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5 Stocks to Watch as NRF Forecasts Strong Holiday Sales

Zacks Equity Research

NRF forecast strong holiday season sales despite rising uncertainties due to the trade war. As consumer confidence remains elevated, we have shortlisted retail stocks in particular that can boost your portfolio.

NRF Forecasts Strong Holiday Season Sales

On Oct 3, the National Retail Federation reported that it expects holiday retail sales during November and December to beat 2018’s mark and increase between 3.8% and 4.2%. This may amount to total sales of around $730 billion, though the forecast does not exclude automobile dealers, gasoline stations and restaurants.

NRF President and CEO Matthew Shay stated that the trade war and slowdown in economy may restrain sales but the U.S. economy is still growing and thanks to growth in consumer spending, the issues can be sidelined. 

The forecast considers economic factors like employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales. The low unemployment rate of 3.7% and high wages keep consumer confidence high, thus giving them the ability to spend more in the holiday season.

Last year, holiday sales totaled $701.2 billion and increased 2.1% in spite of a government shutdown, highly volatile stock market, tariffs issues and more. This year, the fear of trade war has definitely worsened and holiday merchandise that includes apparel, footwear and televisions are subject to higher tariffs.

But retailers are using countless tactics to mitigate price rise due to higher tariffs and encourage consumers to buy more.  On the other hand, NRF forecasts online and other non-store sales to increase between 11% and 14% from $146.5 billion in 2018 to the $162.6 billion to $166.9 billion bracket.

A tight labor market due to rising uncertainties from trade war has dampened hiring in the service sector in September, settling the index at 52.6. But the forecast holiday hiring numbers seem to be quite promising. NRF forecasts that retailers will hire between 530,000 and 590,000 temporary workers this year. Macy's, Inc. M and Target Corporation TGT will hire 80,000 and 130,000 seasonal workers, respectively.

Stocks to Watch Out

Genesco Inc. GCO, Tilly's, Inc. TLYS, Zumiez Inc. ZUMZ, Office Depot, Inc. ODP and Ingles Markets, Incorporated IMKTA are some of the retail stocks that should benefit from strong holiday sales. Needless to say, these are publicly traded specialty retailers selling apparels, footwear and other holiday items. Moreover, these stocks have a favorable Zacks Rank and the Zacks Consensus Estimate for its current-year earnings has increased in the last 60 days. What’s more, these companies are also expected to post earnings growth for the current year that will exceed their respective sub-industry’s projected growth rate for the same period.

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Zumiez Inc. (ZUMZ) : Free Stock Analysis Report
Genesco Inc. (GCO) : Free Stock Analysis Report
Tilly's, Inc. (TLYS) : Free Stock Analysis Report
Target Corporation (TGT) : Free Stock Analysis Report
Office Depot, Inc. (ODP) : Free Stock Analysis Report
Macy's, Inc. (M) : Free Stock Analysis Report
Ingles Markets, Incorporated (IMKTA) : Free Stock Analysis Report
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