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5 Retail Stocks to Buy Ahead of a Promising Holiday Season

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E-commerce is once again projected to play a key role in driving holiday sales this year. The retail sector has been struggling in the face of inflation, which is at a 40-year high, but people have been spending on goods. And like every year, spending is expected to get a boost during the upcoming holiday season.

According to the latest report from Adobe, holiday spending will be driven by online sales and will pick up during Cyber Week, which runs from Thanksgiving Day through Cyber Monday. Given this scenario, stocks with a strong online presence like TravelCenters of America Inc. , Williams-Sonoma, Inc. (WSM - Free Report) , Arhaus, Inc. (ARHS - Free Report) , Movado Group, Inc. (MOV - Free Report) and Designer Brands Inc. (DBI - Free Report) are expected to benefit in the near term.

E-commerce Spending to Grow

According to a recent report released by Adobe, e-commerce sales in the United States are projected to reach $209.7 billion this holiday season, increasing 2.5% year over year. The holiday season starts typically on Nov 1 and ends on Dec 31.

The report also mentions that online sales during Cyber Week, which starts on Thanksgiving Day and runs through Cyber Monday, are expected to jump to $34.8 billion, increasing 2.8% year over year. This makes up 16.3% of the overall online sales during the holiday season.

Moreover, Black Friday e-commerce sales are expected to increase 1% year over year to $9 billion. The report also predicts that there would be massive discounts on a range of products. Discounts on computers are likely to be 32%, increasing 10% year over year. Discounts on electronic goods are expected to be as high as 27%, while on toys it will be 22%.

Other products like televisions and apparel will also have discounts of 19% each, during the holiday season.

Retail Sales Set to Grow

Much like Adobe, Deloitte also predicts a jump in e-commerce retail sales during the all-important holiday season. According to Deloitte, online retail sales during the holiday season are projected to rise between 12.8% and 14.3% year over year and hit between $260 billion and $264 billion. E-commerce holiday sales rose 15.1% in 2021.

The holiday season is an important window for retailers as sales get a massive boost during this period. However, retailers are faced with a lot of challenges this year. With inflation at a 40-year high, spending has taken a hit. People are spending quite cautiously, which has been slowing retail sales.

Even then, the retail sector is fighting hard to hold its ground and higher demand for goods has been helping sales. Another indication that the holiday season will help overall retail sales is a successful back-to-school season.

The back-to-school season sales this year were impressive. Also, the shopping bonanza, started with Amazon.com, Inc’s (AMZN) Amazon Prime Day, generated massive sales.

Our Choices

Given this scenario, it would be wise to invest in these four stocks with a strong online presence. Each of the stocks carries 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, with nationwide locations serving hundreds of thousands of professional drivers and other highway travelers each month, including virtually all major trucking fleet. TA’s travel centers operate under the TravelCenters of America, TA and Petro brand names and offer diesel and gasoline fueling services, restaurants, heavy truck repair facilities, stores and other services.

TravelCenters of America’s expected earnings growth rate for the current year is 96.6%. The Zacks Consensus Estimate for current-year earnings has improved 6.9% over the past 60 days. TA presently sports a Zacks Rank #1.

Williams-Sonoma, Inc. is a multi-channel specialty retailer of premium quality home products. Incorporated in 1973, WSM has five brands and each of the brands are operating segments.

Williams-Sonoma’s expected earnings growth rate for the current year is 11.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. WSM presently has a Zacks Rank #2.

Arhaus, Inc. is a lifestyle brand and omnichannel 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 15.9% over the past 60 days. ARHS 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 60 days. MOV 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 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.         

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