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4 Retail Stocks to Buy Amid Growing Economic Uncertainties

·5 min read

The retail sector is slowly feeling the heat of soaring prices as people have started spending cautiously on necessities. Even then, sales are getting a boost as demand for goods continues to rise. Higher demand is helping retailers earn more revenues, proving that people are still willing to spend amid growing economic uncertainties.

According to the Mastercard SpendingPulse, retail sales grew at a solid pace in June, driven by in-store sales. Although e-commerce sales have slightly slowed over the months, it is playing a crucial role in driving overall retail sales. Given this scenario, retailers like Dollar Tree, Inc. DLTR, Canada Goose Holdings Inc. GOOS, Signet Jewelers Limited SIG and J.Jill, Inc. JILL are likely to do well in the near term.

Retail Sales Grow in June

According to the latest Mastercard SpendingPulse, retail sales jumped a solid 9.5% year over year in June. Retail sales excluding auto and gasoline grew 6.1% on a year-over-year basis in June.

June’s jump was primarily driven by higher in-store sales. According to the report, in-store retail sales, excluding auto and gasoline, increased 11.7% year over year in June. E-commerce sales, however, slowed down a bit and rose 1.1% year over year.

Rising prices, particularly for necessities such as food and fuel, are one of the reasons behind the sales jump in June. Inflation rose 9.1% in June to hit a 41-year high, according to the latest reading released on Jul 13. People are buying cautiously, but they cannot do away with necessities and are ending up spending more, which is getting reflected in the form of higher revenues for retailers.

Sales of fuel and convenience jumped 42.1%, while grocery sales increased 14% year over year in June.

Even after excluding these, retail sales saw solid growth in June. Spending on consumer discretionary products, which include fashion products, climbed 16.2% year over year and 86.6% from 2019. Spending on luxury goods increased 4% year over year and 54% from the pre-pandemic times of 2019. Sales at department stores grew 8.6% year over year and 21.4% from 2019.

Retail Sector Still Going Strong

The peak of the pandemic saw people spending more on goods and less on services as businesses remained closed or partially open. Things started changing from the beginning of last year, following the massive vaccination drive. However, disruptions in the form of the Omicron and Delta variants of the coronavirus kept people from moving out of their homes confidently.

There was a palpable hesitance in visiting restaurants and planning holidays. However, beginning this year, as the economy almost fully reopened and people started moving out of their homes more confidently. Thus, people again started spending more on services. While this hurt retail sales slightly, higher demand for goods continued to help the sector hold on to its ground.

Moreover, despite rising costs, people have finally started traveling and planning holidays. Spending on airlines and lodging is up 18.2% and 33.7%, respectively, year over year.

Also, the back-to-school season, which has almost begun, is further likely to help boost retail sales in the coming days.

Our Choices

The retail sector is still performing well, and so long as demand for goods continues to grow, sales should be on the rise. This is thus the right opportunity to invest in retail stocks that have both a strong offline and online presence and boast of a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar Tree, Inc. is an operator of discount variety stores offering merchandise and other assortments. DLTR’s stores successfully operate in major metropolitan areas, mid-sized cities and small towns. Dollar Tree offers a wide range of quality everyday general merchandise in many categories, including housewares, seasonal goods, candy and food, toys, health and beauty care, gifts, party goods, stationery, books, personal accessories, and other consumer items.

Dollar Tree’s expected earnings growth rate for the current year is 40.5%. The Zacks Consensus Estimate for DLTR’s current-year earnings has improved 3% over the past 60 days.

Canada Goose Holdings Inc.is a global outerwear brand. Canada Goose is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. GOOS’s jackets are sold in 36 countries around the world, including in two owned retail stores and four e-commerce stores.

Canada Goose Holdings’ expected earnings growth rate for the current year is 64.4%. The Zacks Consensus Estimate for current-year earnings has improved 6.7% over the past 60 days.

Signet Jewelers Limited is a retailer of diamond jewelry, watches as well as other products. SIG operates in the United States, Canada, U.K., the Republic of Ireland, and the Channel Islands. Signet Jewelersis often considered the leading retailer of diamond jewelry.

Signet Jewelers’ expected earnings growth rate for the current year is 1.6%. The Zacks Consensus Estimate for SIG’s current-year earnings has improved 10.6% over the past 60 days.

J.Jill, Inc. operates as a specialty retailer of women’s apparel. The company offers sweaters, tops, pants, dresses, shorts, skirts, sleepwear and accessories. J. Jill markets through retail stores, website and catalog.

J.Jill’s expected earnings growth rate for the current year is 25.4%. The Zacks Consensus Estimate for JILL’s current-year earnings has improved 19.2% over the past 60 days.


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