Two Under-The-Radar Retail Stocks Will Ride Resurgent Consumer Spending, According to Traders

Emile Wamsteker | Bloomberg | Getty Images

Ongoing stimulus, the vaccine rollout and a reopening economy have consumers in a spending mood.

Retail sales in March soared nearly 10%, the second best increase on record.

Retail heavyweights like Amazon and Walmart aren't the only ones that could benefit. CNBC's "Trading Nation" asked traders what under-the-radar retail stocks they're watching.

"We are looking at pent-up demand meets unsold inventory and that leads us to the liquidators," said Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors.

Sanchez said Thursday that liquidators like Ross Stores and TJ Maxx traded well during the pandemic with strong growth, and that has pushed up the valuations for these stocks. There is one stock that still offers "growth at a reasonable price," she sad.

"Big Lots is an interesting name. They had actually very strong revenue growth last year," said Sanchez. "Their expectations are still extremely strong, but they're trading at 11.5 times forward earnings relative to an industry average of 30 times, so we think this is an interesting opportunity."

Big Lots has surged 60% this year, better than the 44% growth for the XRT retail ETF. Shares have pulled back 5% from an all-time high set in March.

Craig Johnson, chief market technician at Piper Sandler, pinpointed Guess as a stock with potential.

"Here's a stock that's really not on a lot of people's radars, it's got a $1.75 billion market cap, and only a handful of analysts are following this company fundamentally," Johnson said Thursday.

He said the stock is breaking out to highs not seen since 2018 in a "consistent trend" upward. Shares have climbed 22% this year.

"The stock is trading at 15.5 times forward numbers, and that's well below where some of its peers are trading at like Abercrombie & Fitch and Gap and Levi," he said. "So we think this is kind of one of those little gems out there that … we think that should be that we would be buying."


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