The retail sector is gradually recovering, with sales rising for the sixth straight month in October. Although the rise was lower than expected, the good sign is that the pandemic-ravaged sector is getting back on its own feet.
Moreover, the holiday season is approaching, which in all likelihood is good to give retail sales the much-required push. Also, if the second round of stimulus gets sanctioned in the coming months, it may give consumers more purchasing power, which is likely to boost retail sales.
Retail Sales Increase in October
U.S. retail sales increased 0.3% to $553.3 billion in October, the Commerce Department said on Nov 17. Also, it reflects an 8.5% year-over-year jump. Nonstore retailers increased 29.1% year over year. The reading follows September’s jump of 1.6%. However, retail sales missed expectations of a 0.5% increase.
One of the major reasons behind this decline is that the coronavirus relief benefits lapsed for many, who shied away from spending more. Also, sales at restaurants and bars may have been hit once again owing to the rise in coronavirus cases. However, the good sign is that retail sales have now increased for the sixth straight month after hitting a nadir in March and April due to the coronavirus-related lockdown.
Holiday Season to Boost Sales
The growing cases of coronavirus have once again raised fears in the minds of people. However, people will continue to spend at least on essential goods and e-commerce, which have been breathing life into the retails sector, and are likely to be the preferred choices for shopping over the coming months.
Moreover, the holiday season is about to start and retailers like every year will be hoping for sales to pick up. According to a Deloitte report, retail sales are expected to increase 1-1.5% to between $1.147 trillion and $1.152 trillion during the November-to-January period. Also, the economy is gradually trying to stand back on its feet, with the GDP growing a historic 33.1% in the third quarter, which indicates that the retail sector is on track for a steady recovery.
The jump in retail sales in October once again signals a steady recovery. Although coronavirus fears have once again gripped the nation, it is quite unlikely that the government will go for a lockdown as the economy needs to get back on its feet. However, e-commerce will continue to play a dominant role in the coming months, which is only going to benefit the retail sector. Given this situation, it might be prudent to invest in retail stocks that also have a strong online presence.
Target Corporation TGT has evolved from just being a pure brick & mortar retailer to an omni-channel entity. The company has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.
The company’s expected earnings growth rate for the current year is 13.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.8% over the past 60 days. Target carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Kroger Co. KR operates supermarkets, multi-department stores, marketplace stores, and price impact warehouse stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.
The company’s expected earnings growth rate for the current year is 49.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. Kroger has a Zacks Rank #2.
Best Buy Co., Inc. BBY is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services.
The company’s expected earnings growth rate for next year is 18%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. Best Buy has a Zacks Rank #2.
Systemax Inc. SYX is a direct marketer of brand name and private label products, including personal desktop computers, notebook computers, computer-related products, and industrial products, in North America and Europe.
The company’s expected earnings growth rate for next year is 22.3%. The Zacks Consensus Estimate for current-year earnings has improved 26.9% over the past 60 days. Systemax has a Zacks Rank #2.
Tapestry, Inc. TPR is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. The company offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 21.6% over the past 60 days. Tapestry has a Zacks Rank #1.
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