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Snap Up These 4 Retail Stocks as Holiday Season Sales Boom

Retailers - be it Signet (SIG), The Children's Place (PLCE), Tapestry (TPR) and Target (TGT) - have been increasing product visibility, enhancing customer engagement and making logistics improvements.

This story originally appeared on Zacks

The holiday season turned out to be a blissful one as consumers continued to fill their shopping carts. Even supply chain challenges and rising prices could not take away the sheen of the season. Stimulus measures, pent-up savings, and eagerness among consumers to venture out and shop fueled demand across a diverse set of categories. No doubt, retailers seemed to have addressed logistics as well as inventory issues to meet the festive demand efficiently, be it offline or online.

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U.S. Holiday Retail Sales Surge

A report by Mastercard SpendingPulse indicates that holiday retail sales, excluding automotive — from Nov 1 through Dec 24 — increased 8.5% year over year. The metric rose 10.7% compared with the same time in 2019. While in-store sales jumped 8.1% year over year, online sales surged 11% and accounted for approximately 20.9% of overall retail sales, up from about 20.6% in 2020 and 14.6% in 2019. Clearly, soaring e-commerce sales powered the holiday sales results.

The report highlighted a year-over-year increase in sales for myriad categories — 47.3% for apparel, 32% for jewelry and 16.2% for electronics. Department stores registered sales growth of 21.2%, per Mastercard SpendingPulse.

Steve Sadove, a senior advisor for Mastercard, said. “Shoppers were eager to secure their gifts ahead of the retail rush, with conversations surrounding supply chain and labor supply issues sending consumers online and to stores in droves.”

We note that concerns related to product shortages owing to the festering supply chain issues prompted consumers to kick start their holiday shopping well before Thanksgiving Day. Per Mastercard SpendingPulse, U.S. retail sales — excluding automotive — for the 75 days that runs from Oct 11-Dec 24 were up 8.6% from a year earlier.

Retailers Ultimate Beneficiary

No wonder, the holiday season, which accounts for a sizable chunk of yearly revenues, is a make or break for retailers. Evidently, retailers have been channelizing their strength and making strategic investments to provide consumers fast, convenient and safe shopping experience.

Retailers have been increasing product visibility on online platforms, enhancing customer engagement on social channels and making logistics improvements. Companies have also been recruiting a reasonable number of seasonal associates to deal with the curbside and in-store pickup of online purchases as well as doorstep delivery. They even appointed more full-time and seasonal warehouse staff to ensure a smooth supply of inventories to stores from distribution centers during the festive period.

That said, we have highlighted four 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.

Past One-Year Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

4 Prominent Picks

You may invest in Signet Jewelers Limited SIG. The renowned diamond retailer looks quite promising on the back of its sturdy digital endeavors and other robust strategic initiatives, including Inspiring Brilliance. The company boasts a strong portfolio of well-known brands such as Zales, Kay and Jared. As part of the Inspiring Brilliance growth strategy, the company has been expanding brand banners, boosting service revenues, broadening the Accessible Luxury and Value segments as well as accelerating digital commerce, among others.

Signet has a trailing four-quarter earnings surprise of 77.2%, on average. This Zacks Rank #1 company has an estimated long-term earnings growth rate of 8%. The Zacks Consensus Estimate for Signet’s’ current financial year sales and EPS suggests growth of 42.6% and 415.2%, respectively, from the year-ago period.

The Children's Place, Inc. PLCE, a pure-play children’s specialty apparel retailer, is worth betting on. The company has constantly been deploying resources to expand product offerings, upgrade distribution channels, create seamless omni-channel capabilities and deepen engagement with customers. Structural changes made in business last year and incremental digital investments made pre-pandemic have been contributing to its performance.

The Children's Place’s bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. The Zacks Consensus Estimate for The Children's Place’s current financial year sales and EPS suggests growth of 27.4% and 464.9%, respectively, from the year-ago period. The stock sports a Zacks Rank #1.

Tapestry, Inc. TPR, the provider of luxury accessories and branded lifestyle products, is another potential pick. The company has been benefiting from the successful execution of the Acceleration Program. The program aims to transform the company into a leaner and more responsive organization. It intends to build significant data and analytics capabilities, focusing 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.

Tapestry has a trailing four-quarter earnings surprise of 29%, on average. This Zacks Rank #1 company has an estimated long-term earnings growth rate of 12.3%. The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 14.8% and 17.9%, respectively, from the year-ago period.

Target Corporation TGT has been making investments to enhance omni-channel capabilities, develop new brands, refurbish stores and expand same-day delivery options to provide a seamless shopping experience to customers. Markedly, this general merchandise retailer has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape.

Impressively, Target has a trailing four-quarter earnings surprise of 19.7%, on average. This Zacks Rank #2 company has an estimated long-term earnings growth rate of 14.4%. The Zacks Consensus Estimate for Target’s current financial year sales and EPS suggests growth of 13.9% and 40%, respectively, from the year-ago period.

Zacks Top 10 Stocks for 2022

In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?

From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.

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Target Corporation (TGT): Free Stock Analysis Report


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Tapestry, Inc. (TPR): Free Stock Analysis Report


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