Seventy-nine stocks trading on the NYSE and Nasdaq hit 52-week highs in Tuesday trading. Of those stocks, 30 also hit all-time highs.
I’m someone who writes a fair bit about retail stocks. I happened to notice that three well-known retailers hit 52-week highs: Guess (GES), Miniso Group (MNSO), and TJX Companies (TJX).
Only one of them is a buy. Here’s why.
Guess
Guess stock is up more than 37% over the past year and 15% year-to-date. However, if you invested in the fashion retailer over the past five years, you’d have gone sideways compared to a 55% gain for the S&P 500.
Why is Guess at a 52-week high? Business is decent.
In Q2 2024, its net revenue was 3% higher year-over-year to $664.5 million, with solid performances from its European and Asian businesses, offset by weakness in the Americas. On the bottom line, its adjusted earnings increased by 74% to $39.7 million. Due to fewer shares outstanding, its earnings per share were up 85% to $0.72.
“Most of our businesses delivered better than expected operating results, driven by solid revenue performance, strong gross margin results and effective cost management, which contributed to an operating profit of $65 million and a 9.7% operating margin for the period, well ahead of our expectations,” stated CEO Carlos Alberini in its press release.
For fiscal 2024, it expects revenues to grow by 3.25% (midpoint of guidance) with an adjusted operating margin of 9.2% and adjusted EPS of $2.98.
Based on its estimate for 2024, it trades at 8.2x its 52-week high of $24.40. In addition, it expects 2024 free cash flow of $160 million. Based on an enterprise value of $2.21 billion, it has a free cash flow yield of 7.2%. I consider anything 8% or higher to be in value territory. It’s pretty close.
Miniso Group
The Chinese retailer’s stock is up more than 261% over the past year and 135% year-to-date. However, it’s gained just 9% over the past five years. It’s hard to know if the Miniso of the next five years will be from the past year or the past five years.
There’s no doubt it’s on a hot streak. In May, it opened up a flagship Times Square store with more than 2,500 products. It’s on a mission to become a global lifestyle brand.
Miniso has 5,514 stores worldwide, with more than 60% in China. In December 2020, it launched a sub-brand called Top Toy, which caters to the collectibles market. That concept has 116 stores up and running.
Oberweis Asset Management portfolio manager Barry Wang likes the stock. Wang co-manages the Oberweis China Opportunities Fund (OBCHX). Miniso is a top-10 holding.
“Most of their products are self-designed, not commoditized products, which helps pricing and margin,” the portfolio manager told Investor’s Business Daily in an email.
Unbelievably, Wang says that Miniso launches 100 new products every week.
Jefferies analyst Anne Ling says the company’s long road back to pre-pandemic sales in China is almost complete. It reports Q4 2023 sales shortly. The average sales per store are expected to be between 80-85% of 2019 levels.
It’s currently valued at 5.5x its trailing 12-month sales of $1.53 billion.
TJX Companies
TJX stock is up more than 44% over the past year and 15% year-to-date. More importantly, it’s up 66% over the past five years, nearly 10 percentage points higher than the index.
TJX reported Q2 2023 results on Aug. 16. Its revenue was $12.76 billion, $310 million higher than analyst estimates. On the bottom line, it earned $0.85 a share, eight cents above the consensus.
Compared to Q2 2022, sales were 7.7% higher, with a 23% profit increase. A combination of higher traffic as customers looked for good deals from the discounter and a tremendous selection of inventory due to high-end liquidations from other retailers helped drive these increases.
As a result of its Q2 2023 results, TJX expects same-store sales growth of 3.5% (midpoint of guidance) in 2023 with EPS of $3.69, 10 cents higher than analyst expectations.
“Going forward, we continue to see excellent opportunities to grow sales and customer traffic, capture market share, and drive the profitability of our Company,” stated CEO Ernie Herman.
The Bottom Line
When I started writing this story, I didn't think it would be so challenging to come up with a winner. However, all three retailers are performing exceptionally well, so it's conceivable all three could see their shares continue to rise over the rest of 2023 and into 2024.
But a promise is a promise. I did say I would identify one of the trio as a Buy. Trading at just 2.06x sales, my choice would be TJX. When in doubt, go with the more established retailer.
If you’re into options, the Jan. 19/2024 $82.50 put is exhibiting unusual options activity today. With 143 days to expiration, it’s got an annualized return of 3.8%. That’s not great, but if the stock retreats and you sell the put, you’ll get the shares at $81.10, 11% below where they’re currently trading.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
