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4 Retail Picks for a Dose of Confidence in Your Portfolio

Sumit Singh

U.S. consumer confidence — a key determinant of the economy’s health — witnessed the steepest fall in nine months. Per Conference Board data, the Consumer Confidence Index dropped to 125.1 in September from August’s downwardly revised reading of 134.2. A number of factors were responsible for the slump.

Concerns related to U.S.-China trade tiff, rising crude prices, sluggish business spending and certain geopolitical problems dampened consumer confidence. These are fueling apprehensions about an economic slowdown, which could have a bearing on the job market. This in turn might compel consumers to curtail household spending.

Certainly, consumer spending is one of the pivotal factors driving the economy. As of now, a solid labor market and rise in disposable income have been fueling the same. This is evident from the 0.4% jump in retail sales during the month of August. Again, the recent cut in benchmark interest rate by 25 basis points will help ramp up investment activities and reinforce consumer spending.

An uptick in this metric is always welcome news for retailers. Going by Deloitte’s recent holiday sales projection, retailers are set to raise a toast this upcoming festive season. Holiday sales are projected to increase 4.5-5% and exceed $1.1 trillion between November 2019 and January 2020. Meanwhile, e-commerce sales are estimated to rise 14-18% to reach $144-$149 billion.

The aforementioned data clearly suggests that consumers will splurge, in spite of the lingering issues. But for now, alleviate your concerns by adding four Retail-Wholesale stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.



4 Prominent Picks

Zumiez Inc. ZUMZ, which operates as a specialty retailer of apparel, footwear, accessories, and hardgoods, is a solid bet with a long-term earnings growth rate of 12%. This Zacks Rank #1 company delivered average positive earnings surprise of 60.9% in the trailing four quarters. Moreover, the Zacks Consensus Estimate for its current-year earnings suggests a year-over-year improvement of 20.7%. The stock, with a VGM Score of A, has advanced 58.2% so far this year. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can also consider RH RH, a home furnishing retailer, with a Zacks Rank #1 and a VGM Score of A. The company delivered average positive earnings surprise of 20.2% in the trailing four quarters. Moreover, the Zacks Consensus Estimate for its current-year earnings suggests a year-over-year improvement of 26.2%. We note that the stock with a long-term earnings growth rate of 12.5% has rallied 40.8% year to date.

Lithia Motors, Inc. LAD, an automotive retailer, is another attractive option. The stock has a VGM Score of A and long-term earnings growth rate of 9.2%. This Zacks Rank #1 company delivered average positive earnings surprise of 8% in the trailing four quarters. Moreover, the Zacks Consensus Estimate for its current-year earnings indicates a year-over-year improvement of 12.8%. We note that the stock has surged 71.4% year to date.

Investors can also count on Target Corporation TGT, which offers beauty and household essentials, food assortments, apparel and home decor products. This Zacks Rank #2 company with a long-term earnings growth rate of 7.1% and a VGM Score of A has soared 62.6% so far in 2019. Moreover, the company has average positive earnings surprise of 4.6% for the trailing four quarters. Also, the Zacks Consensus Estimate for its current-year earnings suggests a year-over-year rise of 14.1%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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