Back to top

Image: Bigstock

2021 Has Been Good to Retail So Far: 5 Top Picks

Read MoreHide Full Article

U.S. household spending, no doubt, increased considerably at the beginning of this year compared to last year as evident from a sharp rebound in retail sales last month.

Sales at U.S. retailers climbed 5.3% in January following a decline of 1% in December, per the Commerce Department, as quoted in a livemint article. Notably, retail sales notched their first monthly gain since September, the article further stated. Analysts, by the way, mostly predicted retail sales increase of only 1%.

What’s more, retail sales have been broad-based with all major categories registering sharp advances. After all, there has been an uptick in household spending following a rather weak fourth quarter of 2020, banking on fresh stimulus measures and a declining number of coronavirus cases.

Lest we forget, the coronavirus outbreak last year disrupted the U.S. economy and hampered consumer outlays. But since then, virus cases declined and states have now begun to lift curbs on businesses and various other activities. Most importantly, the latest round of $600 stimulus checks helped boost spending across an array of consumer discretionary as well as staple items.

In fact, the Biden administration is now widely expected to send $1400 stimulus checks as part of the $2 trillion coronavirus-related financial aid package to mostly lower-income workers. Such a move will further help consumers spend even more in the months ahead.

Michael Gapen, chief U.S. economist at Barclays Plc, in the meantime, as mentioned in the livemint article, said that with more stimulus measures likely in March “we should see a pretty rapid acceleration in demand and household spending as we move into the second quarter, which could be continued if vaccinations continue apace, and mobility gradually recovers over time.”

Nonetheless, coming back to last month’s retail sales data, Internet retailers in particular saw sales rise 11%, the maximum in two years, per the livemint article. Sales at electronic and appliance stores as well as home-furnishing shops also posted double-digit gains in percentage terms, as quoted in a MarketWatch article.

The article further stated that sales at food services and drinking outlets jumped almost 7% after receipts declined for three straight months. Bitter winter weather conditions coupled with the coronavirus outbreak were responsible for the shutdown of restaurants during the latter part of 2020. Nevertheless, the article further stated that sales at auto dealers and gas stations jumped 6.1% in January. In fact, sales of automobiles picked up in the month of January.

Separately, consumers’ appetitive for apparels picked up last month. Sales at clothing stores saw rose 5%, while sporting goods outlets witnessed a rise of 8%, per the Census Bureau, as quoted in a footwearnews article.

Thus, with retail sales rising and retailers positioned to benefit from increased consumer outlays on declining coronavirus cases and more financial aid, investing in sound retail stocks as of now will be a smart move.

We have, therefore, selected five retail stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The stocks also boast a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

Abercrombie & Fitch Company (ANF - Free Report) operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids. The company currently has a Zacks Rank #1 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has moved up 16.8% over the past 60 days. The company’s expected earnings growth rate for the next five-year period is 18%.

Boot Barn Holdings, Inc. (BOOT - Free Report) operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. The company currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has risen 21.2% over the past 60 days. The company’s expected earnings growth rate for the next five-year period is 20%.

RH (RH - Free Report) is a leading luxury retailer in the home furnishing space. The company currently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has climbed 0.2% over the past 60 days. The company’s expected earnings growth rate for the next five-year period is 27.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conns, Inc. (CONN - Free Report) sells major home appliances, including refrigerators, freezers, and a variety of consumer electronics, including projection, plasma and LCD televisions, camcorders, VCRs, DVD players and home theatre products. The company currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has risen 9.7% over the past 60 days. The company’s expected earnings growth rate for the next five-year period is 23%.

Dillards, Inc. (DDS - Free Report) is a large departmental store chain featuring fashion apparel and home furnishings. The company currently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has moved almost 12% north over the past 60 days. The company’s expected earnings growth rate for the quarter ending in April is 85.5%.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>