The investment climate may not appear to be a favorable one with concerns of a trade war looming. Quite obviously, Wall Street investors may prefer playing safe with the hope that the United States and China will settle all disputes amicably. However, at the moment, tensions between the two of the world’s biggest economies have escalated following Trump’s order to U.S. Trade Representatives to locate options for imposing a 10% tariff on another $200 billion of Chinese goods.
Consequently, investors are jittery as earnings of companies susceptible to global trade war could be at risk. The market has already paid the price for confrontation with China over trade policies. Yesterday, the Dow Jones Industrial Average fell about 287.26 points, while the S&P 500 declined 11.18 points. The tech-laden Nasdaq Composite Index shed 21.44 points. Nonetheless, ignoring the nervousness in the market, a few stocks have managed to rise 10% or more in a month. Here we have highlighted five such stocks from the Zacks Retail-Wholesale sector.
Why the Retail Sector?
Retail-Wholesale sector, which occupies top 38% position in the list of Zacks sectors (6 out of 16), has advanced roughly 13% in the past six months outpacing the S&P 500’s growth of approximately 3%. Per the latest Earnings Preview, the sector is likely to witness bottom-line growth of 18.3% with top line projected to climb 7.7% in the second quarter reporting cycle.
Thanks to a robust job market as evident from the fall in the number of Americans claiming unemployment benefits and jobless rate hovering at an 18-year low. This along with tax reform and sound economic fundamentals are likely to boost consumer confidence, which rose close to 18-year high in May. We expect this positive sentiment to translate into higher consumer spending — one of the pivotal factors driving the economy. Per industry experts, second-quarter GDP rate likely to come ahead of 4%.
Notably, U.S. retail and food services sales in May advanced 0.8% to $502 billion, following an upwardly revised reading of 0.4% gain in April, per the Commerce Department. Meanwhile, retail sales improved 5.9% from May 2017. Pick up in retail sales is welcome news for retailers, whose fortunes depend upon consumers’ willingness to spend.
For obvious reasons, retailers are the end gainers. With digital transformation in shopping, retailers are fast adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores. Moreover, National Retail Federation’s projection of an uptick in U.S. retail sales of 3.8-4.4% this year raises optimism. Additionally, the recent cut in corporate tax rate will allow retailers to channelize the surplus money toward best possible alternatives.
Certainly, the sector is likely to catch investors’ attention. So, picking up stocks from the space will be a prudent move. Here are five stocks you can count upon. We have shortlisted them on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.
5 Prominent Picks
Shoe Carnival, Inc. SCVL, a family footwear retailer, has a VGM Score of B. It has an expected EPS growth rate of 12% for 3-5 years. This Zacks Rank #1 stock has surged roughly 27% in a month. You can see the complete list of today’s Zacks #1 Rank stocks here.
RH RH, a home furnishings retailer, has a VGM Score of B. The stock has an expected EPS growth rate of 24% for 3-5 years. Shares of this Zacks Rank #1 company have rallied about 54% in a month.
Burlington Stores, Inc. BURL, which operates as a retailer of branded apparel products, has a VGM Score of B and a Zacks Rank #2. It has an expected EPS growth rate of 18.1% for 3-5 years. The stock has increased roughly 13% in a month.
Dillard's, Inc. DDS, which operates retail department stores, has a VGM Score of A. It has an expected EPS growth rate of 9.9% for 3-5 years. This Zacks Rank #2 stock has shown a decent run in the bourses and advanced about 23% in a month.
Tilly's, Inc. TLYS retails casual apparel, footwear, and accessories. This Zacks Rank #2 stock has soared approximately 29% in a month. The stock has a VGM Score of B.
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