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4 Solid Retail Stocks to Buy in a Challenging Industry

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The retail sector, which has been trying to make a steady comeback after taking a beating last year, slowed down in November. However, sales still have been growing despite challenges like the supply chain crisis.

This saw retail sales growing again in November. Moreover, with the holiday still not over, sales are likely to get a further boost in the coming weeks. Given this situation, stocks like Boot Barn Holdings, Inc.(BOOT - Free Report) , Target Corporation (TGT - Free Report) , Costco Wholesale Corporation (COST - Free Report) and Tapestry, Inc. (TPR - Free Report) are likely to benefit in the near term.

Retail Sales Grow in November

Retail sales, slowed down a bit but still grew 0.3% month over month in November the Commerce Department said on Dec 15. On a year-over-year-basis, retail sales grew 18.2% in November. This marked the fourth straight month of increase, indicating that people are willing to spend more but in a calculated way.

Excluding gas and automobiles, retail sales grew 0.2%. The holiday season has always proved good for retailers. Sales haven’t been that impressive this year but there are enough reasons.

The holiday season, unlike other years, started earlier this time, which saw people starting buying gifts as early as n October. Also, people are aware of the supply chain crisis, which saw them begin shopping for the holiday season a lot earlier. Retail sales thus registered its best figures in seven months in October, jumping an unexpected 1.8%.

This somewhat slowed down the retail sales figures in November but overall retail sales still managed to grow, indicating that the economy is on track for a faster recovery.

Retail Sector Poised to Grow

The supply chain crisis is just one of the many challenges being faced by several sectors, including retail, in the United States. People have continued to spend despite skyrocketing prices, helping the retail space. Earlier this month, the Labor Department said that the consumer price index jumped a staggering 6.4%, the biggest year-over-year jump since 1982.

The retail sector had been left battered and bruised last year due to the pandemic. Since then, the sector has been trying to bounce back, thanks to e-commerce, which has so far played a major role in saving thousands of retailers.

The pandemic also saw people shifting their shopping habits, as most people are shopping online. However, retail sales remained unchanged in November for the first time in months.

With the economy opening, people have also been spending on holidaying and recreational activities. This saw both apparel and sales at restaurants and bars jump in November. Apparel sales grew 0.5%, while sales at restaurants increased 1% in November.

Our Choices 

The retail sector is presently facing a number of challenges but its growth hasn’t stagnated, which is a good sign. In fact, with the economy still reopening and the holiday season far from over, the sector is poised to grow in the near term. Given this scenario, it would be ideal to invest in retail stocks with a strong online presence. We have hand-picked four stocks for you. Each of the stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings, Inc. operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. BOOT’s products include boots, denim, western shirts, cowboy hats, belts and belt buckles, and western-style jewelry and accessories. Boot Barn sells its products through, an e-commerce Website. 

Boot Barn Holdings’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 25.7% over the past 60 days. Shares of BOOT have gained 22.9% in the past three months. Boot Barn Holdings carries a Zacks Rank #1.

Tapestry, Inc. is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. TPR offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches. 

Tapestry reported stronger-than-expected first-quarter fiscal 2022 earnings, thanks to robust demand and strong customer engagement. TPR posted first-quarter adjusted earnings of 82 cents a share, beating the Zacks Consensus Estimate of 69 cents.

Tapestry’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 11.5% over the past 60 days. Shares of TPR have gained 2.1% in the past three months. Tapestry sports a Zacks Rank #1.

Costco Wholesale Corporation sells high volumes of food and general merchandise (including household products and appliances) at discounted prices through membership warehouses. Costco is one of the largest warehouse club operators in the United States. COST also operates e-commerce websites in the United States, Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia.

Costco Wholesale Corporation’s expected earnings growth rate for the current year is 13.2%. The Zacks Consensus Estimate for current-year earnings improved 5.6% over the past 60 days. Shares of COST have gained 19.2% in the past 30 days. Costco Wholesale Corporation has a Zacks Rank #2.

Target Corporation has evolved from being a pure brick & mortar retailer to an omni-channel entity. TGT 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.

Target Corporation reported third-quarter fiscal 2021 earnings of adjusted earnings of $3.03 per share, beating the Zacks Consensus Estimate of $2.87 and rising 8.7% from the year-ago period. TGT’s total revenues for the quarter came in at $25,652 million, increasing 13.3% year over year and surpassing the Zacks Consensus Estimate of $24,906 million. 

Target Corporation’s expected earnings growth rate for the current year is 40%. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the past 60 days. Shares of TGT have advanced 26.5% year to date. Target carries a Zacks Rank #2.

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