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4 Solid Stocks to Buy as Holiday Season Boosts Retail Sales

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U.S. retail sales declined unexpectedly in November despite a great start to the holiday season. However, sales seem to be bouncing back, as data from Mastercard SpendingPulse shows that the retail sector has been witnessing impressive sales during the December holiday period.

This, at the same time, proves that people are still willing to spend despite high commodity prices. Also, higher sales during the holiday season indicate a good start for the retail sector in 2023. Given this scenario, stocks with a strong online presence, like Urban Outfitters, Inc. (URBN - Free Report) , Citi Trends, Inc. (CTRN - Free Report) , Ross Stores, Inc. (ROST - Free Report) and Chico's FAS, Inc. (CHS - Free Report) and are expected to benefit in the near term.

Holiday Season Retail Sales Up

U.S. retail sales, excluding automotive, have jumped a solid 7.6% on a year-over-year basis this holiday season, between Nov 1 through Dec 24, according to Mastercard SpendingPulse report. The jump comes despite multi-year high inflation and growing recession fears.

E-commerce once again has been playing a major role in driving sales. Online sales jumped 10.6% year over year. E-commerce made up 21.6% of the overall retail sales during this period. In 2021, e-commerce made up 20.9% of the total retail sales, while 20.6% of sales were online in 2020.

Needless to say, people are increasingly relying on e-commerce, a trend that gathered steam during the peak of the pandemic.

Weekends were the best for sales. Black Friday recorded the top spending day of the holiday season so far, with a 12% year-over-year rise in sales, excluding automotive.

Additionally, sales at restaurants increased 15.1% year over year as Americans relaxed their pandemic quarantines and sought out in-person experiences.

The report follows weak retail sales recorded in November. The holiday season is traditionally seen as a big shopping window for millions of Americans and this year seems to be no different. So, a decline in November sales was quite unexpected given that both Black Friday and Cyber Monday sales hit record highs.

According to a separate report from Adobe Analytics, online sales on Cyber Monday were $11.3 billion, up 5.8% from 2021. 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.

Besides, online sales on Black Friday surpassed $9.12 billion, setting a record. Overall e-commerce sales on Black Friday were up 2.3% from 2021. In 2020, Black Friday sales came in at $9.03 billion.

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.

Urban Outfitters, Inc. is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. URBN’s merchandises are 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.

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 region.

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.

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 primarily offers in-season, branded, and designer apparel, footwear, accessories and other home-related merchandise for everyone in the family.

Ross Stores’ expected earnings growth rate for next year is 14.7%. The Zacks Consensus Estimate for current-year earnings has improved 7.8% over the past 60 days. ROST presently sports a Zacks Rank #1.

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 their brands.

Chico's expected earnings growth rate for 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.

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