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Flat Retail Sales Point at a Few Bright Spots: 4 Top Picks

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Retail sales numbers are always an important gauge of economic conditions. The metric forecasts trends in consumer outlays, which typically drive economic growth. However, sales at U.S. retailers for April remained unchanged compared to the prior month. Many opine that it’s due to the lack of stimulus measures that retail sales flattened out in April. After all, the third batch of financial aid, including the $1,400 stimulus checks, helped retailers achieve blockbuster sales numbers in March.

The Commerce Department, citing a CNBC article, said that sales at U.S. retailers remained unchanged in April following a jump of 10.7% in March. But economists expected retail sales numbers to rise at least 1%. Moreover, the retail sales report followed rather disappointing job numbers last month amid inflation that increased almost to the highest level in 13 years, indicating significant stress on the U.S. economy, as mentioned in a MarketWatch article.

No doubt, Americans spent less on recreational products, home furnishing and clothes, among several other items last month. To put things into perspective, sales at clothing stores witnessed a drop of 5.1% in April from March, as quoted in one of thebalance article. Similarly, sales at department stores as well as sporting goods stores fell 1.9% and 3.6% month over month, respectively, as mentioned in the article. Additionally, sales at drug stores, building, and garden supply stores recorded a month-over-month decrease. Non-store sales too witnessed a decrease from March.

However, the same cannot be said about restaurants and, car and parts dealers. Easing of lockdown measures and the reopening of businesses instilled confidence among Americans to go out and eat. People are comfortable in buying cars despite higher prices and shortage of desirable models, mostly due to the lack of computer chips. It’s, undoubtedly, a tell-tale sign that consumers are now shifting their focus to products and services that took a beating last year due to the outbreak of coronavirus. The rapid increase in the pace of vaccination has also encouraged consumers to step out, benefiting restaurants, car manufacturers and dealers, to say the least. What’s more, their sales are expected to pick up pace in the near future as Americans have already accumulated nearly $2 trillion in extra savings and are eager to spend it during summer and fall, citing another MarketWatch article.

Nonetheless, citing thebalance article, sales at restaurants and bars rose 3% in April from March and were up a whopping 116.8% from the same period last year. Also, sales at auto dealers and parts advanced 2.9% month over month, and soared 104.5% year over year, as mentioned in the article.

Thus, it’s imperative for investors to cash in on this trend and invest in shares of retailers running restaurants businesses as well as auto parts. We have highlighted four such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Bloomin Brands, Inc. (BLMN - Free Report) is a casual dining restaurant company with a portfolio of differentiated restaurant concepts. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 80.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 372.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

BJs Restaurants, Inc. (BJRI - Free Report) owns and operates a chain of high-end casual dining restaurants in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 156.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 110.6%.

OReilly Automotive, Inc. (ORLY - Free Report) is a leading specialty retailer of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 8% over the past 60 days. The company’s expected earnings growth rate for the current year is 6.9%.

LKQ Corporation (LKQ - Free Report) is one of the leading providers of replacement parts, components, and systems that are required to repair and maintain vehicles. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 10.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 20.4%.

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