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4 Solid Stocks to Buy on Continued Growth in Retail Sales

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People have been spending cautiously on fuel, food and other necessities amid a surge in prices. However, with the back-to-school season around the corner, the retail sector has no such reason to worry.

After the initial struggle that stemmed from the pandemic, retailers have done fairly well for the past few months. According to the latest Mastercard SpendingPulse report, retail sales jumped once again in May. The projection is that sales will continue to surge over the coming months despite rising prices. Given this situation, stocks likeDollar Tree, Inc. (DLTR - Free Report) , PC Connection, Inc. (CNXN - Free Report) , Boot Barn Holdings, Inc. (BOOT - Free Report) and Canada Goose Holdings Inc. (GOOS - Free Report) are likely to benefit in the near term.

Retail Sales Jump in May

According to the latest Mastercard SpendingPulse report, retail sales grew a solid 10.5% year over year in May, after surging 7.2% in April. May’s gains are also 21.4% higher than the pre-pandemic May 2019 sales.

The report states that sales have once again started getting driven by in-store purchases. In-store sales in May were up 13.7% from the pre-pandemic levels. People depended largely on e-commerce during the peak of the pandemic. The trend picked up and online sales not only went on to become a key driver but also played a major role in saving the retail sector during the pandemic.

However, with brick-and-mortar stores once again open, in-store sales have gathered momentum over the past few months.

Also, people had cut down on spending on services and were spending more on goods during the pandemic. People are still spending on goods despite the reopening of shops. Overall, high demand is helping boost retail sales, which is a good sign.

The Mastercard SpendingPulse report comes just ahead of the all-important retail sales data to be released by the Commerce Department on Jun 15. Data from Commerce Department also showed a 0.9% jump in retail sales in April amid rising inflation.

Retail Sector Poised to Grow

Although soaring prices have been a cause of concern, higher demand for goods is driving sales, which is still helping the retail sector. The report also mentions that sales are likely to get a boost in the coming months due to the back-to-school season, which is good to witness higher sales.

According to the report, retail sales are projected to grow 7.5%, excluding automobiles, from 2021 ahead of the crucial mid-July through Labor Day back-to-school season. From the pre-pandemic levels, retail sales during the back-to-school period are expected to jump by 18.3%.

Department stores are once again likely to help drive sales by 8.2% year over year and 89.9% from the pre-pandemic levels.

As the economy reopens further, more social gatherings such as weddings and parties during this period are expected to boost both in-store and online sales by 8.7% year over year.

Despite rising prices, retail sales are expected to rise in the following days. This is due to a number of factors. Hiring is on the rise once again, while unemployment claims continue to fall. As a result, a greater number of people are returning to work. There will be an increase in personal income and spending as more people return to work.

Our Choices

Dollar Tree, Inc. is an operator of discount variety stores offering merchandise and other assortments. DLTR’s stores successfully operate in major metropolitan areas, mid-sized cities and small towns. Dollar Tree offers a wide range of quality everyday general merchandise in many categories, including housewares, seasonal goods, candy and food, toys, health and beauty care, gifts, party goods, stationery, books, personal accessories, and other consumer items.

Dollar Tree’s expected earnings growth rate for the current year is 40.5%. The Zacks Consensus Estimate for current-year earnings has improved 7.5% over the past 60 days. DLTR carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PC Connection, Inc. is a direct marketer of brand-name personal computers and related peripherals, software, and networking products to business, education, government, and consumer end users located primarily in the United States.

PC Connection’sexpected earnings growth rate for the current year is 20.8%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. CNXN carries a Zacks Rank #2 (Buy).

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 bootbarn.com, an e-commerce Website. 

Boot Barn Holdings’ expected earnings growth rate for the current year is 4.4%. The Zacks Consensus Estimate for current-year earnings has improved 18.4% over the past 60 days. Boot Barn Holdings sports a Zacks Rank #1.

Canada Goose Holdings Inc. is a global outerwear brand. Canada Goose is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. GOOS’ jackets are sold in 36 countries around the world, including in two owned retail stores and four e-commerce stores.

Canada Goose’s expected earnings growth rate for the current year is 64.4%. The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the past 60 days. GOOS carries a Zacks Rank #2.