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5 Retail Stocks to Buy on Millennial Spending Wave

Tirthankar Chakraborty

The oldest Millennials are turning 38 years this year. They will soon have a major economic impact and will represent nearly 30% of total retail sales. By the way, sales have already picked up at most retail stores, indicating economic expansion as spring gets underway. 

 

To top it, Americans continue to be confident about their present well-being, which surely will help retail sales improve. Thus, it’s time to invest in retailers that are likely to make the most of bullish sentiments.

 

Millennials Will Power Retailers 

 

Currently, there are nearly 80 million millennials in the United States alone, comprising almost 30% of the population. And these millennials, who are mostly young adults in their 20s and 30s, are spending a whopping $600 billion almost each year. They are already into their prime spending years and have more potential to spend than Baby Boomers. It’s widely expected that Millennials spending will grow to $1.4 trillion annually and account for a quarter of all retail sales in the United States by 2020.

 

Millennials encompass a diverse generation from Hispanic to African-American to Asian, and they definitely love to shop. Almost 58% of millennials are into shopping compared to 40% of overall adults. And they spend 8% more on apparels than those aged between 35 and 44.

 

Most of the millennials go online to buy retail products as they get real-time information about the products. But, just because they are savvy online customers, it doesn’t mean they don’t visit brick-and-mortar venues. While millennials spend an average $75 per online visit, they do spend at least average $57 per in-store visit. In fact, many millennials nowadays prefer visiting stores to online shopping as they can touch and smell the product.

 

At the end of the day, however, all millennials want an effortless, smooth buying process from personal computer to smartphones to physical stores in their pursuit for best retail products and services.

 

Retail Sales Perk Up

 

Sales at U.S. retailers, in fact, soared in March. Retail sales increased 1.6%, the most in a year and half, easily beating analysts’ expectations of a 1.1% jump. The best performers were new cars and trucks, who saw their sales climb 3.1%, while sales at auto dealers rose 3.5%, the second biggest jump in a row.

 

Besides gas and autos, retail sales also saw a steady gain of 0.9%. The prominent winners were Internet retailers, clothing stores, home-furnishing outlets and grocers. Such segments saw sales growth between 1% and 2%. Such a jump in retail sales adds to mounting evidence that the U.S. economy is in sound shape, dismissing any threat of recession later this year.

 

Consumers Are More Confident Now

 

Talking about the economy, Americans are feeling more optimistic about their present and future conditions. According to the Conference Board, the consumer confidence index climbed to 129.2 in April from 124.2 in March. The future expectations index also moved up to 103 from 98.3. And people’s confidence in present situations improved from 163 in March to 168.3 in April. Both indexes are now close to their highest levels in a decade.

 

And there are good reasons why confidence has bounced back. The stock market recently touched record highs, and interest rates and inflation are pretty much muted. The labor market remains healthy and wages continue to grow at a steady pace. 

 

Such an encouraging consumer confidence number is a significant reading when it comes to retail spending, at least for the next three to six months. More the confidence households generate, the more will they spend on retail products.

 

5 Solid Choices

 

Taking millennial spending spree into account, retailers are set to witness a strong rally. Hence, it will be prudent to invest in five of the best retail stocks that can witness a significant rise in the near term. Such stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

 

Abercrombie & Fitch Co. ANF operates as a specialty retailer. The company operates in two segments, Hollister and Abercrombie. It offers apparel, personal care products, intimates, and accessories. The company, currently, has a Zacks Rank 1. The Zacks Consensus Estimate for its current-year earnings has climbed 40.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 20.9% compared with the Retail - Apparel and Shoes industry’s projected rally of 3.6%. The company has outperformed the broader industry so far this year (+52.1% vs. +4.9%).

 

 

Boot Barn Holdings, Inc. BOOT offers western and work-related footwear, apparel, and accessories for men, women, and kids. The company, currently, has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 0.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 90% compared with the Retail - Apparel and Shoes industry’s projected rally of 3.6%. The company has outperformed the broader industry on a year-to-date basis (+81.7% vs. +4.8%).

 

 

Ethan Allen Interiors Inc. ETH operates as an interior design company, and manufacturer and retailer of home furnishings. The company, currently, has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 6% over the past 60 days. The company’s expected earnings growth rate for the current year is 17.9% compared with the Retail - Home Furnishings industry’s estimated rally of 2.9%. The company has outperformed the broader industry so far this year (+28.1% vs. +20.7%). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

 

Chipotle Mexican Grill, Inc. CMG, together with its subsidiaries, operates Chipotle Mexican Grill restaurants. The company, currently, has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased almost 6% over the past 60 days. The company’s expected earnings growth rate for the current year is 43.2% compared with the Retail - Restaurants industry’s projected rally of 6.7%. The company has outperformed the broader industry on a year-to-date basis (+64.3% vs. +17.4%).

 

 

Kohl's Corporation KSS operates as an omni-channel retailer in the United States. The company, currently, has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 1.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 8% compared with the Retail - Regional Department Stores industry’s estimated decline of 1.1%. The company has outperformed the broader industry so far this year (+4.3% vs. -6.0%).

 

 

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
 
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
 
Ethan Allen Interiors Inc. (ETH) : Free Stock Analysis Report
 
Kohl's Corporation (KSS) : Free Stock Analysis Report
 
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
 
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