The retail sector is under heavy selling pressure with biting inflationary pressures coming up against tough comparables from a year ago when stimulus checks helped boost spending. The SPDR S&P Retail ETF (NYSEARCA:XRT) fell 8.29% on Wednesday and lost another 1.20% Thursday.
Amid the blows in big-name retail stocks, Evercore ISI said it saw an “extremely attractive” entry point on Lowe’s (LOW).
Analyst Greg Melich said late spring moved $350 million in sales from the first quarter to the second quarter for Lowe’s. With pricing power, rational industry and improved returns, Lowe’s (LOW) at 13.6x 2022 EPS estimate is seen as a bargain for those who think the home improvement cycle has longevity and benefits. Note that an investor would have to go back to the housing bubble burst of 2007-2008 to get LOW at a multiple below 14X.
Meanwhile, Mizuho Americas thinks investors should buy Mondelez International (MDLZ), BellRing Brands (BRBR) and Simply Good Foods Company (SMPL) on weakness. Weak EPS impressions from Walmart and Target would have reflected the shift in consumer spending from discretionary and larger items to consumables and less expensive store brands. MDLZ, BRBR and SMPL are considered well positioned in the macro backdrop and are trading at attractive levels.
Bank of America reiterated that TJX Companies (TJX) is likely to capture even more market share and has the pricing power to offset cost pressures. TJX shares are labeled as attractive even after the earnings recovery.