During the beginning of spring, retail sales in the United States took a severe beating owing to the coronavirus pandemic. Moreover, stores and malls were forced to shut down to curb the rapid spread of the virus. Since then, Americans’ spending habit did improve, and sales at retail outlets picked up for the fifth consecutive month in September, as quoted in a
Most importantly, rise in consumer spending that constitutes the bulk of economic activity indicated that the broader economic revival is underway to a great extent. In fact, spending was broad based in September as Americans splurged at bars and restaurants. American shoppers also spent heavily on items such as clothes, sporting equipment and cars to name a few. Let’s take a look at the numbers –
Sales at retail and food services advanced 1.9% in September from August, and jumped 5.4% on a year-over-year basis, according to the
US Department of Commerce
. In fact, retail sales were up a solid 3.6% in the third quarter compared with the same period a year ago.
More encouragingly, sales that doesn’t include the auto segment, gasoline, food services and building materials improved 1.4% in September, following a revised 0.3% decline in August, as quoted in a
article. Individually, sales at auto dealers and repair outlets that account for almost one-fifth of total retail outlays were up a healthy 3.6%, per the US Department of Commerce. The executive department of the federal government of the United States further stated that sales at clothing outlets, department, and sporting goods, musical and book stores leaped 11%, 9.7% and 5.7%, respectively.
Sales at eating joints and drinking places also rose 2.1%, another tell-tale sign that economic activity did pickup in September. After all, consumers spend more at restaurants only if they are confident regarding their financial situation. By the way, the pandemic led stay-at-home environment did boost demand for home furnishing products in September, with sales at home furniture stores increasing 0.5%.
But let’s admit that it’s the extra unemployment benefit that the government provided, coupled with delayed back-to-school shopping period that eventually led to consumers splurging at retail stores last month. It is worth mentioning that back-to-school shopping period generally happens during the summer months but schools delayed their openings this year due to the pandemic.
Nonetheless, uptick in sales at retail stores does give us an opportunity to invest in retail stocks that have certainly made the most of the buying frenzy. But an astute investor will also look into the future trends. Are consumers equally willing to spend in the near term? Don’t forget that the latest truncated weekly jobless payment is for a limited period of time. There is also no certainty regarding a fresh stimulus package from the Congress with the presidential election knocking at the door. Lack of stimulus measures, by the by, has already started to weigh on a slow labor market recovery.
However, not all hope is lost as consumers’ confidence on future business conditions, jobs and overall economic outlook still remains elevated, something that may lead to more spending and in the process buoy retailers. Per the
, the index of consumer confidence came in at 101.8 in September. It climbed 15.5 points from August’s reading of 86.3 — the biggest one-month jump in 17 years (read more:
US Consumers Gain Confidence in Economy: 5 Winners
5 Top Retail Stocks to Buy Right Away
Given the positives, no doubt, retailers are positioned to witness a promising rally in the near future. Hence, it will be judicious to invest in five of the best retail stocks. Such stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
ZUMZ Quick Quote ZUMZ - Free Report
) operates as a specialty retailer of apparel, footwear, accessories, and hardgoods for young men and women. The company, currently, sports a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings increased 59.9% over the past 60 days. The company’s expected earnings growth rate for the next year is 15.5%.
Levi Strauss & Co.
LEVI Quick Quote LEVI - Free Report
) operates as an apparel company. The company, currently, has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings increased more than 100% over the past 60 days. The company’s expected earnings growth rate for the next year is more than 100%.
RH Quick Quote RH - Free Report
) operates as a retailer in the home furnishings. It offers products in various categories including furniture. The company, currently, flaunts a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings increased 52.1% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 47.5% and 8.6%, respectively. You can see
the complete list of today’s Zacks #1 Rank stocks here.
Jack in the Box Inc
JACK Quick Quote JACK - Free Report
) operates and franchises Jack in the Box quick-service restaurants. The company, currently, has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings increased 1.5% over the past 60 days. The company’s expected earnings growth rate for the next quarter and year is 26.5% and 17.9%, respectively.
Sportsman's Warehouse Holdings, Inc.
SPWH Quick Quote SPWH - Free Report
) operates as an outdoor sporting goods retailer in the United States. The company, currently, has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings increased 91.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 229.8%.
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