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Holiday Sales Forecast to Surge: 6 Solid Retail Stocks to Buy

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The holiday season is approaching but retailers continue to fret as there are no signs of the coronavirus subsiding. Retail sales have been somewhat increasing over the past few months, but are still way behind the year-ago level. However, the good sign is that economies are reopening and people have once again started visiting physical stores.

According to Deloitte, holiday retail sales this year are forecast to increase, although not like the previous year. Still, it is a good sign that people are optimistic about spending. Moreover, despite low morale and millions of job losses, the retail sector has somewhat bounced back, thanks to e-commerce sales, and consumer spending too is on the rise.

Holiday Sales Projected to Rise

According to Deloitte, holiday retail sales this year are forecast to rise between 1% and 1.5%, amounting to between $1.147 trillion and $1.152 trillion during the November-to-January time frame. That, however, is much lower compared with growth of 4.1% in 2019, when sales were nearly $1.14 trillion, according to the U.S. Census Bureau.

The range of 1% to 1.5% is derived by blending two different scenarios, driven by big and small spenders, Deloitte explained. First, Deloitte expects there could be a relatively stable 0% to 1% jump in sales during the holidays, if consumers — especially lower-wage earners — remain nervous about their finances and health, and must commit more of their spending toward necessities. 

However, a bigger 2.5% to 3.5% increase could occur if wealthier consumers gain even more confidence in the back half of 2020. Factors that could bolster confidence within this group include shrinking unemployment, additional government stimulus and an effective COVID-19 vaccine.

E-Commerce, Other Factors to Boost Sales

According to Deloitte, holiday e-commerce sales are forecast to surge 25% to 35%, amounting to between $182 billion and $196 billion. In 2019, year-over-year growth online was of 14.7%, with sales reaching $145 billion. However, this means that retailers could start feeling the pressure to prepare for an onslaught of online orders, which could start as early as next month and run until last-minute shipping deadlines arrive. 

Moreover, since falling 14.7% in April — the largest monthly decline in recorded history — retail sales have surged non-stop for three consecutive months, indicating that consumers are will to spend. In July, retail sales increased by 1.2% from June and gained 2.7% year over year. Prior to this, retail sales in May and June rose 18.3% and 8.4%, respectively. Also, consumer spending rose 1.9% in July, which hints at the willingness of customers to spend.

Our Choices

Now that economies are opening and an assurance from the Trump administration that a vaccine will most likely be available by the end of this year, consumers are gradually showing confidence in spending, which once again indicates a fruitful holiday season for retailers. Given this scenario, it will be wise to invest in retail stocks.

Tapestry, Inc. (TPR - Free Report) is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. The company offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches. 

The company’s expected earnings growth rate for the current year is 89.7%. The Zacks Consensus Estimate for current-year earnings has improved 17.9% over the past 60 days. Tapestrycarries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Walmart Inc. (WMT - Free Report) has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. Walmart’s offerings include almost everything from grocery to cosmetics, electronics to stationery, home furnishings to health and wellness products.

The company’s expected earnings growth rate for the current year is 7.1%. The Zacks Consensus Estimate for current-year earnings has improved 17.9% over the past 60 days. Walmartcarries a Zacks Rank #2.

Target Corporation (TGT - Free Report) has evolved from just being a pure brick & 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.

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 presently carries a Zacks Rank #2.

Hibbett Sports, Inc. (HIBB - Free Report) is a major athletic-inspired retailer, located in small and mid-sized markets across the country. The company operates predominantly in the South, Southwest, Mid-Atlantic and Midwest regions of the United States.

The company’s expected earnings growth rate for the current year is 86.3%. The Zacks Consensus Estimate for current-year earnings has improved 48.1% over the past 30 days. Hibbett Sports currently has a Zacks Rank #1.

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 currently has a Zacks Rank #1.

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