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Investing in Retail Companies/Casual Dining

The process of investing into retail and casual dining companies has a number of similar concerns so I've combined them onto this one page. Investing into these sectors is both unique and different than investing into other sectors. There are some unique considerations that should be understood when investing.

  1. What is the growth in openings : How fast is this retail company growing in opening of new stores or units? This is very important factor in determining the potential for success? The number of openings, for a growing retail or existing retail will help the company to organically grow their revenue. When coupling the openings percentage with the growth in same store sales(SSS), this will determine the potential growth in earnings quarter to quarter.

  2. Same store sales are critical : Same store sales is a metric that retail companies typically report to evaluates the total revenues compared to the revenues earned over the prior year.

  3. What are revenue and earnings growth : At the end of the day, stocks will be valued on their earnings and revenue. So, having a good understanding about how these important metrics are changing quarter over quarter will help you understand the investment profile.

  4. Return on Revenues : This metric will help you understand how much revenue is being returned based on revenues.

  5. What are the Days Sales Outstanding(DSO) : The days sales outstanding, is a metric that is calculated by: DSO ratio = accounts receivable / average sales. The DSO is a measure of how long a company will take to collect revenue after a sale has been made.

The following is a list of popular retail stocks:

  • Lululemon
  • Ulta Salon
  • The Gap
  • Nordstom's
  • Macy's
  • Amazon
  • Walmart
  • Target
  • Kohls
  • Costco
  • Home Depot
  • Urban Outfitters
  • Under Armor
  • Dicks Sporting Goods
  • L Brands
  • Dollar Tree
  • JC Penney
  • Dollar General

Retail is an exciting and fun section of the market to invest in. It can be fad based, quickly changing and fast growing sector of the market. These stocks need to be monitored closely and news items constantly followed.

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