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5 Top-Performing Retailers With Solid Financial Strength

These retailers have outperformed over the past year while maintaining their balance sheets

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Margaret Moran
Sep 03, 2021

Summary

  • Many stocks, including retail stocks, have risen due to speculation or the meme stock rallies.
  • However, others have also shown strong capital gains due to their strong operations and competitive advantages.
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The past couple of years have been a wild ride for financial markets. Things have been especially difficult for retailers, who saw dramatically reduced foot traffic to their stores as customers were hesitant to go out at the beginning of the pandemic.

Many of the retail stocks with the highest capital gains over this period have achieved their success through enthusiasm for potential revenue streams that have yet to be established, or as the result of a meme stock rally in which high numbers of day traders bid up the prices of highly shorted stocks with the intention of creating a short squeeze.

However, there have also been plenty of retailers whose share prices have risen due to their own merits. Though few have recovered to pre-pandemic levels, some did better than their peers in terms of preserving their financial strength, generating profits and strengthening their economic moats and online businesses during this difficult period.

According to the GuruFocus All-in-One Screener, a Premium feature, five retailers that have solid financial strength and profitability and have seen their share prices rise more than 150% over the past 12 months are Children's Place Inc. (

PLCE, Financial), G-III Apparel Group Ltd. (GIII, Financial), Abercrombie & Fitch Co. (ANF, Financial), Tapestry Inc. (TPR, Financial) and Kohl's Corp. (KSS, Financial).

Children's Place

Children's Place (

PLCE, Financial) is a retailer of children’s apparel headquartered in Secaucus, New Jersey. Its stock price has risen 314.12% over the past year to trade around $84.69 on Sept. 3.

The company has a financial strength rating of 5 out of 10, driven by a healthy Altman Z-Score of 2.72 and a good Piotroski F-Score of 6 out of 9. It seems the company is not in danger of bankruptcy, even though it did have to take on a significant amount of debt in 2020, bringing the cash-debt ratio all the way down to 0.12.

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The company’s profitability rating is 7 out of 10. Its operating margin of 8.15% and net margin of 5.17% are outperforming 67% of industry peers. Revenue and net income have mostly recovered to their pre-pandemic trajectory.

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G-III Apparel Group

G-III Apparel Group (

GIII, Financial) is a fashion designer and manufacturer that produces several popular brands, including Guess and Calvin Klein. Its stock price has risen 180.21% over the past year to trade around $32.03 on Sept. 3.

The company has a financial strength rating of 5 out of 10. Although the interest coverage ratio is low at 3.61, the Altman Z-Score of 3.1 indicates the company is not in danger of bankruptcy. The cash-debt ratio has dropped to 0.56 after the company nearly doubled its debt in 2020.

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The company’s profitability rating is 6 out of 10. The return on capital of 19.57% is higher than 65% of industry peers. Revenue and net income have yet to recover to pre-pandemic levels, but the bottom line has risen from negative territory.

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Abercrombie & Fitch

Abercrombie & Fitch Co. (

ANF, Financial) is a retailer of casual apparel based in New Albany, Ohio. Its stock price has risen 177.24% over the past year to trade around $34.68 on Sept. 3.

The company has a financial strength rating of 5 out of 10. The interest coverage ratio of 9.58 and Piotroski F-Score of 8 out of 9 show that the financial situation is very healthy. The cash-debt ratio has declined to 0.64 after the company’s debt rose above its cash on hand in 2020.

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The company’s financial strength rating is 6 out of 10. The return on invested capital of 11.32% surpasses the weighted average cost of capital of 8.89%, indicating the company is creating value for shareholders. Revenue and net income have mostly returned to pre-pandemic levels.

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Tapestry

Tapestry (

TPR, Financial) is a multinational luxury fashion holding company for the Coach New York, Kate Spade New York and Stuart Weitzman brands. Its stock price has risen 175.76% over the past year to trade around $40.57 on Sept. 3.

The company has a financial strength rating of 5 out of 10. The interest coverage ratio of 13.56 and Altman Z-Score of 2.65 show the company is not likely to be at risk of bankruptcy. The cash-debt ratio is 0.47 after the company more than doubled its debt in 2020.

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The company’s profitability rating is 7 out of 10. The return on capital of 15.35% is higher than 81% of industry peers. Revenue and net income have mostly returned to pre-pandemic levels.

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Kohl's

Kohl's (

KSS, Financial) is a discount department store retail chain headquartered in Menomonee Falls, Wisconsin. Its stock price has risen 172.31% over the past year to trade around $55.75 on Sept. 3.

The company has a financial strength rating of 5 out of 10. The interest coverage ratio of 4.35 is low, but the Piotroski F-Score of 6 out of 9 implies the company is financially stable. The ROIC of 9.93% is higher than the WACC of 9.34%, so the company is not making a loss on its investments. Revenue is still down slightly from pre-pandemic levels, but net income has recovered.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
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