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4 Retail Stocks for Your Holiday Shopping Basket

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Retailers have begun prepping for the holiday season with as much zeal as shoppers looking forward to eye-popping deals. Players in the industry are all geared up to walk the extra mile this holiday season to capitalize on any surge in demand. Supply chain issues and rising freight charges are headwinds that the industry is currently jostling with but retailers remain hopeful of a fabulous festive season. Eagerness among consumers to venture out and shop for loved ones should help keep the cash register ringing.

Well, stimulus savings from last year, steady wage gains and a lower unemployment rate should help keep demand alive. Per Mastercard SpendingPulse, U.S. retail sales, excluding automotive, are anticipated to increase 7.1% from a year earlier during the traditional holiday period that runs from Nov 1-Dec 24. While in-store retail sales are projected to increase 7.9%, e-commerce is expected to rise 4.2%.     

According to Mastercard SpendingPulse, “With holiday shopping slated to begin early again this year, some of the season’s retail growth is expected to be pulled forward in October as consumers hunt for early deals. Key promotional days like Black Friday weekend are also expected to make a strong return along with Christmas Eve, which falls on a Saturday, slated to be among the biggest days for retailers and last-minute shoppers.”

Evidently, retailers need to channelize their strength and make strategic investments to provide consumers fast, convenient and safe shopping experience, be it offline or online. Ulta Beauty, Inc. (ULTA - Free Report) , Arhaus, Inc. (ARHS - Free Report) , Designer Brands Inc. (DBI - Free Report) and Chico's FAS, Inc. (CHS - Free Report) look well poised to tap favorable consumer demand.

The holiday season accounts for a sizable chunk of yearly revenues. Keeping in mind consumers’ product preferences, retailers are replenishing shelves with in-demand merchandise. They are increasing product visibility on online platforms, enhancing customer engagement on social channels, making logistics improvements and offering flexible payment options.

That said, we have highlighted four stocks from the Retail - Wholesale sector that look well positioned based on their sound fundamentals.

Past Year Price Performance

 

Zacks Investment Research
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4 Prominent Picks

Ulta Beauty is worth betting on. The company has been strengthening its omni-channel business and exploring the potential of both physical and digital facets. It has been implementing various tools to enhance guests' experience, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Ulta Beauty focuses on offering customers a curated and exclusive range of beauty products through innovation.

This beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products and salon services has a trailing four-quarter earnings surprise of 32.8%, on average. We note that this Zacks Rank #1 (Strong Buy) company has an estimated long-term earnings growth rate of 11.9%. The Zacks Consensus Estimate for Ulta Beauty’s current financial year sales suggests growth of 13.7% from the year-ago period. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arhaus is another potential pick. Strong consumer demand, new collections, brand awareness and ramp-up of new showrooms have been driving Arhaus’ top-line performance. The company plans to have 165 total traditional showrooms over the period from the current count of 80 showrooms, with plans to add five to seven new traditional showrooms per year. Arhaus estimates fiscal 2022 net revenues in the band of $1,173 million to $1,193 million and foresees comparable growth in the bracket of 43% to 48%.

This lifestyle brand and premium retailer has a trailing four-quarter earnings surprise of 92%, on average, and an estimated long-term earnings growth rate of 14.3%. The Zacks Consensus Estimate for Arhaus’ current financial year sales and EPS suggests growth of 49.2% and 5.8%, respectively, from the year-ago period. The stock carries a Zacks Rank #2 (Buy).

Investors can count on Designer Brands. The company’s flexible business model, best-in-class omnichannel capabilities and Owned Brands portfolio have been the key drivers of growth. The company’s efforts to expand sourcing and supply chain capabilities have been leading to speed to market with new designs and faster delivery times.

This designer, producer and retailer of footwear and accessories has a trailing four-quarter earnings surprise of 55.1%, on average. The Zacks Consensus Estimate for Designer Brands’ current financial year sales and EPS suggests growth of 6.9% and 23.5%, respectively, from the year-ago period. The stock carries a Zacks Rank #2.

You may invest in Chico's FAS. This Florida-based fashion retailer’s efforts to become a “digital-first, customer-led” company coupled with a strong portfolio of three unique brands, namely, Chico's, WHBM and Soma, position it well to expand its customer base and market share. Product enhancement, planned inventories, operating discipline and marketing strategies have been helping to drive full-price selling, lower markdowns and produce higher gross margin.

Chico's has a trailing four-quarter earnings surprise of 249%, on average. The Zacks Consensus Estimate for Chico's current financial year sales and EPS suggests growth of 19.6% and 112.5%, respectively, from the year-ago period. The stock carries a Zacks Rank #2.

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