The holiday season is around the corner and it goes without saying that it’s one of the most important times of the year for a large number of companies. This one is particularly important because it will tell us a whole lot about the state of recovery in retail. Both store owners and customers are wary about the outcome of a busy selling season as the pandemic rages on. So retailers are incentivizing people to order online and consumers are starting early to make sure they catch the best deals. Deloitte’s Sep 15 report on holiday spending forecasts retail sales growth of 1% to 1.5% during the November-to-January period. That comes to $1.147 trillion to $1.152 trillion, based on the 2019 sales level of around $1.14 trillion. Explaining the range, the firm said that shrinking unemployment, additional government stimulus and an effective Covid-19 vaccine could boost spending by more affluent consumers while continued concerns about personal health and finances could turn lower-income groups even more conservative. A survey by Morning Consult indicates that alcohol, food, holiday snacks and drinks are on the strike list for around two-thirds of respondents, although most will buy in bulk, likely for discounts. As far as gifts are concerned, 39% are likely to spend less. However, the good news is that 49% will spend the same amount while 12% (mainly younger generations, Blacks and urbanites) will spend more. Around 95% of people buy premium and luxury goods during the holiday season. Of them, 32% are regular buyers who won’t be buying this year, another 19% comprises not-so-regular buyers who also won’t be buying, 21% will buy the same amount, 17% will buy less and only 6% will buy more. Holiday get-togethers with friends or family are being avoided by more than 70%. Travel plans are also being curtailed, with 51% not planning to travel during the Thanksgiving holiday and 49% shelving plans for the entire holiday season. 85% of those traveling prefer their own cars. What’s more, this seems to be a cost-cutting measure for most, so travel money saved won’t be redirected to other things. Although it doesn’t look so good overall, there are segments that will do better than others. That’s what we need to focus on this year- Transportation - Air Freight and Cargo (top 1% of 250+ Zacks-classified industries) While this holiday season appears to be going flat to slightly up from last year, which means it should still be quite a strong period for retailers, and certainly, the strongest period this year. Additionally, the growing ecommerce trend has expanded reach for them. That’s why there should be increased demand for air freight. The industry has already returned 64.28% year to date and there should be more to follow. Stocks: Zacks #1-ranked are the top picks at this point. FDX and #2-ranked ATSG, AAWW and UPS Automotive - Retail and Wholesale (top 2%) Travel spending is coming back very slowly and there’s unlikely to be much change in that scenario. However, road travel has remained strong this year and there are indications that this strength will continue in quarter four. The industry has returned 23.98% year to date with more growth in the cards. Stocks: Zacks #1-ranked (are the way to go. CRMT Quick Quote CRMT - Free Report) , GPI, LAD, TITN and #2-ranked ABG, AN, PAG, SAH Precious Metals and Jewels (top 2%) It’s not unusual to celebrate the season with jewelry, which is why the industry looks attractive now. But it has also returned 185.14% year to date, likely because of the stock market uncertainty. Stocks: Zacks #1-ranked is worth buying. CTHR Retail - Home Furnishings (top 5%) Some people do up their homes for the holidays. This year, some people are also furnishing for the new normal. Financial difficulty is also diverting holiday spending toward more practical items. So while the industry has already returned 26.16% year to date, we can look forward to more. Stocks: Zacks #1-ranked (are top picks. RH Quick Quote RH - Free Report) , TPX, WSM and #2-ranked CSPR and ETH Shoes and Retail Apparel (top 8%) This one needs the least explanation, as shoes and apparel are very common holiday items. The industry has returned 21.31% on the back of spending for the new normal and there should be more to follow from some of these players. Stocks: Zacks #1-ranked (are good buys. CAL Quick Quote CAL - Free Report) , NKE and #2-ranked DECK, WWW
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