The coronavirus-induced temporary store closures and sluggish consumer demand dealt a heavy blow to the Retail – Wholesale sector. With the pandemic taking a toll on employment and household income, consumers were left with no option but to curtail on spending. Nonetheless, things started to turn in favor following measures undertaken to support households coupled with the resumption of economic activities post the coronavirus lockdown.
Well Americans now look way more confident about the labor market, income prospects and business conditions. Markedly, U.S. consumer confidence — a key determinant of the economy’s health — picked up sharply in September and reached the highest level since the coronavirus outbreak. This came despite rise in coronavirus cases with no sure shot treatment, back and forth talks on the new stimulus bill and a contentious presidential election.
Certainly, an upbeat sentiment is likely to translate into increased consumer spending, which accounts for more than two-thirds of U.S. economic activity. Any uptick in consumer spending is always a welcome news for retailers.
Per a CNBC report, economists are anticipating 0.6% jump in September retail sales, equivalent to August. Going by the projection, this will be the fifth straight monthly increase in retail sales. Again, according to the latest Zacks Earnings Preview, the Retail – Wholesale sector is anticipated to witness top-line growth of 7.9% during the third quarter, following an increase of 8.1% in the preceding earnings season.
To beat the COVID-19 blues, retailers have been directing resources toward digital platforms, accelerating fleet optimization and augmenting supply chain. They have been focusing on superior product strategy, advancement of omni-channel capabilities and making prudent capital investments to resonate well with shifting consumer demand and behavior in the new normal.
That said, here we have shortlisted five stocks on the basis of a Zacks Rank #1 (Strong Buy) and a VGM Score of A or B. Notably, these stocks are also likely to register top and bottom-line growth in the upcoming reporting cycle. You can see the complete list of today’s Zacks #1 Rank stocks here.
5 Prominent Picks
Target Corporation TGT is worth betting on. The stock has a Zacks Rank #1 and a VGM Score of A. The company has a trailing four-quarter earnings surprise of 37.6%, on average. It has a long-term earnings growth rate of 7.2%. Moreover, the Zacks Consensus Estimate for its third-quarter fiscal 2020 sales and earnings indicates an improvement of 10.8% and 12.5%, respectively, from the year-ago period. This general merchandise retailer has been deploying resources to enhance omni-channel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customer seamless shopping experience. Shoppers can avail Target's contactless Drive Up and Order Pickup, and same-day delivery with Shipt to get their products.
You may invest in Best Buy Co., Inc. BBY, which has a Zacks Rank #1 and a VGM Score of B. The provider of technology products, services and solutions has a trailing four-quarter earnings surprise of 33.5%, on average. It has a long-term earnings growth rate of 7.7%. Moreover, the Zacks Consensus Estimate for its third-quarter fiscal 2021 sales and earnings suggests growth of 10.9% and 46.9%, respectively, from the prior-year period. The company has been standing out with its efforts to maneuver the coronavirus jitters. It remains committed to providing curbside pickup, in-store consultations, home-installation of appliances, TV, fitness equipment and more, and digital-consultation services.
The Kroger Co. KR is also worth considering. The stock has a Zacks Rank #1 and a VGM Score of A. This operator of supermarkets and multi-department stores has a trailing four-quarter earnings surprise of 13%, on average. It has a long-term earnings growth rate of 6.2%. Moreover, the Zacks Consensus Estimate for its third-quarter fiscal 2020 sales and earnings indicates an improvement of 7.1% and 38.3%, respectively, from the year-ago period. The company has prioritized its actions to resonate well with the prevailing crisis and burgeoning demand for essential commodities. Notably, the company’s digital business remains a key growth driver. The company has been making prudent investments to bolster omni-channel operations, improve supply chain and increase manpower to ensure swift customer service amid such challenging times.
We also suggest investing in Lowe's Companies, Inc. LOW. The stock has a Zacks Rank #1 and a VGM Score of B. This home improvement retailer has a trailing four-quarter earnings surprise of 17.2%, on average. It has a long-term earnings growth rate of 16.6%. Moreover, the Zacks Consensus Estimate for its third-quarter fiscal 2020 sales and earnings indicates an improvement of 18.2% and 34%, respectively, from the year-ago period. Home renovation and maintenance activities have been gaining prominence lately, thanks to increased stay-at-home practices amid the coronavirus pandemic. This trend has been benefiting the company. Lowe’s has been also focusing on enhancing capabilities such as online-delivery scheduling and order tracking. Moreover, with rising demand for contactless services, the company’s latest investment in self-service lockers is another feather in its cap.
Investors can count on Sportsman's Warehouse Holdings, Inc. SPWH, the outdoor sporting goods retailer. The company has a trailing four-quarter earnings surprise of 64.8%, on average. The stock has a Zacks Rank #1 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its third-quarter fiscal 2020 sales and earnings suggests growth of 32.4% and 104%, respectively, from the year-ago period. The company is benefiting from rise in outdoor activities, such as fishing, hunting, camping and hiking. Management believes that the addition of participants in outdoor activities bodes well for outdoor specialty retail in general and Sportsman's Warehouse in particular.
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Target Corporation (TGT) : Free Stock Analysis Report
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
Lowes Companies, Inc. (LOW) : Free Stock Analysis Report
The Kroger Co. (KR) : Free Stock Analysis Report
Sportsmans Warehouse Holdings, Inc. (SPWH) : Free Stock Analysis Report
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