Top 10 Retail Stocks to Buy Now

In this article we will look at the Top 10 Retail Stocks to Buy Now.

Technology is disrupting retail

The rise of technology and artificial intelligence (AI) in recent years has impacted not only the tech sector, but the entire market. The retail sector is no stranger to this impact, with analysts now viewing technological innovation as one of the key drivers of growth in the retail sector. As a result, retailers who are serious about technology expansion and investing to integrate new technologies into their operations are finally starting to gain market attention.

On June 24, Morgan Stanley analyst Simeon Gutman joined CNBC’s “The Exchange” to discuss the impact of technology and AI on retailers and how these companies are using technology to increase their profit margins. Here are some of his comments on retail companies to watch in this regard:

“Walmart is the first company that comes to mind… With Walmart, you’re hitting a lot of those aspects of technology diffusion, and on top of that, they’re gaining market share in terms of technology diffusion. AI is easily one of them, at scale, with lots of data, lots of opportunity to dig through their data and improve both the front end of their business, drive more sales to customers, simplify things and improve the back end.”

According to Gutman, large retailers are the industry winners when it comes to integrating innovative technologies into their internal operations. Because of this innovation in retail and its consequent impact on retailers’ profit margins, it’s safe to say that retail is quickly making a comeback.

Retail Industry Outlook 2024

According to the WTW Global Retail Survey 2024, 52% of retailers generally expect to see higher profitability within two years. Additionally, more retailers (48%) are now looking to integrate artificial intelligence into their operations to deliver personalized shopping experiences to their customers. However, the rise of technology and AI in the industry has also led some retailers (43%) to express concerns about increased cybersecurity risks resulting from a greater reliance on new technologies.

Despite the risks involved, most retailers today are turning to AI integration to meet customer demands. According to the survey, AI is primarily favored by online and electronic retailers due to its potential as a growth catalyst. By helping retailers automate their supply chain processes and operations, AI and new technologies can enable them to deliver personalized experiences and recommendations to their customers. This is a particularly important feature in today’s market, as consumers are increasingly reliant on new technologies and their benefits in daily life.

Our methodology

We combed through ETFs and online rankings to come up with a list of 25 retail stocks. We also used the Finviz stock screener to make sure we didn’t miss any popular stocks. For this list, we considered clothing retailers, discounters, department stores, and home improvement retailers. We selected and ranked 10 stocks from our initial pool of 25 that were most popular with institutional investors. The stocks are ranked in ascending order of the number of hedge funds holding stakes in them.

Why do we care about stocks that hedge funds are heavily invested in? The reason is simple: Our research has shown that we can outperform the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming its benchmark by 150 percentage points.see more details here)

Top 10 Retail Stocks to Buy Now

10. Burlington Stores, Inc. (NYSE:BURL)

Number of hedge fund holders: 40

Burlington Stores, Inc. (NYSE: BURL) is a retail clothing company based in Burlington, New Jersey. The company offers fashion-focused products such as ready-to-wear apparel, footwear, accessories, toys, gifts and outerwear. It operates stores in Washington, D.C. and Puerto Rico.

Burlington Stores, Inc. (NYSE: BURL) reported first-quarter revenue growth of 10.5% and comparable store sales increased 2% compared to the year-ago quarter. The company benefited from the Bed Bath & Beyond bankruptcy, which increased demand for the discount retail products it is able to supply. Burlington Stores, Inc. (NYSE: BURL) also continues to expand its operations with its new store in West El Paso, Texas.

As of May 31, Citigroup analysts maintained a Buy rating on Burlington Stores, Inc. (NYSE:BURL). The average consensus price target for the stock is $265.5, with a high forecast of $284 as of June 28.

In the first quarter, 40 hedge funds held long positions in Burlington Stores, Inc. (NYSE:BURL), with a total stake value of $2 billion. At the end of the first quarter, Citadel Investment Group was the largest shareholder in Burlington Stores, Inc. (NYSE:BURL), owning 1.2 million shares of the company.

ClearBridge Investments mentioned Burlington Stores, Inc. (NYSE: BURL) in its Q4 2023 investor letter:

“The fall in interest rates has also had a significant impact on more cyclical companies and those related to general consumption. For example, consumer discretionary companies and discount retailers Burlington Stores, Inc. (NYSE: BURL) and Five Below both rose in the quarter on improved outlooks. Five Below, a specialty retailer of value products including apparel, accessories, novelty items, home decor, cosmetics and accent furniture, rebounded after being one of the worst performing stocks in the third quarter. We believe Five Below and Burlington are particularly well positioned in an economic environment where consumer budgets are tight but demand for discretionary goods remains stable.

9. Abercrombie & Fitch Co. (NYSE:ANF)

Number of hedge fund holders: 46

Abercrombie & Fitch Co. (NYSE: ANF) is a consumer discretionary apparel retailer based in New Albany, Ohio. The company operates as an omnichannel retailer. Its primary markets are in the United States, Europe, the Middle East, Asia, Asia Pacific, and Canada. We saw 46 hedge funds long Abercrombie & Fitch Co. (NYSE: ANF) at the end of the first quarter, with a total stake value of $786.7 million.

Abercrombie & Fitch Co. (NYSE: ANF) has seen significant sales growth this year, with the company expecting sales to increase 10% in 2024 compared to 2023. The company owns the popular Hollister brand and has made a strong comeback in recent years thanks to growing demand for its products. For example, in the first quarter, Abercrombie & Fitch Co. (NYSE: ANF) saw sales growth of 22% compared to the previous year, with sales of the Hollister brand also increasing 12%.

The average analyst price target for Abercrombie & Fitch Co. (NYSE:ANF) is $166, with a high forecast of $215 as of June 28. As of May 30, Citigroup analysts maintain a neutral rating on the stock.

Here’s what Chartwell Investment Partners, LLC said about Abercrombie & Fitch Co. (NYSE: ANF) in its Q3 2023 investor letter:

“Within the Carillon Chartwell Small Cap Growth Fund, information technology and industrials were the best performing sectors, with rigorous stock selection leading to alpha generation. Abercrombie & Fitch Co. (NYSE:ANF) reported strong results driven by significantly improved margins resulting from significantly lower shipping and freight costs than last year.

8. Macy’s, Inc. (NYSE:M)

Number of hedge fund holders: 47

Macy’s, Inc. (NYSE:M) is another omnichannel retailer on our list of the best retail stocks to buy. It operates stores, websites, and mobile apps in the United States to sell merchandise such as clothing and accessories for adults and children. The company’s markets include the United States, the United Arab Emirates, and Kuwait, among others.

JP Morgan analyst consensus maintains the stock’s overweight rating as of May 22. Macy’s, Inc. (NYSE:M) has an average price target of $19.50, with a high forecast of $27, as of June 28.

Macy’s, Inc. (NYSE:M) operates several retail brands such as Bloomingdale’s and Bluemercury, which have driven the company’s growth. The company’s first-quarter revenue was $4.85 billion, beating analysts’ expectations of $4.82 billion. The company is working diligently to maximize profitability, which is why it is closing stores where sales are declining while focusing on opening small-format stores across the country. By 2025, Macy’s, Inc. (NYSE:M) aims to open 30 new small-format stores.

In the first quarter, 47 hedge funds held long positions in Macy’s, Inc. (NYSE:M). The total value of their stake in the company was $493.1 million.

Citadel Investment Group, which owns 2.8 million shares of the company, was Macy’s, Inc.’s (NYSE:M) largest shareholder at the end of the first quarter.