The first taste of holiday sales was experienced this past weekend, as buyers finally opened their wallets. Unlike last year, when retailers were able to woo consumers as early as October by bringing forward their discounts and promos, this year buyers held out.
One big reason for this was inventory. Last year, people feared they wouldn’t get what they were looking for, so they started shopping early. And this year, people know that there’s sufficient and in fact excess inventory. So they expected steeper discounts if they waited longer. And that’s what has played out.
The still-very-high inflation (7.7% in October), which has sapped some purchasing power, and the news flow around job cuts (as well as the Fed’s intention to inflict more “pain”) have also made buyers more cautious. Availability of funds is a big issue unlike last holiday season, when a strong stock market, free money and limited spending options allowed people to build their bank balances. This year, buyers have leaned on the buy-now-pay-later (BNPL) option. They are also dipping into savings and using credit cards.
Given the above, it’s pretty encouraging that Thanksgiving Day sales were up 2.9% and Black Friday sales up 2.3% from last year (Adobe estimates). Online sales were up 221%. Toys and exercise equipment were the hottest categories, growing 285% and 218%, respectively. Other popular items were gaming consoles, drones and Apple MacBooks. BNPL payments jumped 78% from the prior week.
Overall, Thanksgiving through Cyber Monday is expected to bring in a big haul of $35.12 billion to retailers ($5.29 billion on Thanksgiving Day, $9.12 billion on Black Friday, $4.52 billion on Saturday, $4.99 billion on Sunday and a record $11.2 billion on Cyber Monday). Updated figures will be available later today.
The National Retail Federation expects holiday sales to increase around 8% this year. Given the rate of inflation, this means flattish sales, which is not at all bad, all things considered.
Therefore, this could be a good time to buy some retail stocks. Here are a few that are worth considering-
Chico's FAS, Inc. ( CHS Quick Quote CHS - Free Report)
hico’s an omnichannel specialty retailer of women's private branded casual-to-dressy clothing, intimate wear and complementary accessories.
The shares have a Zacks Rank #1 (Strong Buy) rating and an A for Value, Growth and Momentum, indicating their suitability for every kind of investor.
In the fiscal year ended January 2023, the company is expected to generate revenue and earnings growth of 19.6% and 127.5%, respectively. The following year, revenue and earnings are expected to grow a respective 5.0% and 9.9%. Analyst estimates are also moving up: in the last seven days, 2023 estimates are up 6 cents (7.1%) and 2024 estimates up 5 cents (5.3%).
Burberry Group plc ( BURBY Quick Quote BURBY - Free Report)
Burberry is a London-based manufacturer, retailer and wholesaler of luxury goods such as womenswear, menswear, childrenswear, beauty, eyewear, shoes and accessories, as well as leather goods-like bags.
The shares carry a Zacks Rank #2 (Buy) as well as Value, Growth and Momentum Scores of B, A and C, respectively.
The company’s revenue and earnings for the fiscal year ending in March 2023 are expected to grow 22.7% and 14.8%, respectively. Growth rates are expected to moderate to a respective 6.7% and 8.5% the following year. But given that estimates continue to rise; they’re up 7 cents (5%) for this year’s earnings and up 8 cents (5.3%) for next year’s earnings, current estimates could prove to be conservative.
Hibbett, Inc. ( HIBB Quick Quote HIBB - Free Report)
Being a retailer of athletic-inspired fashion products for small and mid-sized communities in the United States, Hibbett stores offer a range of merchandise, including athletic footwear, athletic and fashion apparel, team sports equipment and related accessories.
The shares carry a Zacks Rank #2 with Value, Growth and Momentum scores of A, F and B, respectively.
The double- and triple-digit estimated growth in the third and fourth quarters, respectively, is not likely to offset the weakness in the first half of the fiscal year ending January 2023. But analysts are optimistic about the following year, in which growth rates are currently estimated to be 6.8% for revenue and 8.2% for earnings.
Even these numbers could prove to be conservative if the estimate revision trend picks up pace. In the last 7 days, the Zacks Consensus Estimate is up 7 cents to $10.60. Current estimates are baking in a good amount of conservatism, which is justified give the fears of a recession.
Vivint Smart Home, Inc. ( VVNT Quick Quote VVNT - Free Report)
As its name implies, Vivint Smart Home sells, installs and services a range of smart home and security systems, primarily in the U.S. and Canada. Its smart home platform includes cloud-enabled smart home operating systems; AI-driven smart home automation and assistance software; software-enabled smart home devices; and tech-enabled services to educate, manage, and support the smart home. It also sells control panels, door and window sensors, security cameras and smoke alarms, door locks, motion sensors, glass break detectors, key fobs, emergency pendants, carbon monoxide detectors, as well as fire, flood and burglary sensors.
The Zacks Rank #2 company has an A for Value, Growth and Momentum and analyst estimates indicate why.
Analysts currently expect the company to grow revenue by 12.6% this year and 7.4% in the next. Losses are expected to be cut, by 70.2% and 19.6%, respectively. Loss expectations for Vivint have been roughly halved in the last 90 days for both the December and March quarters and for fiscal 2023.
Ross Stores, Inc. ( ROST Quick Quote ROST - Free Report)
Ross Stores, Inc., together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brand names. Its stores primarily offer apparel, accessories, footwear, and home fashions. The company's Ross Dress for Less stores sell its products at department and specialty stores primarily to middle income households; and dd's DISCOUNTS stores sell its products at department and discount stores for households with moderate income.
The Zacks Rank #1 stock has Value, Growth and Momentum Scores of D, F and A, respectively.
Its revenue and earnings are expected to decline 2.0% and 11.7% in the fiscal year ending January 2023. Things are already looking up however, going by the estimates for the current and next quarter, which represent increases of 18.3% and 22.7%, respectively. For the year ending January 2024, revenue and earnings are expected to grow a respective 6.1% and 14.3%. In the last 30 days, 2023 estimates are up 27 cents (6.8%) and 2024 estimates are up 30 cents (6.5%).
One-Month Price Performance Image Source: Zacks Investment Research