5 First-Rate Retail Stocks the Pros Still Love

Walmart

• Market value: $353.0 billion
• TipRanks consensus price target: $151.72 (16.7% upside potential)
• TipRanks consensus rating: Strong Buy

Walmart (WMT, $130.06) is considered a defensive stock during inflationary time, and it has fared relatively well amid the broader market sell-off. Shares are down by only 10.1% this year, compared to a 22.5% decline for the S&P 500.

In Q2, the retailing giant's lower-cost products, especially in the grocery segment, helped pull more middle-to-high-income customers to its stores as inflation continued to rise. On a constant currency basis, Walmart posted revenues of $152.9 billion in the second quarter, up 9.1% over the year prior.

The company has also been focusing on right-sizing its inventory since the first quarter of this year. Moreover, WMT has planned more pricing actions in Q3 to place it on a smoother road to optimized inventory in the second half of this year.

Walmart is also looking at scaling up its higher-margin, early stage businesses, including advertising, marketplace, fulfillment services, financial and healthcare services, and data monetization. All of this could lead to a more diversified profit model for one of Wall Street's favorite retail stocks.

Indeed, Morgan Stanley analyst Simeon Gutman believes Walmart is in a strong position to ride out the macroeconomic challenges as its core revenues continue to grow. The analyst has a Buy rating on the Dow Jones stock and a $150 price target.

Wall Street analysts share Gutman's bullish outlook, with a consensus Strong Buy rating among the 29 pros who have sounded off over the past three months. Of these, 22 call WMT a Buy, while seven say it's a Hold. See the full rundown of analyst ratings for WMT on TipRanks.

The TJX Companies

• Market value: $71.1 billion
• TipRanks consensus price target: $75.69 (23.5% upside potential)
• TipRanks consensus rating: Strong Buy

The TJX Companies (TJX, $61.27), an off-price apparel and home fashion retailer in the U.S., has seen its shares decline by more than 19% this year. This is after the retailer delivered mixed second quarter results last month.

The company generated revenues of $11.8 billion in Q2, a decline of 2% year-over-year and below analysts' consensus estimate. Diluted earnings came in at 69 cents per share, at the high end of the company's guidance and ahead of the average Street estimate. The company also said comparable-store sales in the U.S. fell 5% year-over-year, which the company attributed to lower consumer discretionary spending as a result of higher inflation.

More encouragingly, TJX delivered a pre-tax profit margin of 9.2%, which was above its estimate.

"Looking ahead, while we are not immune to macro factors, we are convinced that the flexibility of our off-price business model and the value proposition we offer to a wide range of consumers will continue to serve us well, as we have seen throughout our 46-year history," said Ernie Herrman, president and CEO of TJX.

For fiscal 2023, TJX is expecting sales between $49.6 billion and $49.9 billion, down from its prior guidance due to the decline in Q2 revenue.

But given the improved profitability in Q2, the company hiked its fiscal 2023 pre-tax profit margin outlook to a range of 9.3% to 9.5%, while adjusted profit margin is anticipated to range between 9.7% and 9.9%.

TJX's management stated on its earnings call that the improved profitability outlook is a result of "stronger merchandise margin, better expense management, and less incremental freight and wage pressure expected in the second half of the year."

Barclays analyst Adrienne Yih views the consumer discretionary stock favorably,with a Buy rating and a $76 price target. The analyst believes that consumers will not shrink away from TJX's pricing initiatives, and that will lead to its core apparel business doing quite well.

Ten of 13 analysts surveyed by TipRanks agree that TJX is one of the best retail stocks right now, categorizing it as a Buy. Hear what else the pros have to say about TJX on TipRanks.

Levi Strauss

• Market value: $6.5 billion
• TipRanks consensus price target: $24.38 (47.9% upside potential)
• TipRanks consensus rating: Strong Buy

Levi Strauss (LEVI, $16.49), the jeanswear company, delivered strong second-quarter results this year. The clothing brand generated revenues of $1.5 billion, up 15% year-over-year, and exceeding the consensus estimate.

Adjusted earnings came in at 29 cents per share, surpassing Street estimates. The company's management admitted on its Q2 earnings call that it anticipates macroeconomic volatility to continue for the rest of this year. However, LEVI also expects its fiscal 2022 revenues to grow in the range of 11% to 13%, and to arrive at $6.4 billion to $6.5 billion.

The company reiterated its outlook for adjusted earnings to land between $1.50 per share and $1.56 per share for all of 2022. Moreover, LEVI also hiked its quarterly dividend by 20% to 12 cents per share.

