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3 Top Retail Apocalypse-Proof Stocks to Watch in May

By Rick Munarriz - May 1, 2020 at 10:55AM

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Times are tough and money is tight, but these three investments in the retail space have compelling businesses built to deal with the new normal.

These are understandably scary times to be investing in retailer stocks. Most chains remain closed during the COVID-19 crisis, and even when storefronts across the country do reopen, the state of the economy may not be conducive to shopping sprees. Thankfully for investors, a challenge for one business concept can be an opportunity for another. 

Five Below (FIVE 8.29%), Walmart (WMT 1.32%), and Tanger Factory Outlet (SKT 1.38%) are three brick-and-mortar players that should be able to hold up better than their peers when the going gets tough. Let's take a closer look at why they are top retail stocks to watch in May.

Exterior shot of a Five Below store with colorful merchandise on display outside.

Image source: Five Below.

Five Below 

The fast-growing chain that specializes in stocking teen-trendy items for $5 or less isn't immune to the new normal. It closed all 900 of its stores in mid-March. Even before the shutdown, comps declined 2.2% in its holiday-containing quarter, as it reported a 14% increase in sales -- the result of growing its store count by 20% over the past year. Five Below also has a negligible e-commerce presence, but that is starting to change since acquiring the e-tailing platform earlier this year.

There is still a lot to like at Five Below. For starters, comps had turned positive again for the current quarter before the March store closures. The timing of the Hollar investment was also convenient, giving it the opportunity to shift its online operations over to the newly acquired platform that offers better tech and fulfillment costs. 

We're also now seeing some light at the end of the tunnel. Five Below has already reopened more than 100 of its stores in markets that are starting to loosen operating restrictions. At least three analysts have jacked up their price targets on Five Below this week, and all of them are now perched with goals in the triple digits. Money will be tight for the next few months, but Five Below has always been a haven for the thrifty youth looking to stretch their limited disposable income. 


The world's largest retailer isn't a surprise entry on this list. Walmart stores have remained open through the pandemic as its groceries, hardware, and other product lines are considered pandemic essentials. 

Walmart has always been a reliable place to get more bang for your buck, but store sales are surging now that folks have fewer options for shopping. Walmart is also making sure it doesn't forget the folks avoiding going out these days, announcing this week that it will expand its Express Delivery platform that competes with's Prime Now in offering online orders delivered to customer homes within two hours. 

Walmart also boosted its dividend in February, but that also isn't much of a surprise. The discounter has increased its payouts for 47 consecutive years. 

Tanger Factory Outlet Centers

The riskiest of the three investments to watch this month is a real estate investment trust (REIT) that operates strip malls. You're not going to get a lot of love for retailing landlords these days, which explains why Tanger has shed roughly half of its value in 2020. 

Physical retail is largely collecting cobwebs at this point, and many of Tanger's tenants aren't likely to be around by the time the coast is clear for in-store shopping. The impressive 97% occupancy rate that Tanger had at the beginning of this year is going to be toast. The beefy distributions that Tanger has increased every year since 1993 will also be history. 

These are scary times to be buying into any shopping center operator, but Tanger's stores will be popular at the other end of this pandemic. Traditional retailers will need to dump full-priced inventory that isn't selling, and consumers are going to gravitate to a place where they can score several different merchants offering closeouts and clearance items. 

There may never be a retailer that is truly recession-resistant, but you can help your odds as an investor by buying into retailer stocks that can hold up better than the competition. Five Below, Walmart, and Tanger Factory Outlet Centers are built for today's calamity and tomorrow's hazy recovery. 

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$124.25 (1.32%) $1.62
Tanger Factory Outlet Centers, Inc. Stock Quote
Tanger Factory Outlet Centers, Inc.
$14.66 (1.38%) $0.20
Five Below, Inc. Stock Quote
Five Below, Inc.
$122.36 (8.29%) $9.37, Inc. Stock Quote, Inc.
$113.50 (3.60%) $3.94

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

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