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3 Top Retail Stocks to Buy as Holiday Spending Rises

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Americans opened up their wallets in the busy holiday shopping period, thereby fueling economic growth and squashing concerns about an imminent recession. Black Friday sales touched record highs as online sales picked up after retailers extended their deals beyond brick-and-mortar outlets.

According to a report from MasterCard, in-store sales during Black Friday advanced 1.1% year over year, while online sales climbed 8.5%. MasterCard added that overall Black Friday sales increased 2.5%. Adobe Analytics, meanwhile, said that Black Friday sales came in at a record $9.8 billion across the length and breadth of the country, while e-commerce spending jumped 7.5% from a year earlier.

Thanks to both online and offline deals, price-conscious consumers splurged a lot more during this year’s Thanksgiving holiday shopping compared to last year, when higher food and gas prices impacted their propensity to spend. Consumers were on a shopping spree and spent heavily on items such as televisions, smartwatches, gaming, and toys, to name a few.

But it’s just not about Black Friday sales, the National Retail Federation (NRF) earlier stated that consumers will spend between $957.3 billion and $966.6 billion on various retail products throughout November and December, which will be an uptick of 3% and 4% over the same period last year. NRF, in reality, found out that a greater number of consumers have already started to spend on holiday items such as gifts and decorations since October.

Consumers, in the meantime, are spending more on nonobligatory items and are eventually boosting retail sales solely because the Federal Reserve’s aggressive monetary policy has made incremental progress in curbing price pressures. With inflation showing signs of cooling down and the Fed now expected to pause interest rate hikes, consumers are all set to splurge even more in the near term. Moreover, retailers have already lured bargain-hunting customers with enticing Cyber Monday deals.

Hence, courtesy of an increase in consumer outlays, retailers are positioned to gain as spending plays a crucial role in determining their revenues. We have, thus, selected three retailers, namely, American Eagle Outfitters (AEO - Free Report) , Deckers Outdoor (DECK - Free Report) and Target (TGT - Free Report) , which flaunt a Zacks Rank #2 (Buy) and should make meaningful additions to your portfolio. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

American Eagle Outfitters is a specialty retailer of casual apparel, accessories, and footwear for men and women. The Zacks Consensus Estimate for its current-year earnings has moved up 3.1% over the past 60 days. AEO’s expected earnings growth rate for the current year is 37.1%.

Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The Zacks Consensus Estimate for its current-year earnings has moved up 4.5% over the past 60 days. DECK’s expected earnings growth rate for the current year is 20.9%.

Target has evolved from just being a pure brick-and-mortar retailer to an omni-channel entity. The Zacks Consensus Estimate for its current-year earnings has moved up 9.9% over the past 60 days. TGT’s expected earnings growth rate for the current year is 38.5%.

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Target Corporation (TGT) - free report >>

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Deckers Outdoor Corporation (DECK) - free report >>

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