Retailers are feeling the holiday spirit after the shopping season started off better than expected, yet they are advised to remain cautious of still-fragile economic conditions.
Reuters reports that online sellers were feeling "very good" about their holiday sales performance. Many are also receiving fringe benefits for that performance: eBay's shares climbed over 4% on Monday after strong holiday sales led to an upgrade in analyst ratings.
Aaron Kessler, an analyst at Raymond James & Associates, put a 12-month price target of $39 on eBay's stock. In a note to investors he wrote, "data indicates solid marketplace growth has continued into the fourth quarter, and we believe continued enhancements should continue to drive improved performance."
But retailers are warned not to celebrate too soon, and perhaps investors are wise to do the same.
"It won't take a lot at all to throw things off-course," says Ken Chenault, CEO of American Express -- he sits on the President's Council on Jobs and Competitiveness and is co-chairman of the Business Roundtable. He cites an uncertain future of the eurozone, unemployment, and inaction from the government as top reasons retailers may see a turnaround.
If you think retailers will continue to benefit through the holiday season, or even if you don't, we wanted to create a list of retailers that might be worth a closer look.
We created a list of retail companies that have proven themselves to be more profitable than their competitors, based on gross, operating, and pre-tax profit margins over the last 12 months.
Do you think there's more upside to these profitable retails stocks, despite the sales environment?
List sorted by gross margin difference. (Click here to access free, interactive tools to analyze these ideas.)
1. Jos. A Bank Clothiers
2. Chico's FAS
3. Sally Beauty Holdings
5. True Religion Apparel
9. Lululemon Athletica
10. Limited Brands
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Profitability data sourced from Fidelity.
The Motley Fool owns shares of Guess', lululemon athletica, and Limited Brands. Motley Fool newsletter services have recommended buying shares of lululemon athletica. Motley Fool newsletter services have recommended writing covered calls in Guess'. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.