Snap Up These 5 Retail Stocks Ahead of Big Holiday Season Sales
Retailers - be it Macy's (M), Signet (SIG), Tapestry (TPR), Best Buy (BBY) or Costco (COST) - are looking for an early start to the festive season and...
All eyes are now on the most crucial part of the year for retailers — the holiday season. While challenges related to the Delta variant and its impact on consumer spending activity remain, retailers are hopeful of a fabulous festive season. Pent-up savings, stimulus measures, and eagerness among consumers to venture out and shop at stores bode well for retailers. No doubt, they need to address logistics as well as inventory issues to meet the demand efficiently.
Daniel Bachman, Deloitte’s U.S. economic forecaster, said, “We anticipate strong consumer spending for the upcoming holiday season. As vaccination rates rise and consumers are more comfortable being outside of the home, we are likely to see increased spending on services, including restaurants and travel, while spending on goods will continue to hold steady.”
No wonder, the season, which accounts for a sizable chunk of yearly revenues, is a make or break for retailers. Evidently, retailers need to channelize their strength and make strategic investments to provide consumers fast, convenient and safe shopping experience, be it offline or online. Well, easing of social distancing norms and resumption of active social lifestyle and events are likely to fuel demand across a diverse set of categories.
Early Start to Season
With global supply chains in disarray, retailers are looking for an early start to the festive season and ensuring they stock enough to fulfill predicted consumer demand. They are increasing product visibility on online platforms, enhancing customer engagement on social channels and recruiting a reasonable number of seasonal associates to deal with curbside and in-store pickup of online purchases as well as doorstep delivery.
Per Mastercard SpendingPulse, U.S. retail sales — excluding automotive and gas — for the “75 Days of Christmas” that runs from Oct 11-Dec 24 are anticipated to increase 6.8% from a year earlier. With e-commerce still being one of the preferred modes for shopping, Mastercard SpendingPulse foresees online sales to rise by 7.5% during the aforementioned period.
The survey further projects year-over-year increase in sales for myriad categories during the “75 Days of Christmas” — 45.4% for apparel, 11.8% for electronics, 60% for jewelry and 92.2% for luxury items (excluding jewelry). Department stores are likely to register sales growth of 14%, per the report.
That said, we have highlighted five stocks from the Retail - Wholesale sector that look well positioned based on their sound fundamentals and earnings growth prospects. These stocks have either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Performance Year-to-Date
Image Source: Zacks Investment Research
5 Prominent Picks
Macy's, Inc. M, one of the nation’s premier omni-channel retailers, is worth betting on. In spite of a tough retail landscape, the company has managed to stay afloat, courtesy of its Polaris Strategy. The strategy includes rationalizing store base, revamping assortments and managing costs prudently. Markedly, customers have been responding well to the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. Macy's also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. The company is constantly improving its mobile and website features to deliver enhanced shopping experience. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 269.8%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 37.3% and 269.7%, respectively, from the year-ago period.
Investors can count on Signet Jewelers Limited SIG, a renowned jewelry retailer. The company has been witnessing market share growth, backed by growth across stores and digital platforms. Prudent efforts undertaken as part of the Inspiring Brilliance strategy have also been yielding results. This strategy focuses on expanding big banners, boosting service revenues, broadening the Accessible Luxury and Value segments, and accelerating digital commerce, among others. As part of the Inspiring Brilliance growth strategy, the company makes use of data-driven insights to target new and existing customers. The company has been expanding assortments across its Zales, Kay and Jared brand lines. Impressively, this Zacks Rank #1 company has a trailing four-quarter earnings surprise of 77.5%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 33% and 295.3%, respectively, from the year-ago period.
Tapestry, Inc. TPR is another potential pick. The company has been benefiting from the successful execution of the Acceleration Program. The program is aimed at transforming the company into a leaner and more responsive organization. It intends to build significant data and analytics capabilities with focus on enhancing digital and omni-channel capabilities, and operating with a clearly defined path and strategy for each of its brands namely Coach, Kate Spade and Stuart Weitzman. This provider of luxury accessories and branded lifestyle products has a trailing four-quarter earnings surprise of 65.2%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings indicates an improvement of 11.6% and 12.5%, respectively, from the year-ago period. The stock sports a Zacks Rank #1.
We also suggest betting on Best Buy Co., Inc. BBY. This specialty retailer of consumer electronics and related services has been witnessing robust demand across channels. Continued growth in online revenues backed by robust omni-channel capabilities and customer-centric approach is a key upside. During second-quarter fiscal 2022, Best Buy witnessed robust sales across the Domestic and the International segments, owing to strong demand for technology products and services. It is on track with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices. Best Buy has expanded its In-Home Advisor program that includes advisors who guide customers to select the right technology solution. This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 31.9%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 9.5% and 25.8%, respectively, from the year-ago period.
You may invest in Costco Wholesale Corporation COST. The company’s growth strategies, better price management, decent membership trends and increasing penetration of the e-commerce business have been contributing to its upbeat performance. Cumulatively, these factors have been aiding the Issaquah, WA-based company in registering impressive sales numbers. Costco’s net sales increased 16.2% to $15.75 billion for the retail month of August — the four-week period ended Aug 29, 2021 — from $13.56 billion in the last year. This followed an improvement of 16.6%, 16.9% and 24.2% in July, June and May, respectively. Remarkably, this Zacks Rank #2 company has a trailing four-quarter earnings surprise of 7.7%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 17.6% and 20.5%, respectively, from the year-ago period.
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Macys, Inc. (M): Free Stock Analysis Report
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Signet Jewelers Limited (SIG): Free Stock Analysis Report
Tapestry, Inc. (TPR): Free Stock Analysis Report
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