The company's "broad diversity of our business across geographies, channels and product categories provides us with the control and optionality to successfully navigate the challenges of the external environment," said Harmit Singh, Levi's chief financial officer, during the second-quarter earnings call. Singh added that LEVI's brand strength, strong execution by its business teams and "disciplined cost management have allowed us to expand and sustain gross and EBIT [earnings before interest and taxes] margin expansion."

J.P. Morgan analyst Matthew Boss is upbeat about the stock with a Buy rating and a $23 price target. The analyst recently pointed out that even amid the broader macroeconomic volatility, almost all the companies in the retail sector under his coverage showed signs of "improvement" in the month of August relative to the month of June.

LEVI is another of the Strong Buy-rated retail stocks. Of the analysts who have released notes over the past three months, seven say it's a Buy and just one has it at Hold. Check out other analysts' price targets and analysis for LEVI at TipRanks.

Amazon.com

• Market value: $1.2 trillion
• TipRanks consensus price target: $177.05 (55.6% upside potential)
• TipRanks consensus rating: Strong Buy

Amazon.com (AMZN, $113.78) remains a Buy even amid the macroeconomic volatility. Shares of the e-commerce giant are down about 32% this year as investors have been concerned about inflationary pressures.

The company expects these inflationary pressures to continue through at least the third quarter.

However, Bernstein analyst Mark Shmulik believes AMZN is set to post a higher operating profit of $35.6 billion next year. One of the drivers for better profits going into 2023 is an uptick in the renewal of Prime subscriptions in the U.S. and Europe even after a fee hike, says the top-rated analyst. Earlier this year, Amazon hiked its annual Prime membership subscription fee in the U.S. to $139 from $119.

Shmulik is also of the opinion that AMZN will be able to generate higher ad revenues from its content, such as NFL games. Additionally, its growth could be driven by highly profitable segments like Amazon Web Services (AWS) and advertising.

Amazon's advertising business is doing exceedingly well, registering 17.6% year-over-year and generating $8.8 billion in revenues in the second quarter. AWS is also growing at a fast pace . In Q2, the cloud computing service generated $19.7 billion in revenues, up 33% year-over-year and representing about 16% of total revenue.

Shmulik believes that once inflationary and cost pressures ease, AMZN's current cost-cutting measures will be fruitful. The analyst continues to view the stock favorably and has a price target of $160.

Overall, the Street is bullish toward one of Wall Street's top retail stocks. Thirty-seven of 38 covering analysts that have sounded off over the past three months have Amazon at Buy. See the full rundown of analyst ratings for AMZN on TipRanks.

Capri Holdings

• Market value: $5.5 billion
• TipRanks consensus price target: $71.67 (78.3% upside potential)
• TipRanks consensus rating: Strong Buy

Capri Holdings (CPRI, $40.19) is a fashion luxury group that owns iconic brands including Versace, Jimmy Choo and Michael Kors. These brands cover high-end categories for men's and women's apparel, footwear and accessories.

Currently, the stock is trading just above its 52-week low of $36.90, down 38% for the year-to-date. In its fiscal first-quarter (ended July 2), Capri generated revenues of $1.4 billion, up 8.5% year-over-year and surpassing analysts' consensus estimate. Adjusted earnings also came in higher than expected, at $1.50 per share.

The company reduced its fiscal 2023 revenue outlook by $100 million to $5.9 billion due to currency headwinds, as was stated in its fiscal Q1 earnings call. However, it continues to expect its operating margin to be at 18% and diluted earnings to come in at $6.85 per share.

China, which is an important market for Capri, will continue to face the adverse impact of COVID-19 restrictions into the second half of fiscal 2023. CPRI expects revenues in Mainland China to be down 20% year-over-year in the third quarter and approximately 10% in the fourth quarter.

However, Guggenheim analyst Robert Drbul came away optimistic about the luxury stock following the Q1 earnings. Over the long term, the top-rated analyst – who has a Buy rating and $90 price target on Capri – perceives an "opportunity for CPRI to generate $7 billion in revenue and a 20% operating margin over the long term."

Moreover, Drbul believes that "CPRI offers one of the cheapest and most attractive ways to invest in the ongoing (but nonlinear) reopening of the global economy, with our expectation for higher demand of occasion-based categories of handbags, footwear and apparel for social events, travel and return to office."

Of the 10 analysts who have sounded off on one of the best retail stocks over the past three months, nine are in the bull camp, according to TipRanks. TipRanks offers up a full analyst rundown of CPRI shares.