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Holiday Retail Sales Likely to Rise YoY: 5 Picks

Ritujay Ghosh

The holiday season is approaching and retailers are set to hire seasonal workers. Per Deloitte’s annual forecast for the holiday season, retail sales could top $1.10 trillion this year. With record low unemployment, higher wages and strong consumer confidence, an increasing number of Americans are willing to spend more.

Also, the Trump administration has spared close to 300 product groups such as smart watches from Apple, Inc. AAPL and Fitbit, Inc. FIT and other consumer products like baby car seats and bicycle helmets. Moreover, 10% tariffs imposed by both the United States and China instead of a harsher 25% import duty also came as a sigh of relief for markets. Given this scenario, it makes sense to invest in retail stocks.

Holiday Season to Boost Retail Sales

Per Deloitte’s annual holiday season forecast, retail sales are expected to grow 5% to 5.6% from the prior season. Sales between November 2017 and January 2018 grew 5%, amounting to $1.05 trillion, according to data from the Commerce Department. Deloitte forecasts that retail sales could top $1.10 trillion this year. Given that a large number of customers prefer shopping online, e-commerce is expected to play a major role in pushing up retail sales.

Online sales are forecast to rise 22% during the holiday season, higher than 16.6% growth witnessed between November 2017 and January 2018. The prior season saw online sales accounting for $110 billion. This time around online sales are expected to reach $134 billion. The holiday season marks one of the best sales periods of the year and leads to retailers stocking products well ahead.

Tariffs Unlikely to Pinch Holiday Sales

On Sep 17, the Trump administration announced tariffs on $200 billion worth of Chinese goods, which will take effect from Sep 24. However, the U.S. Trade Representative announced a revision to preliminary list of 6,031 items categories subject to the new tariffs.

The U.S. Trade Representative has removed 286 product groups and excluded certain items from 11 categories. This wide range includes smart watches from Apple and Fitbit along with bicycle helmets, baby car seats, paintings, statues, decorative plaques and a large number of fish products.    

At the same time, Trump announced tariffs of 10% and not 25% as anticipated earlier. This has somewhat brought a sigh of relief given that 25% tariffs would definitely have been harsher. Although the 10% tariffs will be raised to 25% effective Jan 1, the holiday season will me more than halfway through. Analysts thus believe most holiday purchases won’t be subject to big price increases.  Meanwhile, China has also chosen to impose a 10% import duty instead of the 20-25% rate discussed earlier.

Our Choices

Trump’s tariffs definitely have unsettled markets. However, 10% tariffs are being seen as comparatively milder than the earlier expected 25% tariffs. At the same time, close to 300 product groups have been spared from tariffs this time. So, forecasts of retail sales topping more than $1.10 trillion this holiday season may not be far-fetched.

Given this scenario, makes it an opportune time to invest in retail stocks. However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Boot Barn Holdings, Inc. BOOT operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories.

Boot Barn has a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 64.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 12.7% over the last 60 days.

Summer Infant, Inc. SUMR is a designer, marketer and distributor of branded durable juvenile health, safety and wellness products (for ages up to three years), which are sold principally to large U.S. retailers.

The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 50% over the last 60 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez Inc. ZUMZ is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women.

Zumiez sports a Zacks Rank #1 and has expected earnings growth of 53.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 5% over the last 60 days.

Movado Group, Inc. MOV is one of the world's premier watchmakers. Movado Group designs, manufactures and distributes watches from 10 of the most recognized and respected names in time.

Movado sports a Zacks Rank #1. The company has expected earnings growth of 26% for the current year. The Zacks Consensus Estimate for the current year has improved by 4.6% over the last 60 days.

Tilly's, Inc. TLYS is a specialty retailer in the action sports industry selling clothing, shoes and accessories. The company distributes t-shirts, sweatshirts, jackets, shorts, pants, jeans, sweaters, swimwear, shoes and accessories for men, women and kids through its website. 

Tilly's has a Zacks Rank #2 (Buy). The company has expected earnings growth of 38.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 11.1% over the last 60 days.

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
Fitbit, Inc. (FIT) : Free Stock Analysis Report
 
Summer Infant, Inc. (SUMR) : Free Stock Analysis Report
 
Tilly's, Inc. (TLYS) : Free Stock Analysis Report
 
Zumiez Inc. (ZUMZ) : Free Stock Analysis Report
 
Movado Group Inc. (MOV) : Free Stock Analysis Report
 
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
 
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