Retail sales have been steadily rising over the past few months despite continued price pressures, thanks to robust demand and consumers’ aggressive spending. Retail sales grew once again in August, driven by solid sales at apparel stores and restaurants.
Retail sales are poised to grow in the near term, given that the holiday season is approaching. Also, the Fed’s decision to keep interest rates unchanged in September should make retailers happy ahead of the holiday season. Given this situation, investing in retail stocks like
Walmart Inc. ( WMT Quick Quote WMT - Free Report) , Amazon.com, Inc. ( AMZN Quick Quote AMZN - Free Report) , American Eagle Outfitters, Inc. ( AEO Quick Quote AEO - Free Report) and Urban Outfitters, Inc. ( URBN Quick Quote URBN - Free Report) will be a wise decision. Holiday Season, Fed Rate Pause to Help Retail Sector
Retail sales totaled $697.6 billion in August, increasing 0.6% on a month-over-month basis, after rising 0.5% in the prior month and surpassing the consensus estimate of a rise of a modest 0.1%, the Commerce Department said earlier this month.
Year over year, sales grew 2.5% in August. Total sales from June through August rose 2.2% on a year-over-year basis. Clothing and accessories sales rose 0.9% in August. Spending at gas stations increased 5.2%.
Although price pressures have been posing a major challenge for retailers, higher demand for goods and services has seen them spend aggressively. Steady growth in retail sales also attests that the economy is still strong.
Inflation, although increased marginally in August, has steadily declined and halved over the past year from its peak of 9.1% in June 2022.
With just a month left for the holiday season, the solid jump in sales bodes well for the retail sector. According to Mastercard SpendingPulse, the holiday season, which typically runs through Nov 1 and Dec 24, is expected to see a 3.7% jump in retail sales this year.
In-store retail sales are expected to grow by 2.9. On the other hand, e-commerce sales are projected to soar 6.7%. Retailers are adopting a proactive approach and focusing on customer-centric offerings to capitalize on the seasonal opportunities available to them.
The holiday season is one of the most important shopping windows and most retailers bank on it. Moreover, retail sales are likely to get a further boost since the Fed decided to keep interest rates unchanged in its September FOMC meeting.
The Fed also hinted at another rate hike this year, which has raised concerns lately. Then again, the central bank added that it will start cutting interest rates from 2024, which definitely bodes well for the retail sector.
Given the situation, it would be a prudent move for savvy investors to consider betting on retail stocks that stand to benefit directly from these favorable conditions.Each of these 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. Walmart has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. WMT’s product offerings include almost everything from grocery to cosmetics, electronics to stationery, home furnishings to health and wellness products, and apparel to entertainment products, to name a few.
Walmart’s expected earnings growth rate for the current year is 2.2%. The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the past 60 days. WMT presently carries a Zacks Rank #2.
Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America and across the globe. AMZN’s online retail business revolves around the Prime program well supported by the company’s massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish its footprint in the physical grocery supermarket space.
Amazon.com’sexpected earnings growth rate for the current year is 214.1%. The Zacks Consensus Estimate for current-year earnings has improved 43.9% over the past 60 days. AMZN presently sports a Zacks Rank #1.
American Eagle Outfitters, Inc. is a specialty retailer of casual apparel, accessories and footwear for men and women aged 15-25 years. AEO, along with its subsidiaries, engages in the designing and marketing of casual clothing. American Eagle Outfitters’ assortment includes jeans, cargo pants, graphic T-shirts as well as a range of accessories, outerwear and footwear.
American Eagle Outfitters’ expected earnings growth rate for the current year is 33%. The Zacks Consensus Estimate for current-year earnings has improved 27.7% over the past 60 days. AEO presently sports a Zacks Rank #1.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gift products. URBN merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms. Urban Outfitters has operations in the United States, Canada and Europe.
Urban Outfitters’ expected earnings growth rate for the current year is 84.6%. The Zacks Consensus Estimate for current-year earnings has improved 17.5% over the past 60 days. URBN currently carries a Zacks Rank #2.