As the coronavirus outbreak shuts down shopping malls, investors might wonder if there are still opportunities in the retail industry. According to the All-in-One Screener, a GuruFocus Premium feature, opportunities might still exist in retail companies that either specialize in home improvement or generate sales primarily through online channels. Five such companies are Acorn International Inc. (ATV, Financial), Best Buy Co. Inc. (BBY, Financial), Hibbett Sports Inc. (HIBB, Financial), Haverty Furniture Companies Inc. (HVT, Financial) and Williams-Sonoma Inc. (WSM, Financial).
Coronavirus outbreak sends retail landscape from brick-and-mortar to digital channels
Companies like Macy’s Inc. (M, Financial) and J.C. Penney Co. Inc. (JCP, Financial) announced over the past month that they have lost sales as the Covid-19 outbreak prompted the companies to close their stores. Additionally, shelter-in-place orders have significantly changed shopping patterns: Target Corp. (TGT, Financial) said in its business update on Thursday that quarter-to-date comparable sales in digital channels have increased over 100%, with strong growth in Essentials and Food & Beverage. For the month to date, digital comparable sales increased 275% while store comparable sales declined in the mid-teens. Across core categories, comparable sales in Hardline and Home increased in the double digits.
As such, investors might seek opportunities in companies specializing in home improvement or online retail. The companies discussed have strong balance sheets according to the GuruFocus financial strength rank and are trading below the Peter Lynch line of 15 times earnings.
Acorn International
Acorn International develops and markets a diverse range of products across two business segments: direct sales platforms and distribution networks. GuruFocus ranks the Shanghai-based company’s financial strength 7 out of 10: debt ratios are outperforming over 94% of global competitors despite a low Piotroski F-score of 3.
Best Buy
Best Buy retails a wide range of consumer electronics products domestically and internationally. CEO Corie Barry said in an April 15 business update that despite the Richfield, Minnesota-based company closing its domestic stores to foot traffic, domestic online sales increased over 200%, with approximately 50% of the sales attributable to the company’s “temporary enhanced curbside-service only” model.
GuruFocus ranks Best Buy’s financial strength and profitability 7 out of 10 on several positive investing signs, which include expanding operating margins, a solid Altman Z-score of 4.47 and interest coverage ratios outperforming over 72% of global competitors.
Gurus with large holdings in Best Buy include Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Pioneer Investments (Trades, Portfolio).
Hibbett Sports
Hibbett Sports retails sports goods through small and mid-size stores, focusing primarily in the South, Southwest, Mid-Atlantic and Midwest parts of the U.S. GuruFocus ranks the Birmingham, Alabama-based company’s profitability 8 out of 10 on the back of revenue increasing approximately 11.1% per year on average over the past three years, a rate that outperforms 83.70% of global competitors.
Hibbett’s valuation ranks 10 out of 10 as the price-to-owner-earnings, price-to-free-cash-flow and price-to-operating-cash-flow ratios are close to 10-year lows and outperform over 84% of global competitors.
Haverty
Haverty retails a wide range of residential furniture like sofas, sleepers, end tables and cocktail tables. GuruFocus ranks the Atlanta-based company’s financial strength 7 out of 10 on the back of interest coverage ratios outperforming over 84% of global competitors despite debt ratios underperforming over 54% of global home improvement retailers.
Haverty’s valuation ranks 9 out of 10 on the heels of several price valuation ratios close to 10-year lows, including a price-earnings ratio near a low of 9.25.
Williams-Sonoma
Williams-Sonoma operates a direct-to-consumer network of home furnishing stores that retail items like cooking essentials and home accessories. GuruFocus ranks the San Francisco-based company’s financial strength 6 out of 10: debt-to-Ebitda and interest coverage ratios are outperforming 61% and 78% of global competitors despite debt-to-equity ratios underperforming 72% of global peers.
Williams-Sonoma’s profitability ranks 8 out of 10 on the back of returns on equity outperforming over 94.14% of global competitors despite operating margins outperforming just 75% of global cyclical retail companies.
Disclosure: No positions.
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