3 Retail Stocks to Stash in Your TFSA Before Summer

Retail stocks like Dollarama Inc. (TSX:DOL) and Aritzia Inc. (TSX:ATZ) are still attractive ahead of the key summer months.

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Statistics Canada released its March 2018 retail trade report on May 18. Retail sales climbed by 0.6% to $50.2 billion. This was the third consecutive month of gains for Canadian retail. Sales rose in six of 11 sub-sectors but were largely powered by sales at motor vehicle and parts dealers.

The S&P/TSX Composite Index has rallied back to its January levels in April and May, but investors will be hoping the summer will power it to new heights. Let’s take a look at three retailers that could bolster your TFSA ahead of June.

Aritzia Inc. (TSX:ATZ)

Aritzia is a design house and fashion retailer based in Vancouver and with operations across the U.S. and Canada. Its stock has climbed 9.3% in 2018 as of close on May 22. After a difficult 2017, Aritzia has emerged as one of the most attractive clothing retail options this year.

In fiscal 2018, Aritzia saw net revenue increase 11.4% to $743.3 million and reported comparable sales growth of 6.6% over the prior year. Net income climbed to $57.1 million in comparison to a $56.1 million loss in fiscal 2017, while adjusted EBITDA rose 12.8% to $132.7 million.

Like many successful clothing retailers in the present era, Aritzia has reported successes by balancing its brick-and-mortar footprint with a fast-growing e-commerce business. Clothing and clothing accessories stores saw sales rise 2.5% in March. The stock still comes relatively cheap after plunging over 20% since its initial public offering in late 2016.

Dollarama Inc. (TSX:DOL)

There is no getting around it. Dollarama has been an absolute beast this decade. Shares have soared over 1,000% since January 1, 2010, as the dollar store industry has proven robust in the years following the financial crisis. The rise of online retailers like Amazon.com, Inc. have crushed traditional retailers, but dollar stores and convenience stores have flourished and even attracted a more diverse clientele by income strata in that time period.

Dollarama released its fourth-quarter and full-year results for fiscal 2018 on March 29. Sales rose 10.2% from fiscal 2017 to $3.26 billion and comparable store sales increased 5.2% year over year. The decision to include credit card purchases was a big win for Dollarama in the middle of the year, and the company says that it is focused on same-store sales growth and expansion of locations in fiscal 2019.

Canadian Tire Corporation Limited (TSX:CTC.A)

Canadian Tire is a Toronto-based retailer that boasts a wide array of product focuses, including home goods, sporting equipment, automotive parts and accessories, and others. Receipts at general merchandise stores rose 1% in March, and motor vehicle and parts dealers saw a 3% increase in activity. Canadian Tire released its first-quarter results on May 10.

Consolidated same-store sales rose 5.2% year over year, and retail segment revenue climbed 2.8%. Excluding Petroleum, consolidated retail sales increased 5.1% over Q1 2017. The company also declared a quarterly dividend of $0.90 per share, representing a 1.2% dividend yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon.

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