It’s no secret that retailers are having a tough time this year. As of April, the industry was on pace for more than 8,000 store closings, a new record as competition from e-commerce has led to a declining need for storefronts. Retail stocks have also largely flopped this year, missing out on the broader market rally.
The SPDR S&P Retail ETF has fallen 6.9%, while the S&P 500 is up 10.6%.
Some sectors, like department stores, have gotten hit much harder. However, the sell-off so far this year has created some opportunities in the industry.
With that in mind, let’s look at three retail stocks that could bounce back this year.
1. Foot Locker
The sneaker retailer may be one of the best bargains in the sector today. Foot Locker (NYSE:FL) shares are down 34% this year, following weak sales growth in its first-quarter report, but that’s set up the stock as a value play, as it now trades at a P/E of just 9.6. Foot Locker is also much stronger than similarly valued retail stocks.
In its most recent report, the company still managed to deliver comparable sales growth, at 0.5%, and saw comps jump in the high-single digits in March and April, following a February slump on a tax refund delay. Despite the slow start, the company sees improving performance in the second half of the year, forecasting mid-single-digit comparable sales growth and double-digit EPS growth.
Investors also seemed nervous after Nike, a key supplier, said it would sell directly on Amazon.com, but Nike is moving slowly with that partnership and will continue to depend on Foot Locker for high-profile sneaker releases that draw a crowd. The retailer’s 2.7% dividend yield also offers a reward for patient investors. With expectations muted for its August earnings report, the stock could surge if it beats estimates.
The nation’s largest traditional supermarket chain got hit buy a double whammy back in June. The stock fell 19% first on a weak earnings report and then the next day dropped another 9%, after Amazon said it would buy Whole Foods Market.
Kroger (NYSE:KR) stock has since…