5 Retail Companies to Consider Ahead of Christmas

These stocks have high business quality and are trading at a fair GF Value

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James Li
Dec 22, 2020
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Dow slips as coronavirus lockdowns outweigh stimulus passage

The Dow Jones Industrial Average traded around 30,121.17 on Tuesday, down approximately 100 points from Monday's close of 30,216.45 despite Congress passing over $900 billion in pandemic aid. The 30-stock index tumbled from the record close of 30,303.37 last week on the heels of several European countries enacting travel restrictions on U.K. visitors following reports of a new Covid-19 variant.

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According to Johns Hopkins University statistics, global coronavirus cases surpassed 77 million, with over 18 million cases in the U.S. as of Tuesday.

On the heels of consumers making last-minute purchases, investors may find opportunities in e-commerce retail companies that have high financial strength and profitability and are trading below the GuruFocus Value Line. GuruFocus' own valuation method considers a company's historical price multiples and makes internal adjustments for past performance and expected future growth.

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Attractive price-to-GF-Value ratios range approximately between 0.6 to 1.05. If the price-to-GF-Value ratio becomes too low, the stock may be a possible value trap if financial strength and profitability measures begin to deteriorate.

Thus, here are five apparel retail companies to consider that have high financial strength and profitability and are trading at a fair price according to their GF Value, found using the All-in-one Screener, a Premium feature of GuruFocus: Alibaba Group Holding Ltd. (

BABA, Financial), Columbia Sportswear Co. (COLM, Financial), Foot Locker Inc. (FL, Financial), Shoe Carnival Inc. (SCVL, Financial) and Ulta Beauty Inc. (ULTA, Financial).

Alibaba

Shares of Alibaba traded around $255.93, showing that the stock is modestly undervalued with a price-to-GF-Value ratio of 0.82.

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GuruFocus ranks the Hangzhou, China-based e-commerce giant's financial strength 8 out of 10 on several positive investing signs, which include a strong Altman Z-score of 7 and debt ratios that are outperforming over 80% of global competitors.

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Alibaba's profitability ranks 9 out of 10 driven on profit margins, returns and three-year revenue and earnings growth rates outperforming over 90% of global cyclical retail companies.

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Gurus with large holdings in Alibaba include

PRIMECAP Management (Trades, Portfolio) and Ken Fisher (Trades, Portfolio)'s Fisher Investments.

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Columbia

Shares of Columbia traded around $87.70, showing that the stock is fairly valued with a price-to-GF-Value ratio of 1.05.

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GuruFocus ranks the Portland, Oregon-based company's financial strength 8 out of 10 and profitability 9 out of 10 on several positive investing signs, which include a strong Altman Z-score of 6, a five-star business predictability rank, and an operating margin that has increased approximately 6% per year on average over the past five years and is outperforming over 70% of global competitors.

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Foot Locker

Shares of Foot Locker traded around $39.27, showing that the stock is modestly undervalued with a price-to-GF-Value ratio of 0.87.

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GuruFocus ranks the New York-based company's profitability 8 out of 10 on the back of returns outperforming over 80% of global competitors.

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Shoe Carnival

Shares of Shoe Carnival traded around $36.88, showing that the stock is fairly valued with a price-to-GF-Value ratio of 1.02.

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GuruFocus ranks the Evansville, Indiana-based footwear retailer's profitability 8 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, expanding operating margins and a three-year earnings growth rate that outperforms over 80% of global competitors.

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Ulta Beauty

Shares of Ulta Beauty traded around $263.58, showing that the stock is fairly valued with a price-to-GF-Value ratio of 1.02.

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GuruFocus ranks the Bolingbrook, Illinois-based beauty retailer's profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and a three-year revenue growth rate that outperforms over 87% of global competitors.

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Disclosure: Long Ulta Beauty.

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I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!