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Retail sales increased for the second consecutive month in May, experiencing gains across most product categories. Expenditure at gas stations and higher online spending led the key metric higher. This is even more significant since it comes after a month of record gains.
This report lends further weight to evidence that the U.S. economy is growing steadily despite tepid job data released earlier this month. Other reports released on Tuesday indicated a steady increase in import inflation and a higher level of confidence among small businesses. Selecting stocks gaining from higher consumer demand would make for a prudent option at this point.
Second Consecutive Increase
Retail sales increased 0.5% in May to $455.6 billion. Additionally, the metric experienced a 2.5% year-on-year increase. The monthly gain, which was preceded by a record 1.3% increase in April, came in higher than the consensus estimate of a 0.3% rise. April’s gain was the largest since Mar 2015 (read: 5 Retail Picks to Add to Your Cart as April Sales Shoot Up). Excluding auto sales, retail sales increased 0.4% last month after gaining 0.8% a month ago.
Gas stations and non-store sales, which include online sales, experienced the highest increases of 2.1% and 1.3%, respectively. Sporting goods, hobby, book and music stores sales moved up 1.3%. Expenditure at food services and drinking places increased 0.8%. Sales increased by 0.3% and 0.8% at electronics and appliance stores, and at clothing and clothing accessories stores, respectively.
Economic Environment Improving
Meanwhile, U.S. import prices increased 1.4% in May, registering its highest gain since Mar 2012. It was also higher than the consensus estimate of 0.8%. Moreover, export prices rose 1.1% last month, higher than April’s increase of 0.5%.
Separately, the National Federation of Independent Business’s (NFIB) small business optimism index increased from April’s reading of 93.6 to 93.8 last month. This was the index’s second consecutive monthly increase.
Additionally, data released at the end of last month had indicated that April stood out as the best month since Aug 2009 with respect to consumer spending (read: 5 Retail Stocks to Buy as Consumer Spending Picks Up). Taken together, the latest set of reports indicates that the U.S. economic environment has become increasingly favorable, particularly for consumer spending.
Our Choices
Retail sales started the year on a strong footing before declining during the months of February and March (read: Retail Sales See Solid Start to 2016: 4 Mutual Fund Picks). Fresh data indicates that the situation has improved considerably over the last two months.
This makes it imperative to add stocks set to gain from this trend to your portfolio. Even then, picking winning stocks may be a difficult task.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.
Hasbro Inc. (HAS - Free Report) is engaged in the design, manufacture and marketing of games and toys.
Hasbro has a Zacks Rank #2 (Buy) and a VGM Score of B. The company has expected earnings growth of 16.6% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 20.88, lower than the industry average of 22.81. Its earnings estimate for the current year has improved by 0.1% over the last 30 days.
Carter's, Inc. (CRI - Free Report) is a leading provider of apparel and related products exclusively for babies and young children.
Carter's has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 11.5% for the current year.
FTD Companies, Inc. provides floral, gift and related products and services to consumers, retail florists, and other retail locations.
FTD Companies has a Zacks Rank #2 and a VGM Score of A. It has a P/E (F1) of 14.71, which is lower than the industry average of 17.53.
Rent-A-Center, Inc. is the largest rent-to-own operator in the U.S. offering durable goods such as consumer electronics, appliances, computers, furniture and accessories.
Rent-A-Center has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. It has a P/E (F1) of 5.86, which is lower than the industry average of 15.66.
AB Electrolux (ELUXY - Free Report) manufactures appliances and outdoor and industrial products.
AB Electrolux has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of more than 100% for the current year.
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5 Stocks to Buy on Strong Retail Sales
Retail sales increased for the second consecutive month in May, experiencing gains across most product categories. Expenditure at gas stations and higher online spending led the key metric higher. This is even more significant since it comes after a month of record gains.
This report lends further weight to evidence that the U.S. economy is growing steadily despite tepid job data released earlier this month. Other reports released on Tuesday indicated a steady increase in import inflation and a higher level of confidence among small businesses. Selecting stocks gaining from higher consumer demand would make for a prudent option at this point.
Second Consecutive Increase
Retail sales increased 0.5% in May to $455.6 billion. Additionally, the metric experienced a 2.5% year-on-year increase. The monthly gain, which was preceded by a record 1.3% increase in April, came in higher than the consensus estimate of a 0.3% rise. April’s gain was the largest since Mar 2015 (read: 5 Retail Picks to Add to Your Cart as April Sales Shoot Up). Excluding auto sales, retail sales increased 0.4% last month after gaining 0.8% a month ago.
Gas stations and non-store sales, which include online sales, experienced the highest increases of 2.1% and 1.3%, respectively. Sporting goods, hobby, book and music stores sales moved up 1.3%. Expenditure at food services and drinking places increased 0.8%. Sales increased by 0.3% and 0.8% at electronics and appliance stores, and at clothing and clothing accessories stores, respectively.
Economic Environment Improving
Meanwhile, U.S. import prices increased 1.4% in May, registering its highest gain since Mar 2012. It was also higher than the consensus estimate of 0.8%. Moreover, export prices rose 1.1% last month, higher than April’s increase of 0.5%.
Separately, the National Federation of Independent Business’s (NFIB) small business optimism index increased from April’s reading of 93.6 to 93.8 last month. This was the index’s second consecutive monthly increase.
Additionally, data released at the end of last month had indicated that April stood out as the best month since Aug 2009 with respect to consumer spending (read: 5 Retail Stocks to Buy as Consumer Spending Picks Up). Taken together, the latest set of reports indicates that the U.S. economic environment has become increasingly favorable, particularly for consumer spending.
Our Choices
Retail sales started the year on a strong footing before declining during the months of February and March (read: Retail Sales See Solid Start to 2016: 4 Mutual Fund Picks). Fresh data indicates that the situation has improved considerably over the last two months.
This makes it imperative to add stocks set to gain from this trend to your portfolio. Even then, picking winning stocks may be a difficult task.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM score.
Hasbro Inc. (HAS - Free Report) is engaged in the design, manufacture and marketing of games and toys.
Hasbro has a Zacks Rank #2 (Buy) and a VGM Score of B. The company has expected earnings growth of 16.6% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 20.88, lower than the industry average of 22.81. Its earnings estimate for the current year has improved by 0.1% over the last 30 days.
Carter's, Inc. (CRI - Free Report) is a leading provider of apparel and related products exclusively for babies and young children.
Carter's has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth of 11.5% for the current year.
FTD Companies, Inc. provides floral, gift and related products and services to consumers, retail florists, and other retail locations.
FTD Companies has a Zacks Rank #2 and a VGM Score of A. It has a P/E (F1) of 14.71, which is lower than the industry average of 17.53.
Rent-A-Center, Inc. is the largest rent-to-own operator in the U.S. offering durable goods such as consumer electronics, appliances, computers, furniture and accessories.
Rent-A-Center has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. It has a P/E (F1) of 5.86, which is lower than the industry average of 15.66.
AB Electrolux (ELUXY - Free Report) manufactures appliances and outdoor and industrial products.
AB Electrolux has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of more than 100% for the current year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>