Back to top

Image: Bigstock

5 Retail Stocks That Appear to Be Solid Bets for 2H

Read MoreHide Full Article

While pandemic-induced challenges still persist, a constructive economic policy has been playing a major role in defining the course of the market for now. Clearly, stimulus payments, stepped-up vaccinations and resumption of business activities have been stimulating economic recovery. As and when business organizations and industries start to operate at an optimum level, this will potentially ramp up hiring activity, and in turn spending, thereby contributing to GDP.

Markedly, the Federal Reserve recently raised its 2021 real GDP forecast to 7% from 6.5%. The Jerome Powell-led Fed now envisions unemployment rate to be 4.5% in 2021, down from the level of 5.8% in May 2021. We believe that still-low interest rate environment, financial assistance to businesses, widespread vaccinations and waning coronavirus cases are acting as tailwinds. Markedly, the U.S. GDP expanded 6.4% on an annualized basis in the first quarter of 2021.

Undeniably, gradual pick-up in economic activities with more people returning to their workplace and record savings are likely to boost consumer spending activity. There is growing eagerness among consumers to venture out and shop at stores. Easing of social distancing norms and resumption of active social lifestyle and events are likely to fuel demand across a diverse set of categories.

Considering the favorable consumer environment and upbeat momentum in the economy, the National Retail Federation now envisions U.S. retail sales to increase between 10.5% and 13.5% to an estimated $4.44 trillion to $4.56 trillion in the current year. With e-commerce still being one of the preferred modes for shopping, the retail trade group anticipates non-store and online sales to jump between 18% and 23% to a range of $1.09 trillion to $1.13 trillion.

With retailers directing resources toward advancing omni-channel capabilities, enhancing supply chain and providing faster delivery options, they look well-poised to tap any rise in demand. That said, we have highlighted five stocks from the Retail – Wholesale sector that look well positioned based on their sound fundamentals and earnings growth prospects. These stocks have either 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.

Price Performance: Past One Year

 

Zacks Investment ResearchImage Source: Zacks Investment Research

5 Prominent Picks

You may invest in Sally Beauty Holdings, Inc. (SBH - Free Report) . Growing online business and strength in Transformation Plan have been contributing to the overall performance. Also, its efforts to enhance customers’ experience coupled with prudent acquisitions are encouraging. The company has been undertaking a number of efforts to augment its online business amid the ongoing pandemic. In fact, robust investments to enhance the digital space have been yielding results. The stock has a Zacks Rank #1 and a VGM Score of A. This specialty retailer and distributor of professional beauty supplies has a trailing four-quarter earnings surprise of 37.8%, on average. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 7.7% and 89.3%, respectively, from the year-ago period.

Investors can count on Foot Locker, Inc. (FL - Free Report) , retailer of athletic footwear and apparel. Notably, the company has been witnessing strong demand for athleisure and fitness products. It plans to continue investing in boosting store fleet, including revamping and remodeling of the same. Markedly, it will be converting nearly one-third of its Footaction stores to other existing banner concepts. Such initiatives will help the company focus on its iconic banners. Further, it has been actively investing toward reinforcing digital presence. Impressively, the company has a trailing four-quarter earnings surprise of 47.6%, on average. The stock has a Zacks Rank #1 and a VGM Score of B. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 11.2% and 101.4%, respectively, from the year-ago period.

The Home Depot, Inc. (HD - Free Report) is another potential pick. Continued boom in renovations and construction activities bode well for the company. It is also gaining from strong growth in its Pro (professional) and DIY (Do-It-Yourself) customer categories, and continued digital momentum. Notably, this home improvement retailer has a trailing four-quarter earnings surprise of 9.9%, on average. 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 8.4% and 16.4%, respectively, from the year-ago period.

Tapestry, Inc. (TPR - Free Report) is also worth betting on. The company has been benefiting from the successful execution of Acceleration Program. The program is aimed at transforming the company into a leaner and more responsive organization. It also intends to build significant data and analytics capabilities with focus on enhancing digital and omni-channel capabilities, and operating with a clearly defined path and strategy for each of its brands namely Coach, Kate Spade and Stuart Weitzman. The stock has a Zacks Rank #2 and a VGM Score of B. This provider of luxury accessories and branded lifestyle products has a trailing four-quarter earnings surprise of 74.1%, on average. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings indicates an improvement of 13.3% and 191.8%, respectively, from the year-ago period.

We suggest betting on Lowe's Companies, Inc. (LOW - Free Report) , a home improvement retailer. The company is gaining traction with the newly-introduced Total Home strategy that includes providing complete solutions for various types of home repair and improvements needs. The total home strategy is expected to boost market share by accelerating investments in pro-related offerings, installation services, localization as well as boosting product assortments. We note that Lowe’s has been investing toward enhancing its omni-channel retailing capabilities. Markedly, the company has a trailing four-quarter earnings surprise of 14.4%, on average. 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 2.3% and 22.1%, respectively, from the year-ago period.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.

Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.

Click here to download this report FREE >>