Investing in retail stocks can be a rewarding endeavour. However, finding the best retail stocks to buy and hold for the long haul can be quite difficult.
The first thing to consider when looking for the best retail stocks to buy this September is how defensive they are and what products they sell.
Some retailers sell essential goods and household staples, making them much more resilient in this economic environment and giving investors the confidence to hold them for the long haul.
On the flip side, though, some retail stocks only sell discretionary items. Many of these retail stocks have already come under pressure in the current economic environment as consumers’ budgets are impacted by higher interest rates and surging inflation, leaving less cash to pay for discretionary goods.
Furthermore, with the rapidly improving technology as well as shipping times that are consistently getting faster, many retail stocks are also adapting an e-commerce strategy to their business to help lower costs, grow sales and ultimately boost profitability.
Therefore, it’s essential to understand how the retail stocks you’re interested in buying operate as well as how defensive they are and what growth potential they have over the coming years and decades.
With that in mind, if you’re looking for some of the best retail stocks to buy in September 2023, here are two top choices. One is a highly defensive stock with impressive growth potential, while the other is a discretionary business that’s trading ultra-cheap in this environment.
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One of the best retail stocks to buy now
Although plenty of retail stocks sell discretionary items and have been impacted in the current economic environment, one of the most reliable companies to buy in the space is Dollarama (TSX:DOL), the rapidly growing discount retailer.
Even outside the retail sector, the majority of Canadian stocks will be negatively impacted by a recession. With Dollarama, however, the stock can actually get a boost from worsening economic environments, as it drives more consumers to shop at its stores.
While some stocks that thrive during a recession will lag when the economy is expanding, Dollarama is constantly growing its operations, making it one of the best retail stocks you can buy and hold for the long haul.
It’s by no means cheap, with the stock currently trading just off its 52-week high. However, Dollarama has proven time and again that it deserves its growth premium, and it’s one of the few retail stocks that you can have confidence in holding for the long haul through any economic environment.
In fact, over the last decade, it’s earned investors a total return of more than 640%, or a compounded annual growth rate of roughly 22.2%.
Although it trades at 26.8 times its forward earnings, it’s easily one of the best retail stocks you can buy in September 2023, especially if you want to help shore up your portfolio.
One of the cheapest retail stocks on the market today
While Dollarama is a highly reliable stock that offers excellent growth potential, if you’re looking to invest in a company that’s undervalued, one of the best retail stocks to consider in September 2023 is Aritzia (TSX:ATZ).
Aritzia is an impressive growth stock that’s been rapidly expanding its operation for years. The retailer sells women’s fashion items that are high quality but priced relatively affordably.
Its products are more expensive and higher quality than fast fashion alternatives but more affordable than true luxury brands — a strategy that’s seen constant growth in popularity over the last few years.
With the likelihood of a recession materializing in the near term, though, Aritzia’s stock has fallen significantly this year and now trades more than 58% below its all-time high of just over $60.
These impacts on Aritzia, however, should only be temporary. While it trades at such a significant discount, it’s one of the best retail stocks you can buy.
In fact, the stock has roughly double the stores in Canada that it does south of the border, despite the U.S. population being roughly 8.7 times larger than Canada, giving it a natural runway for growth.
Therefore, while it’s significantly undervalued, it’s easily one of the best retail stocks to buy now.
