Q: It seems like every week, there's another headline about a retailer going bankrupt or closing stores. Should investors avoid all brick-and-mortar retail stocks now?
Through the first three quarters of 2017, there have been 22 major retail bankruptcies, including high-profile names like hhgregg, Toys R Us, and True Religion. However, all but a select few have two common characteristics: They sell discretionary goods (things people want, not that they need) and aren't discount-oriented businesses. Retailers who sell full-price discretionary goods don't have the brightest future right now, and it's tough to justify investing in almost any company in this category.
Continue Reading Below
On the other hand, discount-oriented retailers and those who sell non-discretionary products are doing quite well as a group. The e-commerce boom has made discounted products commonplace, so consumers don't want to pay full retail anymore, but they do appear to be eager to shop in-person for bargains.
Wal-Mart Stores (NYSE: WMT) is the best example of a company benefitting from this trend. The retail titan's stock is actually up 40% in 2017 on strong sales figures and increased guidance. Five Below (NASDAQ: FIVE) is another discount retailer that's been absolutely crushing it lately, appealing to bargain-hungry shoppers.
Offer from The Motley Fool: The 10 best stocks to buy nowMotley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the S&P 500!*
Tom and David just revealed their ten top stock picks for investors to buy right now.
*Stock Advisor returns as of Dec. 4, 2017.