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Don't Lose Confidence, Scoop Up These 5 Retail Stocks Instead

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U.S. consumer confidence — a key determinant of the economy’s health — stumbled to its lowest level since August 2020, thanks to surge in the number of coronavirus cases, reimposition of restrictions in some states and delay in reaching a consensus over another round of COVID-19 relief package. Evidently, moderation in hiring activity and increase in the number of new unemployment claims have been hurting consumer sentiment, and in turn the willingness to spend. A reflection of the same was visible in dismal November retail sales data.

Per the Conference Board, the Consumer Confidence Index fell to 88.6 in December from November’s revised reading of 92.9. Lynn Franco, senior director of economic indicators at the Conference Board said, “Consumers’ assessment of current conditions deteriorated sharply in December, as the resurgence of COVID-19 remains a drag on confidence.” Franco further added, “Overall, it appears that growth has weakened further in Q4, and consumers do not foresee the economy gaining any significant momentum in early 2021.”

Although, the U.S. GDP rebounded sharply in the third quarter, the decline in consumer confidence for the second successive month signaled that the economy seems to be running out of steam as the fourth quarter winds down.

Nonetheless, the recent deal on second economic-rescue package of $900 billion did manage to allay some apprehensions as we head into 2021. The bill includes direct payments of $600 to most individuals, $300 weekly supplemental unemployment benefits and new funding for the Paycheck Protection Program. Lawmakers have also allocated funds for procurement and distribution of coronavirus vaccines.

However, some economists cited that the financial aid — which came after months of struggle — is not enough to pull the economy out of doldrums, and more federal help will soon be needed. They even pointed that the stimulus package excluded additional assistance sought by state and local governments, who have been grappling with budget shortfalls for quite some time now due to plunging tax revenues.

Clearly, more needs to be done on the economic front, and the U.S. president-elect Joe Biden is fully aware of the fact. Experts believe that more financial aid could be announced in the months ahead. But for now, stimulus checks for individuals and children, and mass vaccination will lend the much-needed support to the economy.

Economists cited that if business organizations and industries started to operate at an optimum level, it could potentially ramp up hiring activity, and in turn prompt consumers to spend freely. Markedly, consumer spending accounts for more than two-third of U.S. economic activity. That said here we have highlighted five stocks from Retail-Wholesale sector that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

 Past Six-Month Price Performance

5 Prominent Picks

You may invest in DICK'S Sporting Goods, Inc. (DKS - Free Report) , which has a Zacks Rank #1 and a VGM Score of A. The sporting goods retailer has a trailing four-quarter earnings surprise of 34.7%, on average. It has a long-term earnings growth rate of 5.6%. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings indicates growth of 8.1% and 58%, respectively, from the prior-year period.

Another potential pick Beacon Roofing Supply, Inc. (BECN - Free Report) . The stock has a Zacks Rank #1 and a VGM Score of B. This distributor of residential and non-residential roofing materials, and complementary building products has a trailing four-quarter earnings surprise of 13.6%, on average. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings indicates an improvement of 3.5% and 22.7%, respectively, from the year-ago period.

MarineMax, Inc. (HZO - Free Report) is also a solid bet. Impressively, this recreational boat and yacht retailer has a trailing four-quarter earnings surprise of 263.6%, on average. The stock has a Zacks Rank #1 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings indicates growth of 21.9% and 12%, respectively, from the year-ago period.

Rite Aid Corporation (RAD - Free Report) is worth betting on. The stock has a Zacks Rank #2 and a VGM Score of A. The bottom line of this operator of chain of retail drugstores has outperformed the Zacks Consensus Estimate in the last three reported quarters. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings indicates an improvement of 10.2% and 326.7%, respectively, from the year-ago period.

Investors can also count on Target Corporation (TGT - Free Report) , the general merchandise retailer in the United States. The company has a trailing four-quarter earnings surprise of 52.4%, on average. It has a long-term earnings growth rate of 8.5%. The stock has a Zacks Rank #2 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 16.6% and 37.4%, respectively, from the year-ago period.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>