3 Major Retail Stocks to Buy After Beating Earnings Expectations

We’ve rolled through a bulk of earnings season, but now we’re hearing from the retail sector. So far, it’s been hit-and-miss, and the retail sector has struggled. That said, there are some of the best retail stocks to buy amid the mess.

Consumer spending is the lifeblood of the U.S. economy. Put simply, we live in a consumption-driven world, from the food we eat to the gas we buy to the things we do for entertainment.

Listening to the conference calls can give investors some pretty good insight as to what’s going on in the economy. That’s from the upper-tier luxury space to the thriftier outlets as well. Let’s look at a few of the best retail stocks to buy right now.

Best Retail Stocks to Buy: Lululemon Athletica (LULU)

We’re in the week where several retailers are reporting earnings. However, Lululemon Athletica (NASDAQ:LULU) delivered its results in late March. Impressively, shares rallied almost 10% in six straight sessions ahead of earnings, then popped higher by more than 12% on the results.

Since then, the stock has been up more than 18% after Lululemon’s report. That’s after the company delivered 30% revenue growth while beating earnings and revenue expectations. Even more impressively, the company’s direct-to-consumer business exploded, with revenue growth of 37% overall and 39% on a constant currency basis.

The low end of management’s revenue and earnings outlook topped analysts’ expectations for the next quarter, which sent the stock rocketing higher.

There’s always the possibility that Lululemon is wrong and disappoints investors in the future. However, it’s one of the few retailers with robust consumer demand right now.

Good Earnings, Poor Price Action: Ulta Beauty (ULTA)

Is it really fair to say that Ulta Beauty (NASDAQ:ULTA) has had poor price action? Maybe not. After all, shares hit an all-time high on May 1. That said, the stock is “only” up 9.5% so far in 2023, which is about in line with the S&P 500 and Nasdaq, and Ulta shares are down 10% since hitting their highs earlier this month.

For some investors, they’ll view Ulta as a bit lackluster this year, given its in-line performance with the overall market despite hitting all-time highs while the S&P 500 is still 13% below its highs.

Let’s cut to the chase. Ulta will deliver earnings later this month, but its most recent report was a top-and-bottom-line beat. Revenue grew more than 18% year over year. Even better, Ulta provided full-year earnings and revenue estimates above consensus expectations.

The stock is actually down 2% since that report, even though it was enough to send it to all-time highs.

Does Ulta have poor price action? Many will say “no,” and that’s fine. But it’s a top shopping destination for teens, and its valuation is reasonable.

Good Growth, Higher Guidance: TJX Companies (TJX)

Of the three names on this list, TJX Companies (NYSE:TJX) is the most recent to report. The stock initially rallied about 4% on the report, although it closed higher by less than 1%. Shares are currently flat year to date and unchanged, dating back to mid-November. However, the stock is up more than 40% over the past 12 months.

Bulls were hopeful that TJX Companies would be able to break to the upside after this report. While earnings beat expectations, revenue of $11.78 billion missed consensus expectations by about $40 million.

However, the upside is that management gave a boost to its full-year outlook.

My thoughts are pretty simple here. Employment remains strong in the U.S., and TJX has an excellent balance between thrifty bargain shoppers and mid-to-higher-end retail. As long as that remains the case, the stock could have more upside, particularly with consensus expectations calling for about 15% earnings growth this year and 11% growth next year.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.