Stick With Retailers Meeting Customer Needs

The retail sector has been a laggard this year. The headline data suggests a bit of a slowdown, particularly compared to the pandemic era. However, behind the headlines, things are more nuanced.

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  • Customers can’t cut back completely on necessities like food or clothing. So even with a pullback, it may be seen more with luxury goods rather than wants. That logic also extends to necessities such as upkeep and repairs.

    Home improvement spending has dropped a bit. But homeowners are looking to maintain their homes, as they’re not looking to sell now and have to buy a new property with higher interest rates.

    That nuance helped home improvement retailer Lowe’s (LOW) beat earnings and stick to its full-year guidance.

    Shares trade at about 16 times forward earnings, a slight discount to the overall market. And the company recently boosted its dividend, pushing the yield over 2 percent.

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  • Action to take: Shares are a buy at current prices or on any market drop with a long-term investment in mind. The stock yields slightly higher than its other major peer in the space.

    For traders, the January 2024 $250 calls, last going for about $5.90, could see mid-double-digit returns in the coming months.

    They may not move in-the-money, but for leveraging the stock’s uptrend through the end of the year, they should still provide a good return.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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