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E-commerce Breathing Life Into Retail Sales: 4 Stocks to Buy

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E-commerce has been the saving grace for the pandemic-hit retail sector. Ever since the coronavirus outbreak, locked in people have been shopping online. This has seen e-commerce sales almost doubling year over year.

In Q2 2020, U.S. retail sales grew by almost a third from the previous quarter, per the U.S. Census Bureau of the Department of Commerce. This once again reflects the growing dependence of people on e-commerce companies for buying all kinds of necessities.

E-commerce Sales Continue to Soar

E-commerce sales jumped 42% year over year in August, reaching $63 billion, according to the latest data from Adobe. Since March, consumers have spent an additional $107 billion online, with online spend totaling $497 billion in 2020. During the 130-day period as of August, online sales exceeded $2 billion. Last year, that number was two days, outside of the holiday shopping season.

Moreover, in second-quarter 2020, U.S. retail e-commerce sales grew 31.8% from the previous quarter, or 44.5% year over year, per the U.S. Census Bureau of the Department of Commerce. However, this strong e-commerce growth wasn’t enough to offset losses from brick-and-mortar store closures, as total retail sales dropped 3.9% from the prior quarter. 

That said, e-commerce picked up nearly 5% in the total retail market over just one quarter, according to the DOC, accounting for 16.1% of all retail sales in the second quarter.

Retailers Report Surge in Online Sales

E-commerce now accounts for 16.1% of all U.S. sales, up from 11.8% in the first quarter. All major retailers with a strong online presence like Amazon.com, Inc. (AMZN - Free Report) , Walmart, Inc. (WMT - Free Report) and Target Corporation (TGT - Free Report) benefited from the rapid shift to e-commerce during the pandemic.  In fact, Amazon, Target and Walmart reported massive bumps in e-commerce sales in the last quarter.

This is also making companies go on a hiring spree to meet the growing demand of online shoppers. In fact, Amazon announced on Sep 14 that it plans to hire another 100,000 workers in the United States and Canada amid a coronavirus-fueled boom in its online sales.

Even as stores reopen and brick-and-mortar sales rebound, according to e-marketer, e-commerce is forecast to lose just a 0.1% of total retail sales in 2021, before gaining more than 1% each year through 2024. By then, U.S. e-commerce sales are expected to surpass $1 trillion and represent 18.1% of total retail sales in the United States.

Our Choices

The domestic economy has started reopening but the government is still struggling to contain the spread of the pandemic.  Safety measures like at-home orders and strict social distancing will continue for at least a few more months now. Hence, more people will rely on online delivery, especially grocery and household staples. Given this situation, it might be prudent to invest in the following four e-commerce stocks.

Target Corporation has evolved from being just a pure brick and mortar retailer to an omni-channel entity. The company has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.

The company’s expected earnings growth rate for next year is 11.9%. The Zacks Consensus Estimate for current-year earnings has improved 41.9% over the past 30 days. Target sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. (BBY - Free Report) is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services. 

The company’s expected earnings growth rate for next year is 17.3%. The Zacks Consensus Estimate for current-year earnings has improved 26% over the past 30 days. Best Buy has a Zacks Rank #2 (Buy).

DICKS Sporting Goods, Inc. (DKS - Free Report) operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc.

The company’s expected earnings growth rate for the current year is 3%. The Zacks Consensus Estimate for current-year earnings has improved more than 1,000% over the past 30 days. Dicks Sporting sports a Zacks Rank #1.

Caseys General Stores, Inc. (CASY - Free Report) offers a variety of food selection (including freshly prepared foods such as pizza, donuts and sandwiches), beverages, tobacco and nicotine products, health and beauty aids, school supplies, housewares, and pet supplies.

The company’s expected earnings growth rate for next year is 4%. The Zacks Consensus Estimate for current-year earnings has improved 21.1% over the past 30 days. Casey’s General Stores has a Zacks Rank #1.

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