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Holiday Sales to Touch $720.9B: 5 Top Retail Picks

Gourav Kanti Bagchi
Holiday retail sales are projected to advance between 4.3% and 4.8% in 2018, settling at about $720.9 billion.

Holiday retail sales posted its best increase in 2017 since the Great Recession, per the National Retail Federation (NRF). On Oct 3, the NRF projected holiday retail sales to increase significantly even this year and reach around $721 billion in the November-December period.

Moreover, retailers are set to hire a large number of workers for the upcoming holiday season. Further, with strong consumer confidence, higher wages, and record low unemployment, an increasing number of Americans are willing to spend more. Given the present circumstances, apparel companies seem like promising bets.

Holiday Season to Boost Retail Sales

In 2017, retail sales during the last two months of the year climbed 5.5% to reach $691.9 billion, per the NRF. Unlike last year, when retail sales witnessed its best growth since the Great Recession, holiday sales are projected to advance between 4.3% and 4.8% in 2018, settling at about $720.9 billion.

Although this year’s retail growth forecast is not as high as the 2017 performance, an increase between 4.3% and 4.8% is considerably higher than the five-year average of 3.9%. Holiday sales are important for retailers with some even making around 40% of its annual sales in the November-December period.

Moreover, per the NRF, American retailers are expected to hire between 585,000 and 650,000 workers for the November-December holiday period, higher than 582,500 in 2017. President and CEO of the NRF, Matthew Shay said that “healthy economy and strong consumer confidence” will facilitate growth even this year like 2017.

Retail Stocks on Solid Ground

Additionally, retail sales are expected to grow 5% to 5.6% from the prior season, per Deloitte’s annual holiday season forecast released on Sep 19. Sales between November 2017 and January 2018 grew 5%, amounting to $1.05 trillion, per data from the Commerce Department. Meanwhile, Deloitte forecasts more than $1.10 trillion of retail sales this year.

On the earnings front, in the Zacks Retail And Wholesale sector, six reported earnings in the second quarter. Of these six, three posted an earnings beat, while two met the consensus estimate. The sector has projected earnings growth of 14.47% for the current year. Additionally, the SPDR S&P Retail ETF (XRT) increased 16.2% in the last one year period, higher than S&P 500’s rise of 13.7% during the same period.

5 Retail Stocks to Buy Now

Strong sales projection and record hiring in the holiday season will benefit retail stocks. In this context, investing in retail stocks seems like a prudent option. Here, we have selected five stocks that are expected to move north following these developments. However, picking winning stocks may prove difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows one to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score. Moreover, these stocks also carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

The company is based in Lynnwood, WA, and has a Zacks Rank #1 and VGM Score of A.. It has expected earnings growth of 54.55% for the current year. The Zacks Consensus Estimate for the current year has improved 4.9% over the last 60 days.

Urban Outfitters, Inc. URBN is a lifestyle products and services company, involved in the retail and wholesale of general consumer products.

The company is based in Philadelphia, PA, and carries a Zacks Rank #1. It has a VGM Score of A.The company has expected earnings growth of 59.62% for the current year. The Zacks Consensus Estimate for the current year has improved 6.8% over the last 60 days.

America's Car-Mart, Inc. CRMT is an automotive retailer in the United States.

The company is based in Bentonville, AR, and carries a Zacks Rank #1. It has a VGM Score of B. The company has expected earnings growth of 48.19% for the current year. The Zacks Consensus Estimate for the current year has improved 15.6% over the last 60 days.

BJ's Restaurants, Inc. BJRI is an operator of casual dining restaurants in the United States based out of Huntington Beach, CA.

The company carries a Zacks Rank #2 and has a VGM Score of A. It has expected earnings growth of 50.21% for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the last 60 days.

Ruth's Hospitality Group, Inc. RUTH is an operator of fine dining restaurants under the Ruth's Chris Steak House name.

The company is based in Winter Park, FL, and has a Zacks Rank #2 and VGM Score of B. It has expected earnings growth of 26.36% for the current year. The Zacks Consensus Estimate for the current year has improved 2.2% over the last 60 days.

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