The retail industry’s already challenging situation was made considerably more problematic by the coronavirus outbreak. The negative impacts of COVID-19 drastically affected the retail business, with some companies trying to boost their e-commerce operations and others electing to close their doors.
Despite significant transformations and significant challenges, some firms have profited as a result of the changes and are in the process of charting a new future for retail. FinancialCentre Broker reports 3 retail stocks that can benefit from firms like Amazon (NASDAQ: AMZN), BJ’s Wholesale (NYSE: BJ), and Alibaba Holdings Limited (NASDAQ: BABA) as they emerge from and move past the epidemic.
- Amazon
Amazon’s various businesses make it even more powerful. Amazon developed the cloud computing business, which until recently accounted for the majority of the company’s income. When it comes to increasing competition, these cloud revenues can carry the organization. Furthermore, during the previous 12 months, Amazon’s operating margin was 6.6 percent. Despite a 4% margin in its North American retail business and a 2% margin on overseas sales, Amazon Web Services 31% operational margin enabled huge profit rises throughout that time.
This structure explains why, despite a market capitalization of $1.7 trillion, the company continues to prepare for massive growth. Net sales increased by 44% year over year in the most recent quarter. In addition, net income increased 224 percent to $8.1 billion as operating expenditures increased at a slower rate than sales. In addition, the corporation received an extra $1.7 billion in other revenue from its equity interests, which resulted in additional profits.
These margins enabled the company to earn $26.4 billion in free cash flow last year, further improving its balance sheet. Amazon can comfortably handle its long-term debt of just under $31.9 billion with its current cash flow and more than $73 billion in liquidity.
While Amazon has a bright future, when the United States recovers from the pandemic, buyers may return to physical locations, slowing sales growth in the short term. This is most likely why the company did not guide beyond the current quarter. However, Amazon will succeed as long as it has a stable financial sheet and its e-commerce and cloud computing businesses are on a long-term positive trend.
- BJ’s Wholesale
BJ’s is a regional warehouse club based on the East Coast of the United States. Its 221 locations stand out by concentrating on a smaller (but more refined) selection of popular items. It also distinguishes itself by emphasizing fresh items and providing warehouse club pricing rather than bulk package sizes like Costco or Walmart’s Sam’s Club.
Moreover, its geographic footprint has great room for development, which it may now take advantage of owing to the epidemic. The increased sales stoked by the contagion helped revenue rise by 17% in 2020. In addition, as a result of decreased operational expense growth and decreased interest expenses, net income climbed by 12% over that time.
More importantly, the additional money may help BJ’s finances in the long run. Because BJ’s earned $676 million in free cash flow, a 276% increase over the previous year, the above interest expenses were reduced. BJ’s paid down $574 million in debt with a portion of this money, bringing their total debt to $1.1 billion. Consequently, BJclaims $319 million in shareholders’ equity, or the worth of the corporation, after liabilities are subtracted from assets. This increases from the $54 million in negative equity it had at the end of 2019.
Like many other retailers, BJ’s did not give projections for the future, and growth may be slowed in the near term when specific pre-pandemic spending patterns resurface. Nonetheless, BJ’s should establish new stores more quickly now that its debts have been reduced. In addition, a wider footprint gives BJ’s a handy alternative for more customers, which might contribute to faster revenue growth.
- Alibaba Holdings Limited
Alibaba is one of the most well-known retail-focused organizations on the market today. The modern empire of the company is based on its vast e-commerce activity. In addition, Alibaba is now active in cloud computing and other technological projects. So would it be wise for investors to purchase on the dip, even if BABA stock has been trading sideways this year?
Former Vice President (US) Al Gore, for one, appears to think so. To give you some context, his investment business, Generation Investment Management, recently quadrupled its position in Alibaba. The company also sold all of its Airbnb (NASDAQ: ABNB) stock at the same time. Alibaba, on the other hand, continues to invest in its cloud computing services.
Last week, the business announced ambitions to expand the compatibility of Apsara, its cloud operating system, to include more processing chips. Without a doubt, this would help it gain a competitive advantage in the field. So would you consider BABA stock to be a good investment right now, given all of this?
Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.