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US Retail Sales to Top $3.8 Trillion in 2019: 5 Gainers

Tirthankar Chakraborty

U.S. retail sales are widely expected to rise between 3.8% and 4.4% to more than $3.8 trillion this year, according to the National Retail Federation (NRF). Out of the total, online sales are projected between $751.1 billion and $764.8 billion.

In fact, NRF added that its preliminary estimates show retail sales growth of 4.6% to $3.68 trillion last year, surpassing NRF’s forecast of at least 4.5%. This largely reflects the best holiday season shopping in nearly six years.

Per the most recent Mastercard SpendingPulse report, holiday retail sales (from November 1 through December 24) grew 5.1% last year to more than $850 billion, the strongest in six years. Apparel and home improvement mostly boosted sales.

Apparel sales from before Thanksgiving through Christmas rose 7.9% last year from 2017 — the best growth since 2010 — per Mastercard SpendingPulse that mostly tracks outlays in stores and online across all payment options. In fact, apparel sales picked up during the back-to-school season and accelerated right up to the Christmas season.

Home improvement spending, by the way, increased across the United States at a rate of 9% over the holiday season. The trend started before the holiday season and continued through 2018. At the same time, home furniture and furnishing sales rose 2.3%.

It was also a memorable year for online retail, with sales climbing 19.1% over 2017, per a Mastercard study. Major online player Amazon Inc AMZN recorded the best holiday season sales ever. The e-commerce giant claimed that it shipped a billion products for free in the United States alone through its Amazon Prime subscription program.

The NRF forecast, by the way, followed other estimates from companies like consumer research firm Customer Growth Partners (CGP). The research firm added that retail sales will total $3.77 trillion in 2019, up 5% from $3.59 trillion in 2018.

Catalysts Behind the Surge

Rising wages, robust jobs growth and low unemployment rate not only helped retail sales improve last year but are also expected to provide a boost this year. Needless to say, strong holiday sales are being fueled by a healthy U.S. economy.

In the past 12 months, average hourly earnings increased 3.2% and in January, private sector employees, specially, got an average 3-cent hourly raise, adding up to an average hourly pay of $27.56.

Meanwhile, the economy added 304,000 new jobs in January, per the Bureau of Labor Statistics, exceeding analysts’ estimates of around 172,000.

December’s job additions, in the meanwhile, were revised down from 312,000 jobs to 222,000, but November figure rose from 176,000 to 196,000. Nonetheless, the average for the last three months is 241,000 jobs, marking one of the best stretches during an economic expansion dating back nine-and-a-half years ago. By the way, employment gains in 2018 turned out to be the strongest in the last three years.

(Source: Bureau of Labor Statistics)

The jobless rate, however, ticked up to 4% from 3.9%. But, it still continues to languish at historically low levels. Further, a higher jobless rate was mostly due to the government shutdown, but it had “no discernible impacts” on the uptick in hiring last month, added the Labor Department.

5 Solid Picks  

Taking the bullish retail sales trend into account, retailers are undoubtedly set to witness a strong year-end rally. Hence, it will be prudent to invest in five of the best retail stocks. Such stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Shoe Carnival, Inc. SCVL operates as a family footwear retailer in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 1.7% over the past 60 days. The stock’s expected earnings growth for the current year is 62.4%, higher than the Retail - Apparel and Shoes industry’s expected growth of 11.4%.

Boot Barn Holdings, Inc. BOOT operates specialty retail stores in the United States. The company's specialty retail stores offer western and work-related footwear, apparel, and accessories for men, women, and kids. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 4% over the past 60 days. The stock’s expected earnings growth for the current year is 85.7%, higher than the Retail - Apparel and Shoes industry’s expected growth of 11.4%.

Ross Stores, Inc. ROST operates off-price retail apparel and home fashion stores. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 0.2% up over the past 60 days. The stock’s expected earnings growth for the current year is 25.8%, higher than the Retail - Discount Stores industry’s projected growth of 16.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

RH RH operates as a retailer in the home furnishings. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 0.9% over the past 60 days. The stock’s expected earnings growth for the current year is 175.4%, higher than the Retail - Home Furnishings industry’s estimated growth of 9.5%.

DSW Inc. DSW operates as a branded footwear and accessories retailer in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 2.3% over the past 60 days. The stock’s expected earnings growth for the current year is 16.5%, higher than the Retail - Apparel and Shoes industry’s expected growth of 11.4%.

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