Back to top

Image: Bigstock

4 Stocks to Buy on the Rebound in August Retail Sales

Read MoreHide Full Article

Retail sales increased in August after a decline in the prior month amid challenges of rising prices that have made purchases expensive. The surprise rise once again proves that higher demand for goods is making people spend more. At the same time, it is helping the retail industry, which is otherwise reeling under inflationary fears.

The jump in August retail sales comes ahead of the all-important holiday sales. Predictions are that sales will grow again during the holiday season, which is good news for retailers. Given this situation, retailers like TravelCenters of America Inc. (TA - Free Report) , Movado Group, Inc. (MOV - Free Report) , Arhaus, Inc. (ARHS - Free Report) and Designer Brands Inc. (DBI - Free Report) are likely to do well in the near term.

Retail Sales Rebound

The Commerce Department said on Sep 15 that retail sales increased 0.3% in August after declining in the prior month. July’s figures were revised down from unchanged to a decline of 0.4%. On a year-over-year basis, retail sales increased 9.1% in August. However, the figures are not adjusted for inflation.

Although the jump in August is marginal, it comes at a time when the economy is suffering from inflationary pressures. Rising costs are compelling people to spend cautiously, and mostly on buying necessities.

However, people are also spending on other goods as evident from robust demand. One major reason for the surprise jump in August is a decline in fuel costs. Prices have lately cooled a bit and energy costs fell in August. This drove sales of motor vehicles and parts, which grew 2.8% in August.

Restaurant sales grow when the economy is healthy, but surprisingly sales have been on the rise over the past few months. This may be because people have once again started spending more on services and less on goods since the economy started reopening after the COVID-19 outbreak two years back. Sales at bars and restaurants grew 1.1% in August.

Also, back-to-school shopping gave a boost to retail sales in August.

The government said that inflation, measured on the basis of the consumer price index, rose 8.3% annually in August but retail sales rose 9.3%, which shows that purchases outpaced prices.

Holiday Season to Help Retailers

A separate report from Mastercard SpendingPulse shows retail sales grew 11.7% year over year in August. The jump in August comes just ahead of the all-important holiday season.

Retailers bank heavily on the holiday season for sales to pick up. According to Mastercard SpendingPulse, holiday retail sales, excluding autos, are expected to jump 7.1% year over year in 2022. Analysts claim that several retailers are planning to start the holiday season in October to increase sales.

A separate report from Deloitte’s annual holiday retail forecast shows holiday sales growing between 4% and 6%. During the 2022–2023 holiday season, Deloitte also predicts that online sales during the holiday season will jump between 12.8% and 14.3% year over year. This would take online sales during this period to between $260 billion and $264 billion.

For the first time, the 2021 holiday season was disappointing as total revenues fell short of what retailers had anticipated. But this year, major shopping weekends like Black Friday are anticipated to rebound strongly. In addition, Christmas Eve, which is predicted to be one of the busiest shopping days this holiday season, falls on a Saturday.

Our Choices

Although retailers are struggling as higher costs have made consumers spend cautiously, the retail sector has so far put up an impressive show. This is thus the right opportunity to invest in retail stocks that have both a strong offline and online presence and boast a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TravelCenters of America Inc. is a full-service national travel center chain in the United States. TA has nationwide locations serving thousands of professional drivers and other highway travelers each month, including virtually all major trucking fleets.

TravelCenters of America’s expected earnings growth rate for the current year is 83.9%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. TA sports a Zacks Rank #1.

Movado Group, Inc. is one of the world's premier watchmakers. MOV designs, manufactures and distributes watches from 10 of the most recognized and respected names in time: Movado, Concord, EBEL and ESQ Movado, along with their Coach, HUGO BOSS, Juicy Couture, Lacoste, Tommy Hilfiger and Scuderia Ferrari licensed watch brands.

Movado Group’s expected earnings growth rate for the current year is 7.4%. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 60 days. MOV has a Zacks Rank #2.

Arhaus, Inc. is a lifestyle brand and omnichannel retailer of premium home furnishings. ARHS offers an assortment of heirloom quality products. Arhaus Inc. is based in Boston Heights, OH.

Arhaus’ expected earnings growth rate for the current year is 5.8%. The Zacks Consensus Estimate for current-year earnings has improved 15.9% over the past 60 days. ARHS has a Zacks Rank #2.

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, and the Affiliated Business Group segment.

Designer Brands’ expected earnings growth rate for the current year is 23.5%. The Zacks Consensus Estimate for current-year earnings has improved 6.1% over the past 60 days. DBI has a Zacks Rank #2.

Published in