5 Retail Stocks Worth a Look, and 1 to Avoid

Home Depot is one of the retail stocks that are worth buying after the sector’s latest selloff.

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Tolstoy wrote that all happy families are alike. The same could be said about the retailer stocks that are worth buying after the sector’s latest selloff: Each is likely to sidestep the surge of discounting among big-box stores.

Retail has been on the ropes for weeks now, after


(ticker: WMT) and


(TGT) delivered downbeat earnings reports in mid-May and lowered their outlooks. Inventory was one problem. Both rushed to stock their shelves amid transportation and supply-chain gridlock, just as consumers were shifting their spending—whether tightening their belts in reaction to inflation or prioritizing experiences and special occasions that call for dressing up.

Stores now are discounting some merchandise, particularly apparel, setting off a wave of worry for the industry. Those concerns intensified on June 7, when Target lowered its forecast for the second time in three weeks, citing the issue.

Yet, retailers such as

Academy Sports and Outdoors

(ASO) have painted a brighter picture. Even Walmart hasn’t warned that inventory will further hurt results. “Target’s problems definitely look to be company-specific,” says John Zolidis, president of Quo Vadis Capital.

That creates an opportunity for investors. But to make the right choices, they must be discriminating. Some battered shares, such as


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