With the unbroken string of interest rate hikes now well and truly behind us, consumers have started spending on staples and discretionaries, and retail sales have picked up in 2023.

This has also been reflected by the retail sales numbers for August released in September. Per the Commerce Department, retail sales rose 0.6% to $697.6 billion in August from the previous month, widely surpassing the consensus estimate of 0.2%. The July number was revised down to a 0.5% gain from the previously reported 0.7%.

Inflation and purchasing power have the biggest impact on retail sales. When prices of consumer goods are in a state of continuous increase and interest rates are raised as a retaliatory measure, people have less money at their disposal to spend on non-essential goods. But even as consumer prices increased in August, it was driven almost unilaterally by fuel prices, which have been rising in recent weeks because Russia and Saudi decided not to raise production till the end of 2023. Core inflation, which excludes food and energy prices, was at an agreeable level.

Also, with further interest hikes currently deemed unlikely to be declared in the Fed meetings in September and November, a consumer’s purchasing ability will be getting a boost. Per a March report from the National Retail Federation, retail sales are supposed to grow between 4% and 6% in 2023.

One would also have to factor in the upcoming holiday season when the retail sector sees its biggest spike of the calendar. During July and August, there were 17 states in the United States that had tax-free weekends for back-to-school shoppers. A vast majority of the tax-free allowance was for apparel, while some were for computers. There will be no tax relief as we approach the end of the year. However, shoppers will be well advised to shop for gifts early, while these offers are still available. This would also help sustain retail sales all through the last quarter.

Thus, as we approach the end of the year, astute investors should consider buying retail stocks. If the sector is growing now, it should be booming closer to November and December.

We have selected three stocks that we believe would be gaining ground in the ensuing months and should be looked into now. The stocks below flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum; the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

American Eagle Outfitters, Inc. (AEO Quick QuoteAEO - Free Report) is a specialty retailer that engages in the business of selling clothing, accessories and personal care products.

AEO’s expected earnings growth rate for the current year is 29.9%. The Zacks Consensus Estimate for its current-year earnings has improved 24.8% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprouts Farmers Market, Inc. (SFM Quick QuoteSFM - Free Report) is a retailer of natural and organic food products in the United States.

SFM’s expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for its current-year earnings has improved 2.6% over the past 60 days. The company has a Zacks Rank #2 and a VGM Score of A.

BJ's Restaurants, Inc. (BJRI Quick QuoteBJRI - Free Report) is a retail chain of casual dining restaurants operating in the United States.

BJRI’s expected earnings growth rate for the current year is 27.4%. The Zacks Consensus Estimate for its current-year earnings has improved 447.1% over the past 60 days. The company has a Zacks Rank #1 and a VGM Score of A.