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These 6 Retail Stocks Are Smart Coronavirus Buys

By Daniel B. Kline - Apr 8, 2020 at 7:15AM

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These companies are attracting fans and performing well during a difficult time.

The retailers that invested heavily in their supply chains and delivery infrastructure and already started moving to true omnichannel models have thrived during the coronavirus pandemic.

Not every company on this list will see sales gains during this period, and many, if not all, will report smaller profits due to lower-margin items being the most in-demand. But these six companies have shown their strength by finding ways to keep serving customers despite all of the operational challenges businesses currently face.

A woman works in an Amazon warehouse.

Amazon has been working on adding 100,000 workers. Image source: Amazon.

1. Amazon

It's rare you get to buy a retail giant that's also strong in other areas at a discount. Amazon (AMZN 3.58%) closed at $1906.59 on April 3, nearly $300 of its 52-week high. It's reasonable to assume that the company has not only benefited from high demand during the pandemic, but has likely signed up new Prime members while also adding customers to Amazon Web Services (AWS).

2. Walmart

Walmart (WMT 0.08%) had a decision to make a few years ago. It could lean into its stores and make digital secondary, or it could go full-on omnichannel. It chose the latter, and invested billions in being able to ship orders faster from its stores and warehouses. It has also built out a same-day delivery grocery service and offers curbside pickup at many locations.

Investors have noticed this, and shares closed at $119.48 on April 3, only about $9 below the chain's 52-week high. Walmart has shown its resilience and its ability to operate under nearly any conditions. That should help its shares hit new heights in the post-coronavirus world.

3. Target

Target (TGT 2.46%) made many of the same moves Walmart did. It also bought Shipt to accelerate its ability to offer same-day delivery.

Now the retailer is poised to post big sales numbers while many of its non-food competitors remain closed. The chain sells food, but it also offers office supplies, electronics, and other things that aren't essential but are wanted.

Once the pandemic passes, the chain should quickly reset to normal. It may not get back to its 52-week high of $130.24 quickly, but it's going work its way back from the $92.57 shares closed at on April 3.

4. Best Buy

Best Buy (BBY 4.77%) has so far been the surprise winner of the current situation. The chain has closed its stores, but its website remains open and it's offering curbside pickup at many locations.

That has led to what the company called a "spike" in sales as consumers sought to buy electronics to work at home, appliances to store food, and things to keep them entertained. It's unclear how long that spike will last, but it's clear the chain won't be devastated in the way many others will. That should help its share price recover from $53.48, where it closed April 3, down from its 52-week high of $91.99.

5. Costco

Costco (COST 1.97%) was built for pandemics. It sells a limited selection of items in bulk. That makes it easier to keep its shelves stocked, because people come in expecting to be able to buy toilet paper, paper towels, and other items, and don't really care about specific sizes or brands. The warehouse club also makes most of its profit from memberships (about 2/3), and has likely picked up quite a few -- the company has not made any public statements to that effect, but it has acknowledged higher-than-normal demand.

Investors have clearly noticed. Costco shares closed April 3 at $288.65. That's down from their 52-week high of $325.26, but less of a drop than many retailers experienced, and still leaves room for growth whenever a recovery happens.

6. Ollie's Bargain Outlet

Ollie's Bargain Outlet (OLLI 4.50%) may not be on every trader's radar, but it's a well-run company. During the pandemic, it has shifted its supply chain to provide food and other essentials. When the coronavirus passes the company should be well-positioned to buy low-cost goods from orders other retailers canceled.

Being a bargain retailer that sells an eclectic mix of items is a good thing a period when many people will have constrained budgets. That should help Ollie's recover from $44.59 and eventually work back toward its 52-week high of $103.03.

Buy carefully

All of these stocks may fall further, and they may fall again when earnings get reported. A prolonged recession could delay their long-term success, and it's impossible to know when the world will revert to anything close to normal.

For long-term investors, however, these companies have shown that they're built on strong foundations. That should mean that there will eventually be a day when their arrows point up and the numbers turn green.

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$123.72 (0.08%) $0.10, Inc. Stock Quote, Inc.
$116.46 (3.58%) $4.02
Best Buy Co., Inc. Stock Quote
Best Buy Co., Inc.
$74.69 (4.77%) $3.40
Costco Wholesale Corporation Stock Quote
Costco Wholesale Corporation
$484.37 (1.97%) $9.37
Target Corporation Stock Quote
Target Corporation
$150.42 (2.46%) $3.61
Ollie's Bargain Outlet Holdings, Inc. Stock Quote
Ollie's Bargain Outlet Holdings, Inc.
$63.43 (4.50%) $2.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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