[MUSIC] The rise of e-commerce in light of
the pandemic has shaken up the retail stock industry.
Many consumers are relying more on the Internet to
purchase items rather than going to
a brick-and-mortar store in person.
But our brick-and-mortar companies
actually on the decline?
According to the Census Bureau,
only about 13 percent of
total retail sales goes through e-commerce channels.
Which retail stocks are actually, thriving right now?
Hi, I'm Dez with The Motley Fool.
I spoke with Jeremy Bowman about which companies,
brick-and-mortar and e-commerce are
thriving in the pandemic today.
What's really interesting about
e-commerce and brick-and-mortar retail,
this is a multi-trillion dollar market
we're talking about.
What's happening is brick-and-mortar retailers
and e-commerce companies are merging into one another.
When looking at brick-and-mortar retail companies,
which ones have stood out amongst the path?
Few of the companies I really like right now are Target,
and as far as
brick-and-mortar retailers are
Target and Children's Place.
Target has really done well
during the pandemic and their shares
are up about 70 percent since the start of 2020,
they're a multi-category retailer
so they sell food and beverage,
medicine, healthcare stuff, paper products, toy.
We've all been to Target,
so we know what they have. They are
doing curbside pickup and store base fulfillment,
which is a different thing from what Amazon offers.
That's saving them money
that's delivering higher profits and it's been really
popular and their drive up which is what they call their
curbside pickup program has actually their sales
are up by 2,000 percent during the pandemic.
That's [LAUGHTER] pretty good I think.
Then Children's Place is another brick-and-mortar retail
I think it has been overlooked.
They are actually trading at a price
to earnings ratio around six,
which is about as
cheap as you're going to find on the stock market.
That company has been gradually closing
stores. They were even doing this before the pandemic.
But they've accelerated that program and
converting their sales through the e-commerce channel.
They had about 1,200 stores back in
2013 and now they're closer to 700.
But their most recent quarter,
their Q3 2021,
they had record sales,
record profits, margins across the board,
so I think that strategy is really
paying off for them and
being able once again to use
that hybrid order online pickup in store,
return in store that thing is paying
off as the closing down, underperforming store strategy.
What do you think are some major factors that
both Target and Children's Place have
benefited from during this time?
I think what's made Target really unique
is they compete in this pretty narrow market,
really their only direct competitors are
Walmart, Costco and Amazon.
They are different from all of them.
Target is really the only one that's strong in cities
with their small-format stores
that they are opening up all over the place.
That gives them an edge with
again that curbside pickup, hybrid model.
They're also growing pretty hard with
what they call own
brands or their private label products,
they now have $10 billion owned brands
or 10 different brands that are making
billion dollars in revenue each.
It also makes them unique and the company can
do that because unlike Amazon or Walmart,
they're not really pushing this
marketplace model where they're
having third-party retailers on their online platform.
Target is doing everything themselves,
doing that combined with the store base fulfillment
has really allowed them to deliver
higher profit margins and
outstanding growth over the last two years.
Children's Place too,
I think they're in a niche that
investors don't really look too
closely at apparel retailers.
There's a lot of them out there,
a lot of them don't do that well,
they come and go,
but I think a lot of
their competitors have retrenched
or even gone out of business.
Gymboree was a big one in recent years.
They are the last big chain still
standing there and they've
actually acquired some of their rivals.
I think they've consolidated market share there.
When just looking at e-commerce retail,
which companies do you think are
thriving right now compared to their competitors?
I think Revolve Group is a really unique company.
They target millennials and
Gen Z so I'm out of that demographic.
Maybe Dez, you
know [LAUGHTER] a little bit more than me,
[LAUGHTER] but they use influencer driven marketing,
which is a pretty unique approach.
They're pretty heavy on social media.
They also host a lot alike parties, live events.
They do a big party at the Coachella Music Festival,
where they track some of the big name actresses,
musicians, the influencers there.
They built a pretty strong brand
for themselves and they tend
to target fairly high price point.
I think they also manage
really well through the pandemic.
Sales were mostly flat in 2020,
but they actually grew their profits.
It was a tough year for apparel retailers,
but I think that's a credit to
management's ability to manage
inventory during a tough time.
Most recently, their revenue was up
62 percent in the third quarter.
I think they are in an events-driven business
and they sell primarily focused on occasion,
wear dresses as their biggest categories.
You think of events like weddings, parties,
music festivals, as I said before,
the CNBC and kind of things.
We start to see it come back over the last year and now
we got the Omicron thing going on.
But I think hopefully we will be out of
the woods by at least this summer with that thing.
I think it could be a big year for Revolve Group.
Carpark.com is a small-cap online auto-parts retailer
and they've really been
under the radar company for a long time.
They were US Auto Parts,
but new management team took
over the company and re-branded
and focused on the Carpark.com brand name.
The stock has done well,
great during the pandemic,
but I think over the long-term too,
they should have a lot of growth of the
really disrupting an industry that
e-commerce companies have mostly ignored because it's
auto-parts is a difficult thing to do online.
You've got a lot of different SKU's
at stock-keeping units.
Every car has a different set
of parts that their customers are going to need.
That's why, part of the reason why I think
the Amazons of the world haven't really focused on it.
But they're building a business, doing that,
they're targeting 20-25 percent
long-term revenue growth and they are opening
new distribution centers as
ones in Florida that's supposed
to come online in the spring and they're
expanding their Texas locations.
I think when they complete that,
they'll be able to reach 98 percent
of the US market in two days.
Pretty fast delivery too.
I think if they have the inventory and
the delivery aspect in place,
their sales continue to ramp higher
and the stock is very cheap for
an e-commerce company trading at
just 0.8 price-to-sales ratios.
I think they have
a promising future in front of them as well.
Jeremy, how do you think
e-commerce will play an overall role in
the retail market given
the pandemic and the push towards digital innovation?
I think that's a great question.
You know, e-commerce is definitely had
a big impact on
the pandemic and companies have had to evolve.
I think going forward,
we'll see e-commerce is steadily grown by
15 percent in sales a
year and I think it will continue to grow.
But I think we'll also see more of
this hybrid approach from companies.
I think what's interesting is
that it isn't just retailers that are
doing curbside pickup and online ordering.
Amazon is opening stores,
there are brands like Warby Parker that started online
and have found a pretty good
market with their own stores.
I think we'll see more of a push to this hybrid
of brick-and-mortar and e-commerce,
and more digital innovation
from the brick-and-mortar retailers
because I think they're
going to need to do that to
survive and thrive over the long-term. [MUSIC]