield of 1.36%. Moreover, the company regularly undertakes stock buybacks to increase shareholder value. For FY25, TJX expects to repurchase shares worth $2 to $2.5 billion depending on certain criteria.
For Q1 FY25, TJX reported better-than-expected earnings and sales figures. However, management’s EPS guidance range fell short of consensus estimates. Furthermore, for FY25, TJX forecasts comparable store sales growth between 2% and 3% while also boosting its EPS guidance to the range of $4.03 to $4.09, which is above the consensus estimate.
What is the Price Target for TJX?
On TipRanks, the average TJX Companies price target of $114.09 implies 13.9% upside potential from current levels. Also, TJX stock carries a Strong Buy consensus rating, backed by 19 Buys and two Hold ratings. In the past year, TJX shares have gained 30.4%.
#3 Walmart (NYSE:WMT)
American big-box retailer Walmart needs no introduction. It operates a chain of hypermarkets, discount department stores, and a member-only retail chain, Sam’s Club. Plus, it runs several e-commerce websites in 19 countries, offering a seamless digital shopping experience. In the past year, WMT shares have gained 31.8%. WMT also pays a regular quarterly dividend of $0.21 per share, carrying a yield of 1.19%.
In Q1 FY25, Walmart exceeded the consensus estimates on both the top and bottom lines. Based on the continued demand momentum, WMT also increased the full-year guidance. WMT now expects net sales to reach the higher end or exceed its previous outlook of between 3% and 4%. Similarly, adjusted EPS is expected to reach the high end or exceed the previous outlook range of $2.23 to $2.37. Walmart’s vast grocery offerings ensure that sales keep growing irrespective of the macro environment.
Notably, Walmart’s e-commerce penetration is growing rapidly, backed by store-fulfilled pickups and deliveries. In Q1, e-commerce revenue rose 21% globally. Plus, Walmart is also boosting its revenues with its advertising business (up 24%). Meanwhile, WMT is undertaking cost-cutting measures such as layoffs and employee relocations, coupled with store and warehouse automation to spur profitability.
What is the Price Target for WMT?
On TipRanks, the average Walmart price target of $70.76 implies 9.1% upside potential from current levels. Further, WMT stock has a Strong Buy consensus rating based on 25 Buys and four Hold ratings.
Ending Thoughts
The above-discussed three retail stocks are amongst the handful in the sector that have attracted analysts’ optimistic ratings. Investors can consider investing in these retail stocks after thorough research.
