An optimistic economic outlook coupled with improved consumer confidence could boost retail stocks this holiday season. More consumers are expected to visit brick-and-mortar stores to grab promotions and deals.
Therefore, this might be a good time to invest in some retail stocks as these could gain from well-prepared retailers and enthusiastic consumers.
More Consumers Likely to Shop
According to an annual survey by National Retail Federation (NRF) and Prosper Insights & Analytics, 164 million consumers could go shopping Thanksgiving Day through Cyber Monday. NRF further forecasted that holiday retail sales this November and December will rise 4.3-4.8% from last year’s sales figures.
The survey revealed that about 34 million consumers plan to shop on Thanksgiving Day while 116 million will splurge on Black Friday. Small Business Saturday might witness 67 million customers, followed by 32 million hitting the stores on Sunday. The shopping season will end on Cyber Monday, with an approximate 75 million customers expected to visit retail websites looking for bargains.
An increasing number of brick-and-mortar stores are now staying open on Thanksgiving to cash in on the pre-Black-Friday rush. Some of the large retailers that will open late afternoon on Thanksgiving Day are the likes of Walmart WMT, Macy’s M, DICK’s Sporting Goods DKS, Best Buy BBY and Target TGT.
“Whether it’s heading to the stores after finishing their turkey or going online on Cyber Monday, consumers will be shopping all weekend and retailers will be ready to meet the demand,” said Matthew Shay, NRF President and CEO.
Strong US Economy to Favor Retailers
Per a holiday retail survey by Deloitte, consumers feel optimistic about the economy, their household finances and plans to spend over the holiday weekend. Consumers are extremely focused on value and price, which will go well with retailers since they are in good shape.
Consumer confidence increased in October to 137.9, following a modest gain in September. This reflects consumers’ optimism about their well-being. The labor market scenario is positive too, with non-farm payroll rising much more than expected in October, the Labor department cited earlier in November. The economy added 250,000 new jobs across major industries, much higher than analysts’ estimate of 190,000. The hiring was broad-based with no major industry responsible for layoffs.
Employee wages grew at an annual rate of 3.1% in October, up from September’s 2.8%. Private sector workers’ hourly earnings hit $27.30 in October, increasing 83 cents from a year ago. This annual wage growth is the strongest since April 2009. The country’s labor participation rate inched up as well, from 62.7% in September to 62.9% in October.
The above factors indicate that consumers are extremely bullish on the economy, which could well reflect in their spending plans for the holiday season.
4 Retail Stocks to Buy
We have hand-picked a few retail stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). All the stocks have outperformed their respective industries this year.
Kohl’s Corporation KSS is one of the most engaging retailers in America and carries a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 30.8% compared with the Zacks Retail – Regional Department Stores industry’s projected rise of 19.1%. The Zacks Consensus Estimate for the company’s current-year earnings rose 0.5% in the last 60 days.
Shoe Carnival, Inc. SCVL is one of the largest footwear retailers in the United States. The company carries a Zacks Rank #1. The company’s expected earnings growth rate for the current year is 59.7% compared with the Zacks Retail – Apparel And Shoes industry’s projected rise of 11.5%. The Zacks Consensus Estimate for the company’s current-year earnings increased 10.1% in the last 60 days.
Movado Group Inc. MOV is one of the premium watchmakers worldwide. The company carries a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 27% compared with the Zacks Retail – Jewelry industry’s estimated rise of 7.9%. The Zacks Consensus Estimate for the company’s current-year earnings advanced 0.7% in the last 60 days.
Dollar General Corporation DG is a discount retailer and carries a Zacks Rank #2. The company’s expected earnings growth rate for the current year is 35.9% compared with the Zacks Retail – Discount Stores industry’s projected rise of 18.8%. The Zacks Consensus Estimate for the company’s current-year earnings hasn’t changed in the last 60 days.