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Don't Lose Confidence, Pick These 5 Retail Stocks Instead

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Consumer confidence that had touched new highs some time back on the revolutionary ideas of the current administration has somewhat receded now, thus raising concerns about the state of the economy  Analysts believe that this is a temporary phase and the economy is well on the growth path with improved domestic demand. They believe confidence will improve once the policies start taking shape and the picture becomes clearer.

Coming to the facts, consumer confidence – a key determinant of the economy’s health – further weakened in May, after falling in April. The index now stands at 117.9, down from its April reading of 119.4 and also below analysts’ expectations of 119.5. On the contrary, U.S. consumer spending leaped to a four-month high in April and personal income also rose, indicating that the economy, which had lost pace in the first quarter, is firming up.

Steady job additions, low unemployment rate and gradual wage acceleration coupled with tax refunds boosted spending. Consumer spending, which accounts for over two-thirds of U.S. economic activity, jumped 0.4% last month, following an uptick in March’s reading to 0.3%. On the other hand, personal income increased 0.4%. Experts cited that consumer spending is likely to remain strong in the second quarter and could help GDP to accelerate.

With the economic scenario looking quite favorable as of now, Janet Yellen and other Fed officials may hike the benchmark interest rate by another 25 basis points next month, which was kept intact at 0.75% to 1% during the May 2017 policy meeting. The U.S. central bank had last increased the interest rate in March. Not to forget, inflation plays a decisive role, when it comes to rate hike. Currently, it is lower than the Fed’s desired level of 2%.

5 Key Picks

The Retail-Wholesale sector has not been an outstanding performer but it still holds some promise, given the favorable economic indicators. Here we have highlighted five Retail/Wholesale stocks with a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a VGM Score of “A” or “B.”

We suggest investing in The Children's Place, Inc. (PLCE - Free Report) , with a long-term earnings growth rate of 8% and a VGM Score of “A.” In the past year, the stock has surged roughly 49.8% and outperformed the Zacks categorized Retail-Apparel/Shoe industry, which declined 15.1%. This specialty retailer of children's apparel delivered an average positive earnings surprise of 36.6% over the trailing four quarters and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

You may also consider Big 5 Sporting Goods Corp. (BGFV - Free Report) , which operates as a sporting goods retailer. The stock sports a Zacks Rank #1 and has a VGM Score of “A.” The company posted an average positive earnings surprise of 94.5% in the trailing four quarters and has a long-term earnings growth rate of 12%. In the past year, the stock has displayed a fabulous bull run on the index and has risen 65.8%, while the Zacks categorized Retail – Miscellaneous/Diversified industry decreased 6.1%.

Investors can count on Burlington Stores, Inc. (BURL - Free Report) , a retailer of branded apparel products, with a long-term earnings growth rate of 15.9%. The company posted an average positive earnings surprise of 22.6% over the trailing four quarters and has a VGM Score of “A.” In the past year, this Zacks Rank #2 stock has exhibited a bullish run and surged 55.6%, while the Zacks categorized Retail-Discount & Variety industry gained 0.7%.

Investors can count on Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , which owns and operates entertainment and dining venues, with a long-term earnings growth rate of 17.4%. The company posted an average positive earnings surprise of 34.2% over the trailing four quarters and has a VGM Score of “B.” This Zacks Rank #2 stock has surged roughly 65% in the past year and comfortably outperformed the Zacks categorized Retail-Food & Restaurants industry, which increased 12.4%.

We suggest investing in Best Buy Co., Inc. (BBY - Free Report) , which has a long-term earnings growth rate of 11.4% and a VGM Score of “A.” This retailer of technology products, services, and solutions delivered an average positive earnings surprise of 33.8% in the trailing four quarters and carries a Zacks Rank #2. We note that in the past year, the stock has advanced approximately 84%, while the Zacks categorized Retail-Consumer Electronic industry has gained 57%.

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