TSCO Tractor Supply Company

CHICAGO, Feb. 16, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: PriceSmart (Nasdaq: PSMT), Limited Brands (NYSE: LTD), Zumiez (Nasdaq: ZUMZ) and Tractor Supply Co (Nasdaq: TSCO).

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4 Retail Stocks on the Rise

While the industry is expected to see solid growth overall this year, there will certainly be some retailers who see tremendous growth and those who get left behind.

But how do you know which ones to buy and which ones to avoid?

One important item to look at is same-store sales. This metric compares sales across stores open at least a year. This is also known as comp sales.

This is beneficial because it allows investors and analysts to compare sales between different retailers and can alert them to shifts in consumer demand. Total sales growth, while important, will naturally be higher among retailers who are rapidly opening new stores. Same-store sales ignores this, however, and only focuses on sales at existing stores.

It's also beneficial in that it excludes the "honeymoon phase" of strong sales typically experienced shortly after stores are opened in new locations.

Early Warning Signs

It can also make it easier to spot shifts in consumer tastes or preferences. Although overall sales for a company might be up, a few consecutive months of negative comp sales can signal trouble ahead.

Compare high-end retailer Nordstrom with off-price retailer TJX Companies, which owns T.J. Maxx, Marshalls and HomeGoods stores, during the heart of the recession:

Clearly, consumer habits shifted away from luxury retailers and towards more value-oriented companies during the Great Recession.

As the economy continues to pick up, however, which companies are now seeing consistent increases in same-store sales?

Here are 4 companies seeing strong same-store sales:

PriceSmart (Nasdaq: PSMT)

PriceSmart operates 28 U.S.-style membership warehouse clubs in Central America and the Caribbean. Many might question whether this business model would work in Latin America. The same-store sales numbers speak for themselves:

The company will be expanding into South America later this year with the opening of a store in Colombia. It is a Zacks #2 Rank (Buy) stock.

Limited Brands (NYSE: LTD)

LTD operates well-known brands Victoria's Secret and Bath & Body Works. Same-store sales have been strong over the last several months, including a remarkable 24% increase in January (35% at Victoria's Secret):

Valuation is attractive with a PEG ratio of 0.97. It is a Zacks #3 Rank (Hold) stock.

Zumiez (Nasdaq: ZUMZ)

Zumiez (pronounced "zoomies") is a retailer focused on action sports like skateboarding, surfing, snowboarding, motocross and BMX. Same-store sales have been surging over the last several months:

The company carries no long-term debt and is a Zacks #3 Rank (Hold) stock.

Tractor Supply Co (Nasdaq: TSCO)

This rural-focused retailer has been on a tear lately. Estimates have been surging after it recently delivered a strong fourth quarter in which EPS came in 8% above the Zacks Consensus Estimate.

Rising agricultural prices have certainly played a role in Tractor Supply's strong results. The company reports sales each quarter rather than on a monthly basis, and the results have been impressive:

Tractor Supply is a Zacks #2 Rank (Buy) stock.

Conclusion

When evaluating retail stocks, it's important to look at a company's recent same-store sales trends. These 4 are seeing strong demand for their products in existing locations, which should lead to rising earnings estimates and rising stock prices.

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