Back to top

Image: Bigstock

Holiday Season Sales Aiding Retail Sector Rebound: 5 Winners

Read MoreHide Full Article

The retail sector, which has been under tremendous pressure owing to inflationary pressure, is making a solid rebound. The holiday season might just prove to be the stepping stone toward this recovery as sales skyrocketed despite concerns over rising prices.

E-commerce, which helped the retail sector from a total collapse during the peak of the pandemic, is once again proving to be a key player in driving sales. Given this scenario, stocks with a strong online presence, like Chico's FAS, Inc. (CHS - Free Report) , Citi Trends, Inc. (CTRN - Free Report) , Urban Outfitters, Inc. (URBN - Free Report) , PC Connection, Inc. (CNXN - Free Report) and Ross Stores, Inc. (ROST - Free Report) are expected to benefit in the near term.

Holiday Season Driving Retail Sales

According to the latest Mastercard SpendingPulse, the holiday season started on a high, with retail sales, excluding auto, jumping 10.9% year over year during the Thanksgiving weekend. Both in-store and online sales were robust.

In-store sales rose 10.5% year over year during this period, while online sales climbed a solid 12.5% year over year for the weekend beginning Nov 24 (Thanksgiving Day) through Nov 27.

Sales were primarily driven by higher purchases of apparel, electronic items and at restaurants. Sales at restaurants increased 23.3% year over year, while apparel and electronic items sales rose 14.4% and 2%, respectively.

People have been compelled to spend cautiously owing to rising prices. As a result, retail sales slowed down over the following months. However, increased consumer demand has kept the retail industry from giving in to inflationary pressure. Additionally, the retail industry has been improving steadily, with sales up an impressive 1.3% in October.

Retail Sales Rebound

A separate report from Adobe Analytics shows that online sales on Cyber Monday were $11.3 billion, up 5.8% from the previous year. In 2021 and 2020, Cyber Monday sales totaled $10.7 billion and $10.8 billion, respectively. This year’s sales figures hit a new record after declining 1.4% in 2021.

Over the course of the weekend, retail sales increased dramatically on several days, not just Cyber Monday. Black Friday online sales hit a record high of $9.12 billion. On Black Friday, overall e-commerce sales increased 2.3% from the previous year. Black Friday sales totaled $9.03 billion in 2020.

Although online sales were growing, the pandemic worked miracles for e-commerce as millions shopped online out of fear of getting the COVID-19 virus. The trend has continued since then as people have realized the convenience of shopping online.

E-commerce will continue to be very important during the holidays and in the months to come. According to the Department of Commerce, Internet sales in the United States surpassed $1 trillion for the first time in the last 12 months, totaling $1.02 trillion.

The initial forecast for e-commerce spending was for it to reach $1 trillion in 2024 but the market has already outperformed the prediction this year, proving its enormous potential.

Additionally, during the next two months, total retail sales are anticipated to reach $210 billion.

The holiday season is an important sales period for retailers. Sales have already hit record highs over the Thanksgiving weekend and with the holiday season continuing into the first week of January, the retail sector is expected to begin 2023 on a high.

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.

Chico's FAS, Inc. 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 next year is 9.9%. The Zacks Consensus Estimate for current-year earnings has improved 7.1% over the past 60 days. CHS presently sports a Zacks Rank #1.

Citi Trends, Inc. is a value-priced retailer of urban fashion apparel and accessories for the entire family. CTRN currently operates stores located in the South, Southeast and Mid-Atlantic regions.

Citi Trends’ expected earnings growth rate for next year is 97.4%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days. CHS presently has a Zacks Rank #2.

Urban Outfitters, Inc. is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. URBN’s merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms.

Urban Outfitters’ expected earnings growth rate for next year is 28.2%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 30 days. Currently, URBN has a Zacks Rank #2.

PC Connection, Inc. is a direct marketer of brand-name personal computers. CNXN also markets related peripherals, software, and networking products to business, education, government, and consumer end users located primarily in the United States.

PC Connection’s expected earnings growth rate for next year is 29.1%. The Zacks Consensus Estimate for current-year earnings has improved 4% over the past 60 days. CNXN presently carries a Zacks Rank #2.

Ross Stores, Inc. operates as an off-price retailer of apparel and home accessories, primarily in the United States. ROST operates its stores under the Ross Dress for Less (Ross) and dd’s DISCOUNTS names. Ross Stores’ outlets are located mostly in community and neighborhood shopping centers in heavily populated urban and suburban areas.

Ross Stores’ expected earnings growth rate for the next year is 14.4%. The Zacks Consensus Estimate for current-year earnings has improved 7.8% over the past 60 days. ROST presently sports a Zacks Rank #1.

Published in