Back to top

Image: Bigstock

4 Retail Stocks to Buy as Holiday Season Sales Gather Steam

Read MoreHide Full Article

Rising prices and inflation may be the biggest concerns for Americans but that didn’t stop them from aggressively shopping over the weekend. After Black Friday sales hit a record high, Cyber Monday sales are also on track to set a new record. Needless to say, the holiday season has kicked off in style and is likely to give overall retail sales the much-required boost in the coming months.

The retail sector has been heavily relying on e-commerce since the onset of the pandemic and the staggering sales recorded on Cyber Monday are once again proof of that. Given this scenario, stocks with a strong online presence, like TravelCenters of America Inc. (TA - Free Report) , Chico's FAS, Inc. (CHS - Free Report) , Vivint Smart Home, Inc. (VVNT - Free Report) and Dollar General Corporation (DG - Free Report) , are expected to benefit in the near term.

Record Cyber Monday Sales

According to Adobe Analytics, Cyber Monday online sales hit $11.3 billion, increasing 5.8% year over year. Cyber Monday sales totaled $10.7 billion in 2021 and $10.8 billion in 2020. This year’s figure is a new record after sales declined 1.4% in 2021.

During the peak, people were spending $12.8 million per minute on Cyber Monday, according to the report. This year’s sales were driven by deep discounts on a large segment of goods.

This year’s Cyber Monday is also by far the biggest day of the long weekend that started with Thanksgiving Day.

Cyber Monday wasn’t the only day over the weekend that saw retail sales surging to new highs. According to a separate report from Adobe Analytics, Black Friday online sales totaled $9.12 billion, hitting a record high. Overall e-commerce sales were up 2.3% from the previous year on Black Friday. In 2020, Black Friday sales came in at $9.03 billion.

Thanksgiving sales totaled $5.29 billion, increasing 2.9% year over year. Interestingly, the figures on all three days surpassed estimates. According to Adobe, consumers spend $2 billion to $3 billion on average on online shopping on a typical day.

Another major reason behind the jump in sales was Buy Now Pay Later deals, which saw people shopping more freely.

E-Commerce Key Player

Soaring prices have been compelling people to spend cautiously. This resulted in retail sales slowing over the months. However, higher demand for goods has been preventing the retail sector from succumbing to inflationary pressure. Also, the retail sector has been showing steady improvement, with sales increasing a solid 1.3% in October.

The holiday season is an important sales period for retailers and is likely to drive sales further in the coming days. E-commerce, which has been playing an important role in driving overall retail sales, is likely to be the main driver of sales in the coming days too.

Although e-commerce was growing, the pandemic worked as a boon, as millions shopped online on fears of contracting the COVID-19 virus. This has now become a trend.

E-commerce will continue to play a major role this holiday season and in the coming months too. The Department of Commerce reported that online sales in the United States reached $1.02 trillion in the past 12 months, surpassing $1 trillion for the first time.

E-commerce spending was initially projected to reach $1 trillion in 2024 but it has already surpassed the goal this year, demonstrating the market's enormous potential.

Also, overall retail sales are expected to reach $210 billion over the next two months.

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 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 fleets. 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 more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 11.8% over the past 60 days. TA presently has a Zacks Rank #2.

Chico's FAS is a cultivator of brands serving the lifestyle needs of fashion-savvy women 30 years and older. CHS’s brand portfolio currently consists of three brands: Chico's, White House Black Market and Soma. Currently, Chico’s operates boutiques and outlets throughout the United States and Canada, as well as an online presence for each of its brands.

Chico's expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 7.1% over the past 60 days. CHS presently sports a Zacks Rank #1.

Vivint Smart Home is a smart home company, primarily in North America. VVNT delivers an integrated smart home system with in-home consultation, professional installation and support delivered by its Smart Home Pros, as well as 24/7 customer care and monitoring.

Vivint Smart Home’s expected earnings growth rate for the current year is 70.2%. Shares of VVNT have gained 18.6% in the past 30 days. Vivint Smart Home presently has a Zacks Rank #2.

Dollar General is one of the largest discount retailers in the United States. DG trades in low-priced merchandise, typically $10 or less. Dollar General offers a wider selection of merchandise, including consumable items, seasonal items, home products and apparel.

Dollar General’s expected earnings growth rate for the current year is 13.8%. Shares of DG have gained 6% in the past three months. Dollar General Home presently has a Zacks Rank #2.

Published in