With the rise of e-commerce and an increasingly complicated global trade environment, the retail industry has arguably never endured greater disruptive threats than it faces today. But for investors who know where to look, the retail space still contains some of the most compelling bargains our market has to offer.

So we asked three Motley Fool contributors each to find a retail stock they think investors should be watching this month. Here's what they had to say about Carter's (NYSE:CRI), Tractor Supply (NASDAQ:TSCO), and Dollar Tree (NASDAQ:DLTR).

Hand holding multiple shopping bags, with outdoor retail shops blurred in the background.


This youthful brand could be poised to pop

Steve Symington (Carter's): Carter's investors have endured a harrowing roller-coaster ride in recent months. Shares of the children's-clothing retailer first plunged more than 20% in May, then rebounded 16% in June as the market weighed the potential impact of trade tensions and tariffs on the broader apparel industry.

That said, current tariffs have not had a material impact on Carter's business, so it's mostly the threat of incremental tariffs on products imported from China that could hurt its profits at this stage -- a risk Carter's management noted during last quarter's conference call, and continues to monitor closely.

Carter's hasn't formally announced the date of its second-quarter report just yet, but if its past Q2 timing is any indication, it should be slated for late this month. When that update hits the wires, investors will want to watch for fresh color on management's views of the current state of global trade. They'll also want to see whether Carter's is able to live up to its guidance (provided in late April) for net sales growth of 4% to 6% -- a modest increase, as the company works to recoup sales lost to the bankruptcies of Toys R Us in late 2017 and Bon-Ton in early 2018 -- which should translate to roughly flat adjusted earnings of $0.79 per share.

With Carter's shares still down around 17% over the past year and roughly flat from early 2015 levels, any encouraging news could be just the spark the stock needs to break out to the upside.

Supplying investors will harvest strong returns

Demitri Kalogeropoulos (Tractor Supply): Rural lifestyle retailer Tractor Supply will announce its second-quarter results in the last week of July, and there are several good reasons for investors to follow this report. For one, the company's strong start to the year suggests it might have achieved even better momentum during its peak spring selling season.

Tractor Supply's sales growth, and the balance between customer traffic gains and rising spending, will determine whether the company is on track to improve on 2018's comparable-store sales spike of 5%.

CEO Greg Sandfort and his team also tend to adjust their full-year outlook following the spring sales period, which means the stock could swing in response to their updated reading on the industry.

Heading into late July, that prediction called for sales to reach between $8.3 billion and $8.5 billion this year, thanks to a 3% comps boost at the midpoint of guidance and the addition of 80 new stores to the base. Net income is on track to rise for the first time in four years, too, as efforts to build the e-commerce sales channel begin to pay off. Each of these targets could move significantly, though, depending on how well the company fared in the second quarter.

A dollar store which craves a trade truce

Leo Sun (Dollar Tree): Dollar Tree has underperformed its main rival, Dollar General, ever since it acquired competitor Family Dollar in 2015. Dollar Tree sold all of its goods for a dollar, while Family Dollar sold products at higher price points. As a result, Family Dollar struggled to compete against superstores and other discount retailers, and its soft comps growth offset Dollar Tree's stronger numbers.

However, Dollar Tree recently launched an aggressive turnaround effort, which involved shuttering hundreds of Family Dollar stores, rebannering 200 Family Dollar stores as Dollar Tree stores, and renovating about 1,000 locations.

It also started selling alcohol, added a $1 Dollar Tree section to its renovated Family Dollar stores, and tested out sales of slightly pricier products at select Dollar Tree locations. Those efforts paid off, and both banners posted firmly positive comps growth over the past two quarters. The company also continues to open stores, expanding its store count from 14,957 locations to 15,264 between the first quarters of 2018 and 2019.

Dollar Tree's gross margin remained flat year over year during the first quarter, and it expects to post low single-digits comps growth for the full year -- a combination that would normally translate to bottom-line growth. However, that's not the case, as Dollar Tree's guidance calls for earnings per share to dip 7% to 12% in 2019, driven by costs related to its turnaround efforts and higher tariffs on Chinese goods. That bottom-line pressure was worrisome, but investors can take solace knowing the Trump administration recently paused tariff hikes against China -- which could pave the way toward an eventual trade deal.

At 18 times forward earnings, Dollar Tree isn't especially cheap relative to its growth potential. However, improved trade relations with China could quickly change this retailer's outlook -- which makes it a top stock to watch this month.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.