The COVID-19 pandemic has unexpectedly affected retailers. Nonetheless, the U.S. economy has been turning around and holiday sales are expected to be strong. Per a recent press release by the National Retail Federation (“NRF”), holiday sales are expected to increase between 3.6% and 5.2% year over year, amounting between $755.3 billion and $766.7 billion. Notably, the numbers exclude automobile dealers, restaurants and gasoline stations, and follow a 4% increase to $729.1 billion in 2019.
With the pandemic raging on, people might resort more to online shopping as social distancing has become a necessity. Moreover, online shopping, as a trend, has been gathering steam in any case over the past few years. During the Thanksgiving weekend in 2019, 142.2 million people shopped via retailers’ websites while 124 million people shopped in stores, according to a press release by the NRF. This year, the NRF expects online and other non-store sales to shoot up between 20% and 30%, amounting between $202.5 billion and $218.4 billion, compared to $168.7 billion in 2019.
The NRF stated that consumers have continued to show resilience to the pandemic which has helped retail sales to rebound. Notably, the NRF reported that aggregate retail sales have witnessed a recovery both on a year-over-year and a month-on-month basis every month since June. In October, aggregate retail sales were up 10.6% on a year over year basis with early holiday shopping being partly the reason. Separately, the Commerce Department also reported that retail sales increased in October even though the growth was moderate. Retail sales rose 0.3% in October compared to a revised 1.6% gain in September, as quoted in a CNBC article. The article further mentioned that core retail sales or excluding automobiles, gasoline, food services and building materials, rose 0.1% in October following September’s revised increase of 0.9%.
Moreover, the NRF report mentioned that the strong balance sheet of households will be the primary reason behind the expected uptick in spending. The report said that this has been aided by a “strong stock market, rising home values and record savings boosted by government stimulus payments issued earlier this year.” The report also stated that retail spending will also be boosted by reduced spending on other activities like “personal services, travel and entertainment.”
5 Top Stocks to Buy
With the holiday season predicted to witness strong sales, major retailers are expected to do well despite the pandemic. People have also resorted to online shopping to help maintain social distancing norms. Hence, the situation is now judicious to invest in retail names, which can benefit from this positive trend. We have picked five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Levi Strauss & Co. LEVI designs, markets and sells apparel including jeans, casual and dress pants, jackets, footwear, and so on, for men, women and children in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its next-year earnings increased 32.4% over the past 60 days. The company’s expected earnings growth rate for next year is more than 100%.
Tapestry, Inc. TPR is a provider of luxury accessories and branded lifestyle products in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 21.6% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.
Target Corporation TGT is a general merchandise retailer in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 19.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 33.5%.
The Kroger Co. KR operates supermarkets, multi-department stores, marketplace stores, and price impact warehouse stores in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 1.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 49.1%.
Ross Stores, Inc. ROST, along with its subsidiaries, operates off-price retail apparel and home fashion stores in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 3.6% over the past 60 days. The company’s expected earnings growth rate for next year is more than 100%.
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