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Retail Sector on Track for a Robust Holiday Season: 5 Picks

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The holiday season is approaching and retailers are worried that rising prices of commodities might prevent consumers from spending more. However, predictions are that retail sales will pick up during the holiday season.

This comes as retail sales unexpectedly rose in August. This once again shows that people are still not hesitant about spending on commodities, a sign that might motivate retailers ahead of the holiday season. Given this situation, retailers like Arhaus, Inc. (ARHS - Free Report) , Movado Group, Inc. (MOV - Free Report) , The Buckle, Inc. (BKE - Free Report) , Designer Brands Inc. (DBI - Free Report) and Chico's FAS, Inc. (CHS - Free Report) are likely to do well in the near term.

Holiday Sales Projected to Jump

There are several factors playing a key role that has made experts optimistic about the upcoming holiday season. It may not be as bad for the retail sector as previously thought. According to Deloitte’s annual holiday retail forecast, retail sales will jump between 4% and 6%.

Total spending will range between $1.45 trillion and $1.47 trillion during the November to January period. Last year, holiday season sales hit $1.49 trillion, marking a 15.1% jump from 2020. This year, the projection is quite low, given that everyone is skeptical about spending.

Deloitte also projects online sales to soar by 12.8% to 14.3%, keeping up the trend seen over the past few years. This holiday season, e-commerce sales are expected between $260 billion and $264 billion.

This is 8.4% higher than last year when e-commerce sales totaled $231 billion. Although sales projection is lower than last year, the good sign is that despite challenges like soaring commodity prices, people are spending. Moreover, holiday shopping is expected to match the pre-pandemic levels this year.

Also, according to the latest Mastercard SpendingPulse, holiday retail sales are projected to jump 7.1% year over year in 2022. According to several analysts, this year’s holiday shopping will be an extended affair as several retailers are planning to kick off the holiday season in October in order to boost sales.

Clothing and high-end items will be among the best-selling product categories. Sales of clothing are predicted to increase by 4.6% year over year, while sales of luxury goods will increase by 4.4%.

This comes as August retail sales unexpectedly rose 0.4%. The surprise jump in retail sales despite soaring prices will give retailers the much-required morale boost ahead of the all-important holiday season.

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 so far. This is thus the right opportunity to invest in retail stocks that have both a strong offline and online presence and boast of a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arhaus, Inc. is a lifestyle brand and omni-channel retailer of premium home furnishing. 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 17.7% over the past 90 days. ARHS currently has a Zacks Rank #2.

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 90 days. MOV has a Zacks Rank #2.

The Buckle, Inc. is a leading retailer of medium to better-priced casual apparel, footwear, and accessories for fashion-conscious young men and women. BKE markets a wide selection of brand names and private label casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear.

The Buckle’sexpected earnings growth rate for the current year is 4.5%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. BKE at present carries 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 dsw.com 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.

Chico's FAS, Inc. is a cultivator of brands serving the lifestyle needs of fashion-savvy women 30 years and older. CHS’ portfolio currently consists of three brands: Chico's, White House Black Market and Soma.

Chico's FAS’ expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 18.1% over the past 60 days. DBI has a Zacks Rank #2.

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