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4 Solid Stocks to Buy as Retail Sector Regains Lost Ground

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Retailers were worried following a not-so-impressive holiday season, but things seemed to have changed with the turn of the year. Retail sales, which had been slowing down for a few months in 2021, bounced back in January.

The jump comes despite fears of the Omicron variant of the coronavirus and rising consumer prices. However, consumers braved all these to give retail sales a push, reflecting the growing confidence among consumers to spend more freely. Given this situation, stocks likeTapestry, Inc. TPR, Capri Holdings CPRI, Ethan Allen Interiors Inc. ETD and Signet Jewelers Limited SIG are likely to benefit in the near term.

Retail Sales Bounce Back

The Commerce Department said on Feb 16 that retail sales increased 3.8% in January, higher than economists’ expectations of 2.1%. The figures aren’t adjusted for inflation. Retail sales were downwardly revised to a 2.5% decline in December. January’s jump shows the growing demand among Americans to buy merchandise.

Excluding auto sales, retail sales jumped 3.3% in January after declining 2.8% in December. Retail sales declined in the prior month following a weaker-than-expected holiday season. Also, rising prices made many skeptical about spending more on retail goods in December.

However, the trend changed in January as people shopped aggressively, braving odds like skyrocketing prices as the consumer price index jumped 7.5% year over year in January to hit a 40-year high. Moreover, fears of the Omicron variant of the coronavirus have been gripping people over the past couple of months.

People seemed to overcome all these fears and go shopping, thus giving the much-required push to the retail sector.

Sector on Track

It has been a bumpy ride for the retail sector since the economy started reopening. While the sector showed signs of recovery in the initial months of 2021, sales slowed down over the past few months. Some segments like apparel and jewelry have been winners, while the restaurant industry has taken a beating every time a new COVID-19 variant has emerged.

A separate report from Mastercard SpendingPulse showed that retail sales, excluding auto, rose 7.2% in January on a year-over-year basis. The report further shows that apparel sales rose a solid 37.6% year over year in January, while jewelry sales increased 19.8%.

The retail sector is gradually trying to get back on its feet and e-commerce is playing a major role in this recovery. The COVID-19 outbreak saw more people shopping online, making them finally realize the benefits and conveniences of contactless shopping.

The trend has continued. The Commerce Department in its report said that online sales jumped 14.5% in January. The Mastercard SpendingPulse also shows a 10.4% rise in online sales in January.

It thus shows the growing dominance of e-commerce when it comes to shopping. Also, the pandemic is far from over, which will continue to see e-commerce dominating the space.

Our Choice

Given this scenario, investing in retail stocks with a strong online presence seems wise. We have chosen four stocks for you. Each of the stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Signet Jewelers Limited’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 11.8% over the past 60 days. Shares of SIG have gained 15.1% in the past six months. Signet Jewelers Limited sports a Zacks Rank #1.

Tapestry is adesigner and marketer of fine accessories and gifts for women and men in the United States and internationally. TPR offers lifestyle products, including handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches.

Tapestry reported stronger-than-expected second-quarter fiscal 2022 earnings, thanks to robust demand and strong customer engagement. TPR posted second-quarter adjusted earnings of $1.33 per share, beating the Zacks Consensus Estimate of $1.19.

Tapestry’s expected earnings growth rate for the current year is 22.9%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 60 days. Shares of TPR have advanced 5.4% in the past 30 days. Tapestry has a Zacks Rank #2.

Ethan Allen Interiors Inc. is a leading interior design company and manufacturer and retailer of quality home furnishings. ETD offers free interior design service to its clients and sells a full range of furniture products and decorative accessories through ethanallen.com and a network of the Design Centers in the United States and abroad. Ethan Allen owns and operates eight manufacturing facilities, including six manufacturing facilities in the United States plus a plant in Mexico and one in Honduras.

Ethan Allen’s expected earnings growth rate for the current year is 38.4%. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the past 60 days. Shares of ETD have advanced 4.2% in the past three months. Ethan Allen has a Zacks Rank #2.

Capri Holdings provides women’s and men’s accessories, footwear and ready-to-wear, as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products. CPRI operates in the global personal luxury goods industry, which has been severely impacted by the coronavirus outbreak.

Capri Holdings’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 13.1% over the past 60 days. CPRI’s shares have advanced 28.6% in the past six months. Capri Holdings sports a Zacks Rank #1.


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Signet Jewelers Limited (SIG) : Free Stock Analysis Report
 
Tapestry, Inc. (TPR) : Free Stock Analysis Report
 
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