Here are 2 havens among retail stocks

Inherent strengths at these sellers make them safe in an uncertain holiday shopping season.

By Nov 1, 2013 10:20AM
MoneyShow.comTeenage girl buying clothes at till, close-up © Lisa Stirling, Digital Vision, Getty ImagesBy Khoa Nguyen, Personal Finance

As the all-important holiday season approaches, political warfare and tepid job growth doesn't bode well for the retail sector. Nonetheless, certain retailers are overcoming these headwinds—which means they’re positioned to take off when conditions improve.

Below are two retail companies with inherent advantages that buffer them against the travails of their peers, allowing investors to prosper even during uncertain times.

As an added bonus, they're not shy about returning value to investors through buybacks and will continue to generate growth as the retail industry picks up.

TJX Companies (TJX), the nation's largest off-price retailer, operates about 3,000 stores through its subsidiaries TJ Maxx, Marshall’s and HomeGoods.

Ita business model provides a competitive edge in a challenging retail environment, by offering a viable alternative to customers who may stray from full-priced items at other stores.

TJX has enormous growth potential domestically and internationally, without cannibalizing its own business. Overall, TJX plans to expand its total number of stores by over 50 percent to 4,700 worldwide.

The company has grown sales an average of 7 percent for the past 5 years since the recession, and picked up this pace to 12 percent growth in fiscal 2013.

For the first half of fiscal 2014, the firm bought back $625 million worth of stock, or 12.9 million shares. TJX expects to repurchase about $1.3 billion to $1.4 billion in shares in fiscal 2014.

The industry leader in off-price merchandise, TJX's price-to-earnings (P/E) ratio of 20.4 is an attractive discount to the industry average of 28.3. This growth company also offers a 1 percent yield to boot.

Bed Bath and Beyond (BBBY) operates a chain of 1,471 domestic retail stores under the names Bed Bath & Beyond, Harmon and Harmon Face Values, and World Market in all 50 states in the US and Canada.

Bed Bath & Beyond's comparable store sales have grown at a rate of 5 percent from 2009 to 2012 and the firm was able to register 2.5 percent store sales growth even as the US retail market remained weak.

During the quarter, the company repurchased about $257 million of its stock, or about 3.5 million shares. It still has a $1.8 billion remaining balance authorized on its repurchase program.

The housing market's continued recovery will translate into more good news for this domestic giant, especially since one of its previous competitors—the now bankrupt Linens n' Things—continues to liquidate its assets.

Its P/E ratio stands at a bargain of 15.8, well below the industry average of 24.3. While the company waits for the retail market to recover, it’s benefiting from a steady housing market that will only get stronger as economic recovery speeds up.

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