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Retail Group Expects Strong Holiday Sales in 2020: 5 Picks

Nalak Das
·6 min read

This year is likely to remain coronavirus-stricken despite the recent positive developments on the COVID-19 vaccine front. Nevertheless, all is not expected to be bad for the U.S. economy. Recently, the leading retail trade group of the United States has given strong sales projection for this holiday season, defying the significant spike in new coronavirus cases.

A growing U.S. economy albeit at a slow pace due to lack of a new fiscal stimulus, an impressive stock market, record personal savings and fresh initiative for a new coronavirus-aid package are likely to act as the drivers for a solid holiday season.

NRF Expects Strong Holiday Sales

On Nov 23, the National Retail Federation said that the industry body expects holiday sales during November and December to rise between 3.6% and 5.2% year over year. In absolute terms , the figure will be between $755.3 billion and $766.7 billion. Last year, holiday sales increased 4% to $729.1 billion. The last five-year average was 3.5%.

Notably, the online and other non-store sales are projected to soar 20% to 30% amounting to between $202.5 billion and $218.4 billion this year. Last year, this was $268.7 billion.

Fresh Initiative for a New Coronavirus-Aid Package

On Nov 20, Senate Minority leader Democrat Chuck Schumer said that Senate Majority leader Republican Mitch McConnell has agreed to resume negotiations over a potential new Covid-19 relief package.

Last week, the Trump administration had decided not to negotiate further with Democrat House Speaker Nancy Pelosi regarding a new stimulus. Instead, Senate Majority Mitch McConnell will be the Republican negotiator, who is well known for his tough stand on a new tranche of coronavirus-relief package.

A Growing U.S. Economy

The first tranche of the coronavirus-aid package — CARES ACT — came to an end in July. Despite the absence of any new stimulus, the U.S. economy has grown in the last three months albeit at a slow pace.

Retail sales grew 0.6%, 1.9% and 0.3%, respectively, in August, September and October. Core retail sales (excluding the volatile auto sales) rose 0.5%, 0.9% and 0.1%, respectively, in the months. Notably, the core retail sales data correspond most closely with the consumer spending component of the U.S. GDP.

On Oct 29, the Department of Commerce reported that the GDP jumped a record high 33.1% at annualized pace after plunging 31.4% in the second quarter. Personal consumption increased 40.7% annually after plummeting 33.2% in the second quarter. The personal saving rate — personal saving as a percentage of disposable personal income — was 15.8% in the third quarter.

Moreover, Wall Street had an astonishing bull run from April to August after facing setbacks in September and October. However, the market regained its momentum in November on vaccine hopes. Additionally, the U.S. housing market remained robust during the pandemic period.

Our Top Picks

At this stage, it will be prudent to invest in retail stocks with a favorable Zacks Rank. We have narrowed down our search to five such retail stocks that have a strong growth potential and witnessed robust earnings estimate revisions in the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past six months.

 

Nautilus Inc. NLS is a fitness solutions company, which designs, develops, sources, and markets cardio and strength fitness products, and related accessories for consumer and commercial use in the United States, Canada and internationally. It operates in two segments, Direct and Retail.

The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 87.2% over the last 30 days. The stock price has rallied 206% in the past six months.

Tapestry Inc. TPR provides luxury accessories and branded lifestyle products in the United States, Japan, China, Hong Kong, Macau, Taiwan, Europe, Canada, South Korea, Malaysia, Singapore, Australia, and New Zealand. It operates through three segments: Coach, Kate Spade, and Stuart Weitzman.

The company has an expected earnings growth rate of more than 100% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved 0.4% over the last 7 days. The stock price has jumped 106.5% in the past six months.

Brinker International Inc. EAT owns, develops, operates, and franchises casual dining restaurants in the United States and internationally. The company has an expected earnings growth rate of 61.4% for the current year (ending June 2021). The Zacks Consensus Estimate for the current year has improved 30.2% over the past 30 days. The stock price has climbed 102.2% in the past six months.

MarineMax Inc. HZO is the largest recreational boat and yacht retailer in the United States. It sells new and used recreational boats, including pleasure boats, motor and convertible yachts, pontoon boats, fishing boats, ski boats and jet boats.

The company has an expected earnings growth rate of 12% for the current year (ending September 2021). The Zacks Consensus Estimate for the current year has improved 53.8% over the past 30 days. The stock price has soared 80.9% in the past six months.

Haverty Furniture Companies Inc. HVT operates as a specialty retailer of residential furniture and accessories in the United States. It offers furniture merchandise under the Havertys brand name.

The company has an expected earnings growth rate of 21.4% for the current year. The Zacks Consensus Estimate for the current year has improved 47.9% over the past 30 days. The stock price has surged 76.2% in the past six months.

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Brinker International, Inc. (EAT) : Free Stock Analysis Report
 
MarineMax, Inc. (HZO) : Free Stock Analysis Report
 
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Tapestry, Inc. (TPR) : Free Stock Analysis Report
 
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