Fill Your Holiday Shopping Cart With These 5 Retail Stocks
While the word pandemic very well remains in headlines, retailers are all geared up to walk the extra mile this holiday season to capitalize on any surge in demand. Supply chain bottlenecks, rising freight charges and labor shortages are issues that the industry is currently grappling with but retailers still remain hopeful of a fabulous festive season. Well, pent-up savings, stimulus measures, and eagerness among consumers to venture out and shop for loved ones should help keep the cash register ringing.
The season, which accounts for a sizable chunk of yearly revenues, is a make or break for retailers. With global supply chains in disarray, retailers are ensuring they stock enough to fulfill predicted consumer demand. They have even ramped up hiring to make sure that they are adequately staffed before the holiday season kicks off to deal with curbside and in-store pickup of online purchases as well as doorstep delivery.
Keeping in mind consumers’ product preferences, retailers are replenishing shelves with in-demand merchandise. They are increasing product visibility on online platforms, enhancing customer engagement on social channels, making logistics improvements and offering flexible payment options. The industry players are rapidly embracing the “buy now, pay later” model to entice shoppers amid higher retail prices. Per Salesforce, global "buy now, pay later'' service is expected to account for 8% of online orders for this shopping season.
Challenges might persist but retailers are finding innovative ways to make the most of the season. Per Mastercard SpendingPulse, U.S. retail sales — excluding automotive and gas — for the “75 Days of Christmas” that runs from Oct 11-Dec 24 are anticipated to increase 6.8% from a year earlier. With e-commerce still being one of the preferred modes for shopping, Mastercard SpendingPulse foresees online sales to rise by 7.5% during the aforementioned period.
The survey further projects year-over-year increase in sales for myriad categories during the “75 Days of Christmas” — 45.4% for apparel, 11.8% for electronics, 60% for jewelry and 92.2% for luxury items (excluding jewelry). Department stores are likely to register sales growth of 14%, per the report.
That said, we have highlighted five stocks from the Retail - Wholesale sector that look well positioned based on their sound fundamentals and earnings growth prospects. These stocks have either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Performance Year-to-Date
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5 Prominent Picks
Macy's, Inc. M, one of the nation’s premier omni-channel retailers, is worth betting on. In spite of a tough retail landscape, the company has managed to stay afloat, courtesy of its Polaris Strategy. The strategy includes rationalizing store base, revamping assortments and managing costs prudently. Markedly, customers have been responding well to the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. Macy's also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. The company is constantly improving its mobile and website features to deliver enhanced shopping experience. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 269.8%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 37.3% and 269.7%, respectively, from the year-ago period.
Investors can count on Signet Jewelers Limited SIG, a renowned jewelry retailer. The company has been witnessing market share growth, backed by growth across stores and digital platforms. Prudent efforts undertaken as part of the Inspiring Brilliance strategy have also been yielding results. This strategy focuses on expanding big banners, boosting service revenues, broadening the Accessible Luxury and Value segments, and accelerating digital commerce, among others. As part of the Inspiring Brilliance growth strategy, the company makes use of data-driven insights to target new and existing customers. The company has been expanding assortments across its Zales, Kay and Jared brand lines. Impressively, this Zacks Rank #1 company has a trailing four-quarter earnings surprise of 77.5%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 33% and 329.4%, respectively, from the year-ago period.
You may invest in Hibbett, Inc. HIBB, an athletic-inspired fashion retailer. Management anticipates that pent-up demand and compelling merchandise coupled with superior customer service and a best-in-class omni-channel platform should continue to drive top and bottom-line performance. The company’s focus on both in-store and online experience, distribution capabilities and vendor relationships will help generate sustainable profitable growth. The company expects mid-teens growth in comparable sales for fiscal 2022. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 124.6%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share indicates an improvement of 18.3% and 84.6%, respectively, from the year-ago period.
We suggest betting on Best Buy Co., Inc. BBY. This specialty retailer of consumer electronics and related services has been witnessing robust demand across channels. Continued growth in online revenues backed by robust omni-channel capabilities and customer-centric approach is a key upside. During second-quarter fiscal 2022, Best Buy witnessed robust sales across the Domestic and the International segments, owing to strong demand for technology products and services. It is on track with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices. Best Buy has expanded its In-Home Advisor program that includes advisors who guide customers to select the right technology solution. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 31.9%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 9.5% and 26.2%, respectively, from the year-ago period.
Costco Wholesale Corporation COST is another potential pick. The company’s growth strategies, better price management, decent membership trends and increasing penetration of the e-commerce business have been contributing to its upbeat performance. Cumulatively, these factors have been aiding the Issaquah, WA-based company in registering impressive sales numbers. Costco’s net sales increased 15.8% to $19.50 billion for the retail month of September — the five-week period ended Oct 3, 2021 — from $16.84 billion in the last year. This followed an improvement of 16.2%, 16.6% and 16.9% in August, July and June, respectively. Remarkably, this Zacks Rank #2 company has a trailing four-quarter earnings surprise of 7.7%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings per share suggests growth of 8.2% and 7.2%, respectively, from the year-ago period.
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Macy's, Inc. (M) : Free Stock Analysis Report
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Hibbett, Inc. (HIBB) : Free Stock Analysis Report
Signet Jewelers Limited (SIG) : Free Stock Analysis Report
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