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5 Retail Stocks to Play the Surge in US Consumer Confidence

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Americans look way more confident now, with people stepping out for work, shopping and leisure. Markedly, U.S. consumer confidence — a key determinant of the economy’s health — leaped for the fifth successive month in June and reached the highest mark since the pandemic gripped the economy last year. Easing of restrictions owing to stepped-up vaccinations and gradual pick-up in business activities with improving job prospects have boosted confidence.

Undeniably, the government’s timely intervention to provide financial assistance did play a major role in lifting the consumer sentiment. Per the Conference Board, the Consumer Confidence Index jumped to 127.3 in June from May’s revised reading of 120. This marks the highest level since February last year, when the index was at 132.6. It is quite apparent that there is growing eagerness among consumers to spend on goods and services.

Lynn Franco, senior director of economic indicators at the Conference Board said, “The proportion of consumers planning to purchase homes, automobiles, and major appliances all rose — a sign that consumer spending will continue to support economic growth in the short-term. Vacation intentions also rose, reflecting a continued increase in spending on services.”

Economists pointed that as business organizations and industries start to operate at an optimum level, it could potentially ramp up hiring activity, and in turn prompt consumers to spend more freely. Relaxing of social distancing norms and resumption of active social lifestyle and events are likely to fuel demand. Any uptick in consumer spending, which accounts for more than two-thirds of U.S. economic activity, is always a welcome news for retailers.

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.

Price Performance: Past One Year

 

Zacks Investment ResearchImage Source: Zacks Investment Research

5 Prominent Picks

Macy's, Inc. (M - Free Report) , one of the nation’s premier omni-channel retailers, is worth betting on. In spite of a tough retail landscape, the company has managed to stay afloat, courtesy of its Polaris Strategy. The strategy includes rationalizing store base, revamping assortments as well as managing costs prudently. Markedly, customers have been responding well toward the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. The company also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. Additionally, the company is constantly improving its mobile and website features to deliver enhanced shopping experience. Impressively, this New York-based company has a trailing four-quarter earnings surprise of 161.8%, 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 27.6% and 197.3%, respectively, from the year-ago period.AN

You may also invest in Sally Beauty Holdings, Inc. (SBH - Free Report) . Growing online business and strength in Transformation Plan have been contributing to its 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.

We also suggest betting on AutoNation, Inc. (AN - Free Report) , which operates as an automotive retailer in the United States. The company’s diversified product mix, large dealer network and store expansion efforts bode well. Markedly, the company has been making investments to enhance its digital capabilities. It significantly upgraded its AutoNation Express integrated retailing solution. Moreover, the acquisition of 11 stores and a collision center from Peacock Automotive Group is likely to add $380 million to AutoNation’s annual revenues. Markedly, this Fort Lauderdale, FL-based company has a trailing four-quarter earnings surprise of 103.6%, 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 suggests growth of 16.1% and 42.6%, respectively, from the year-ago period.

Investors can count on Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) , which operates, and franchises full-service and casual-dining restaurants. Notably, it is benefiting from robust delivery program, off-premise sales and strong digital initiatives. The company engages guests through its guest loyalty program — Red Robin Royalty — with offers designed to increase the frequency of visits. Moreover, it has been investing in technology and data infrastructure. Impressively, the company has a trailing four-quarter earnings surprise of 27.9%, on average. The stock has a Zacks Rank #2 and a VGM Score of B. Moreover, the Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 36.3% and 98.9%, 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.

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