The day to celebrate love is here. In honor of the global love day, people splurge on gifts like candies, chocolates, cologne, greeting cards, flowers and other such gifts pick up. Restaurants also see high footfall.
This year, the demand for such discretionary items is likely to shoot up on economic strength, with employment and income growing at a steady clip. Given the encouraging trends, it will be prudent to invest in fundamentally-sound companies that could make the most of Valentine’s Day.
Americans to Spend Billions
Per the recent annual survey by the National Retail Federation and Prosper Insights and Analytics (NRF), U.S. consumers are expected to spend a total of $20.7 billion on discretionary items, up from $19.6 billion last year and the record of $19.7 billion in 2016.
On average, consumers will spend $161.96, up from last year’s $143.56 and $146.84 spent in 2016. Survey shows consumers will spend an average $4.26 on spouses, $29.87 on children or parents, $8.63 on children’s classmates or teachers, $9.78 on friends, $7.78 on co-workers and $6.94 on pets on average. Largely, consumers aged 35 to 44 will spend the maximum, averaging $279.14, followed by the 25-34 age bracket at $239.07. Notably, men are expected to shell out the highest, at $229.54 — more than double of what women said they would spend.
Nearly $3.9 billion will be spent on jewelry (18%), $2.1 billion on clothing (18%), $1.3 billion on gift cards/gift certificates (15%) and $1.9 billion on flowers (35%). Spending on eating out is likely to total $3.5 billion (34%), while candy purchases will be up 52% from last year to a total of $1.8 billion. Meanwhile, 40% want tickets to concerts or sporting events, better known as ‘gifts of experience’, while only 25% plan on giving it.
And when it comes to shopping venues, much of it remains the same as last year. Consumers planning to shop at department stores, discount stores, online, specialty stores, florists, local small business, and jewelry stores and specialty clothing stores will be around 35%, 32%, 27%, 18%, 16%, 14% and 9%, respectively.
Catalysts Behind the Rise in Spending
Americans are set to splurge on discretionary items this Valentine’s Day, courtesy of a strong economy, solid job additions and fatter paychecks. Federal Reserve Chairman Jerome Powell recently stated that his country is continuing to see solid economic growth and that he does not feel the probability of a recession “is at all elevated.”
Jobs growth in January, by the way, smashed estimates, with nonfarm payrolls increasing for the 100th straight month. According to the Bureau of Labor Statistics, the economy added 304,000 new jobs in January, exceeding analysts’ estimates of around 172,000.
December’s job additions, in the meanwhile, were revised down from 312,000 jobs to 222,000, while November’s count rose from 176,000 to 196,000. Nonetheless, the average for the last three months is now 241,000 jobs, marking one of the best stretches during an economic expansion dating back nine-and-a-half years. By the way, employment gains in 2018 turned out to be the strongest in the last three years.
(Source: Bureau of Labor Statistics)
In the past 12 months, average hourly earnings increased 3.2% and in January, private sector employees, specially, got an average 3-cent hourly raise, adding up to an average hourly pay of $27.56.
5 Stocks to Gain From Valentine’s Day
Consumers are expected to spend at record levels this Valentine’s Day. Thus, investing in stocks that could make the most of the spending spree seems judicious. We have selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Berkshire Hathaway Inc. BRK.B may be a property and casualty insurance and reinsurance company, but, candies and chocolates are one of its oldest holdings. In fact, the company has a significant stake in The Kraft Heinz Company KHC, which is known for manufacturing Cadbury. Needless to say, Warren Buffet bought the California boxed-candy business way back in 1972, long before Berkshire Hathaway became a household name for serious investors.
The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 0.9% in the past 60 days. The company’s expected earnings growth rate for the current year is 68.1%, way more than the Insurance - Property and Casualty industry’s gain of 13.8%. The company has outperformed the broader industry in the past year (+2.6% vs +0.3%).
If 1-800-FLOWERS.COM, Inc.’s FLWS isn’t a good way to play Valentine’s Day then I don’t know what is. After all, the company provides gourmet food and floral gifts for various occasions in the United States.
The stock has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings rose 12.2% in the past 60 days. The company’s expected earnings growth rate for the next year is 15.2%, more than the Retail - Mail Order industry’s gain of 7.5%. The company has outperformed the broader industry in the past year (+55.0% vs +31.1%).
Darden Restaurants, Inc. DRI owns and operates full-service restaurants in the United States and Canada.
The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 1.2% in the past 60 days. The company’s expected earnings growth rate for the current year is 18.3%, more than the Retail - Restaurants industry’s gain of 6.4%. The company has outperformed the broader industry in the past year (+16.7% vs +15.1%). You can see the complete list of today’s Zacks #1 Rank stocks here.
DSW Inc. DSW offers dresses, casual and athletic footwear, and accessories under various brands for women, men, and kids. It also provides handbags, hosiery, jewelry, and other accessories.
The stock has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings rose 2.3% in the past 90 days. The company’s expected earnings growth rate for the current year is 16.5%, more than the Retail - Apparel and Shoes industry’s gain of 11.2%. The company has outperformed the broader industry in the past year (+36.8% vs -18.1%).
Abercrombie & Fitch Co. ANF offers apparel, intimates, personal care products, and accessories for men and women.
The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 4.4% in the past 60 days. The company’s expected earnings growth rate for the current year is 46.2%, more than the Retail - Apparel and Shoes industry’s gain of 11.2%. The company has outperformed the broader industry in the past month (+12.0% vs +3.6%).
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The Kraft Heinz Company (KHC) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
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1-800 FLOWERS.COM, Inc. (FLWS) : Free Stock Analysis Report
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