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4 Stocks to Buy as Back-to-School Season Holds Promise

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Retailers have once again started worrying, with sales declining in May. The sector was doing well despite surging prices, as sales continued to rise on higher demand in the first few months of the year. Rising prices have made people spend cautiously on food, fuel and other necessities, which has led to a slowdown in retail sales.

However, retailers are now banking on the back-to-school season, which might drive sales. The back-to-school season is expected to generate higher sales this year, given that educational institutes remained closed almost throughout 2020 and most of 2021. Given this situation, stocks likeDollar Tree, Inc. (DLTR - Free Report) , Canada Goose Holdings Inc. (GOOS - Free Report) , Boot Barn Holdings, Inc. (BOOT - Free Report) and Designer Brands Inc. (DBI - Free Report) are likely to benefit in the near term.

Back-to-School Season Likely to Drive Retail Sales

The back-to-school season didn’t mean much for retailers over the past two years as millions learned from home owing to the pandemic. This year, however, retailers are heavily banking on the back-to-school season to give the much-required push to sales. After slowing over the past few months, retail sales finally slipped 0.3% in May.

So, the back-to-school season this time comes as a ray of hope for retailers. Also, the prediction is that sales will witness a solid jump this year as millions go back to school. According to a Mastercard SpendingPulse report, back-to-school sales are projected to grow 7.5% this year. This includes both in-store and online sales.

The back-to-school season is from mid-July through Labor Day. Per the report, sales should grow 18.3% from the pre-pandemic levels in 2019.

Moreover, in-store sales are expected to drive sales as most people prefer to try on new sizes and check out the latest fashion trends in person.

Also, sales at department stores have been rebounding for 15 consecutive months. Department stores will play a major role in driving back-to-school sales as they will serve as one-stop shopping destinations for various products. Department store sales are projected to grow 13% year over year and 27.3% from the pre-pandemic levels of 2019.

Retail Sector Going Strong on Higher Demand

Rising prices have been a cause of concern, and many had predicted that the sector would start witnessing a decline in sales from the beginning of the year. However, higher demand for consumer goods kept helping the retail sector, which saw sales jump in the first four months of the year.

The decline came in May but that too was marginal. Although people have started spending more on services once again, demand for goods is still high. This has seen durable goods orders rise almost every month.

The Commerce Department said on Jun 27 that orders for durable goods produced in U.S. factories grew 0.7% month over month in May to $267.2 billion, while economists had predicted the data to remain unchanged. May’s jump came after a 0.4% increase in durable goods orders in April.

Additionally, more social occasions like weddings and parties are anticipated as the economy continues to reopen, which is expected to help in-store and online sales grow 8.7% year over year during this time.

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 3% 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.

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’s jackets are sold in 36 countries around the world, including in two owned retail stores and four e-commerce stores.

Canada Goose Holdings’ expected earnings growth rate for the current year is 64.4%. The Zacks Consensus Estimate for current-year earnings has improved 6.7% over the past 60 days. GOOS has a Zacks Rank #2.

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 19.1% over the past 60 days. Boot Barn Holdings sports a Zacks Rank #1.

Designer Brands Inc. designs, produces and retails footwear and accessories. DBI offers shoes, boots, sandals, sneakers, socks, handbags and accessories. Designer Brands’operating segment consists of the DSW segment, which includes DSW stores and dsw.com and the Affiliated Business Group segment.

Designer Brands’ expected earnings growth rate for the current year is 16.5%. The Zacks Consensus Estimate for current-year earnings has improved 7.6% over the past 60 days. DBI holds a Zacks Rank #1.