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E-Commerce Drives Retail Sales in January: 5 Stocks to Buy

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The retail sector, which had taken a beating during the initial months of the COVID-19 pandemic, is gradually trying to get back on its feet. Although retail sales declined in December after gaining consecutively for six months, higher consumer spending helped push sales in January, according to Mastercard SpendingPulse.

Moreover, e-commerce has been playing a major role in helping retail sales growth as most people are shopping online or going for curbside pickup facilities. Given that another round of stimulus is on its way, retail sales are likely to continue growing in the coming months as stimulus checks should increase the spending power of people.

Retail Sales Jump in January

According to the latest Mastercard Spending Pulse, retail sales excluding automotive and gasoline jumped 9.2% year over year in January. The growth was witnessed across all 50 states as the holiday season shopping momentum continued into January.

The surge in January comes at the back of 3% year-over-year growth in sales during the holiday season. Spending on furniture and furnishings surged 16.6%, registering eight straight months of growth. Also, spending on groceries continued to rise. The specialty apparel category saw a 52.5% year-over-year jump in sales. Sales in departmental stores increased 1.5% year over year. This was primarily because of strong online sales.

E-commerce Helping Retail Sector

E-commerce has come as a savior for the retail sector. An increasing number of people have been shopping online since the coronavirus outbreak that has been working as a tailwind for the retail sector. According to the report, online sales surged 62.1% in January on a year-over-year basis. According to Adobe Analytics, U.S. online sales during the 2020 holiday season grew 32% from 2019, hitting a record $188.2 billion. The momentum continued into January that helped retail sales grow further.

Another big shift from visiting physical stores was curbside pickup. BOPIS (Buy Online Pick-Up in Store) gained popularity last year because of the pandemic. BOPIS started picking up with the onset of the pandemic and increased substantially during the holiday season. The trend is expected to continue in the near term.

Moreover, with the new round of stimulus having finally been approved, the spending power of people is expected to increase further, which is likely to help the retail sector.

Our Choices

The jump in retail sales in January once again signals a steady recovery. Moreover, with the new round of fiscal stimulus on its way, it is likely that retail sales will get a boost. However, e-commerce will continue to play a dominant role in the coming months, which is only going to benefit the retail sector. Given this situation, it might be prudent 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 more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 8% over the past 60 days. Tapestry sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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 the current year is 42.6%. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the past 60 days. Target carries a Zacks Rank #2 (Buy).

Ethan Allen Interiors Inc. is a leading interior design company, and manufacturer and retailer of quality home furnishings. The company offers free interior design service to its clients and sells a full range of furniture products and decorative accessories through and a network of the Design Centers in the United States and abroad.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 44.4% over the past 60 days. Ethan Allen carries 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 such as for team sports, fitness, camping, fishing, tennis, golf and water sports.

The company’s expected earnings growth rate for the current year is 57.5%. The Zacks Consensus Estimate for current-year earnings improved 46.3% over the past 60 days. Dicks Sporting has a Zacks Rank #2.

1800 FLOWERS.COM, Inc. (FLWS - Free Report) is a leading e-commerce provider of floral products and gifts, in terms of the number of customers and revenues. 

The company’s expected earnings growth rate for the current year is 79.6%. The Zacks Consensus Estimate for current-year earnings improved 47.9% over the past 60 days. 1800 FLOWERS.COM sports a Zacks Rank #1.

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