Few sectors have been hit as hard as the Retail Sector (XRT) over the past nine months, with the ETF finding itself down 45% from its highs at its June lows.
This shellacking should not be a huge surprise, given that the group was coming up against impossible year-over-year comps in Q1/Q2 2022. This was related to the benefit of government stimulus on sales in the year-ago period, with margins also under pressure due to labor inflation and higher shipping costs.
The index is now finally lapping this unfavorable period, but it’s dealing with another issue: worries about a global recession.
While few sectors are hit harder than retail in a recessionary environment, all businesses are not created equal, and many can weather the storm much better than their peers.
This is especially true of the businesses that lean more towards staples than discretionary or those companies that benefit from a trade-down environment, with these being off-price retailers.
If the sector is destined for lower prices once a recession is confirmed (which looks like a high probability), it’s understandable that some investors aren’t in a hurry to invest. However, I believe two names stand out as cheap with high-quality businesses that should outperform the group.
Let’s take a closer look below: Continue reading "These 2 Retail Giants Are Trading at a Steal"