Retail sales jumped unexpectedly in June after declining for the past few months. However, the surprise rebound once again proves that the economy is on track for a faster-than-expected recovery, with people having started spending on goods.
The jump in June comes despite a decline in auto sales, as microchip shortage continues to hurt the production of new vehicles. The retail sector had taken a bad hit due to the pandemic but e-commerce has been breathing life into the sector and played a key role in driving June sales.
Retail Sales Rise in June
The Commerce Department said on Jul 16 that retail sales increased 0.6% in June, beating analysts’ expectation of a decline of 0.4%. Also, sales grew 18% year over year. The retail sector has been trying to bounce back since the economy started reopening but was still on a downtrend.
Sales had declined 1.7% in May instead of 1.5% as reported earlier. However, the year-over-year jump is now sharply above the pre-pandemic levels, which is an indication that the economy is on track to recovery.
Demand for electronic goods and motor vehicles, as well as other essential commodities had surged during the peak of the pandemic in 2020 as more people worked from home and avoided public transportation. However, it is now rotating back to service as the travel and entertainment industries are gradually reopening.
Also, with almost 160 million Americans fully vaccinated now, consumer spending is increasing as people are stepping out of their homes.
Another section that saw a jump in demand in June was used cars. As semiconductor shortage continues to cripple the automotive industry, with vehicle manufacturers cutting down production, people are now buying used car.
E-Commerce Boosting Retail Sales
From being the saving grace for the retail sector when the coronavirus outbreak crippled the United States, e-commerce has now turned into a habit. People have finally realized the benefits and comfort of shopping online.
The Commerce Department said that online sales grew 1.2% in June on a month-over-month basis.
Amazon.com, Inc.’s ( AMZN Quick Quote AMZN - Free Report) Amazon Prime Day is expected to have played a major role in this increase. Another reason behind the surge in retail sales is the additional spending power thanks to the new round of stimulus checks that has given people the confidence to spend more.
Also, new cases of COVID-19 Delta variant are one the rise in almost all the states in the United States. Per the U.S. Centers for Disease Control and Prevention data, new cases of COVID-19 have jumped more than 70% in the past week and deaths are up 26%. This is reason enough to instill fears in the minds of people. They might start stockpiling or avoid physical stores once again.
Online shopping will continue to be a safe bet for millions given its safety and convenience. This is thus the right opportunity to invest in retail stocks that have a strong online presence.
Target Corporation ( TGT Quick Quote TGT - Free Report) has evolved from being just 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 28.5%. The Zacks Consensus Estimate for current-year earnings has improved 39.6% over the past 60 days. Target sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here. Walmart Inc. ( WMT Quick Quote WMT - Free Report) has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. In this regard, the acquisitions of Bonobos, Moosejaw and Parcel; partnership with Shopify and Goldman Sachs; delivery programs like Walmart + and Express Delivery; and investment in online e-commerce platform Flipkart are noteworthy.
The company’s expected earnings growth rate for the current year is 8.6%. The Zacks Consensus Estimate for current-year earnings has improved 9.8% over the past 60 days. Walmart has a Zacks Rank #2.
Best Buy Co., Inc. ( BBY Quick Quote BBY - Free Report) is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services.
The company’s expected earnings growth rate for next year is 7.8%. The Zacks Consensus Estimate for current-year earnings has improved 17% over the past 60 days. Best Buy has a Zacks Rank #1.
Costco Wholesale Corporation ( COST Quick Quote COST - Free Report) sells high volumes of food and general merchandise, including household products and appliances, at discounted prices through membership warehouses.
The company’s expected earnings growth rate for the current year is 17.9%.The Zacks Consensus Estimate for the current year earnings has improved 7.3% over the past 60 days. Costco carries a Zacks Rank #2.
Urban Outfitters, Inc. ( URBN Quick Quote URBN - Free Report) is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gift products.
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 83.6% over the past 60 days. Urban Outfitters carries a Zacks Rank #1.
Levi Strauss & Co. ( LEVI Quick Quote LEVI - Free Report) designs and markets jeans, casual wear and related accessories for men, women and children under the Levi's, Dockers, Signature by Levi Strauss & Co. and Denizen brands.
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 14.4% over the past 60 days. Levi Strauss sports a Zacks Rank #1.