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5 Retail Stocks to Buy on Soaring Consumer Confidence
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Americans are a lot more optimistic about the economy’s future now as inflation continues to decline and hopes of rate cuts in the near term are high. Although inflationary pressures made life difficult for consumers last year, they have been spending quite aggressively.
A steady rise in personal income helped consumers spend quite freely, which helped the retail sector overcome the challenge of rising costs last year.
As inflation started declining, consumers grew more confident and continued to spend. This saw consumer sentiment jumping to a two-and-a-half-year high in January. The University of Michigan’s preliminary index of consumer sentiment came up with a reading of 78.8 in January, surpassing both the previous month’s reading and the consensus estimate of 69.7.
More importantly, in January, the sub-index for the current economic condition increased to 83.3 from 73.3 in December. Also, the sub-index for consumer expectations rose to 75.9 in January from 67.4 in December.
The survey's gauge of one-year inflation expectations decreased to 2.9% in January from 3.1% in the previous month, marking the lowest level since December 2020.
Dovish comments from Federal Reserve officials after increasing interest rates by 525 basis points since March 2022 are also boosting consumer sentiment. The Federal Reserve has signaled that its monetary tightening campaign is nearing its end and rate cuts are on the anvil.
Lower interest rates will boost consumers’ sentiment further as it will allow them to spend more lavishly. Given this situation, the retail sector is poised to gain the most as consumers who have been spending cautiously over the past year will now spend more on retail.
Retail sales totaled $709.9 billion, increasing 0.6% month over month in December, beating expectations of a rise of 0.4%. The unexpected jump came as inflationary worries eased, making consumers more confident about the economy’s future.
Wingstop Inc. franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 30.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. WING currently carries a Zacks Rank #2.
Target Corporation has evolved from just being a pure brick & mortar retailer to an omni-channel entity. TGT has been making investments in technologies, improving websites and mobile apps and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players. Target Corporation provides an array of goods ranging from household essentials and electronics to toys and apparel for men, women and kids.
Target Corporation’s expected earnings growth rate for the current year is 38.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. TGT has a Zacks Rank #2.
Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY also operates two stores under the name "Tobacco City," selling primarily tobacco and nicotine products, one liquor store and one grocery store.
Casey's General Stores’ expected earnings growth rate for next year is 9%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. CASY presently sports a Zacks Rank #1.
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 and is well supported by its 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 278.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. AMZN presently sports a Zacks Rank #1.
Deckers Outdoor Corporation is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. DECK sells products primarily under five proprietary brands — UGG, HOKA, Teva, Sanuk and Other brands (mainly comprising Koolaburra).
Deckers Outdoor’sexpected earnings growth rate for the current year is 21.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. DECK currently has a Zacks Rank #2.
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5 Retail Stocks to Buy on Soaring Consumer Confidence
Americans are a lot more optimistic about the economy’s future now as inflation continues to decline and hopes of rate cuts in the near term are high. Although inflationary pressures made life difficult for consumers last year, they have been spending quite aggressively.
A steady rise in personal income helped consumers spend quite freely, which helped the retail sector overcome the challenge of rising costs last year.
As inflation started declining, consumers grew more confident and continued to spend. This saw consumer sentiment jumping to a two-and-a-half-year high in January. The University of Michigan’s preliminary index of consumer sentiment came up with a reading of 78.8 in January, surpassing both the previous month’s reading and the consensus estimate of 69.7.
More importantly, in January, the sub-index for the current economic condition increased to 83.3 from 73.3 in December. Also, the sub-index for consumer expectations rose to 75.9 in January from 67.4 in December.
The survey's gauge of one-year inflation expectations decreased to 2.9% in January from 3.1% in the previous month, marking the lowest level since December 2020.
Dovish comments from Federal Reserve officials after increasing interest rates by 525 basis points since March 2022 are also boosting consumer sentiment. The Federal Reserve has signaled that its monetary tightening campaign is nearing its end and rate cuts are on the anvil.
Lower interest rates will boost consumers’ sentiment further as it will allow them to spend more lavishly. Given this situation, the retail sector is poised to gain the most as consumers who have been spending cautiously over the past year will now spend more on retail.
Retail sales totaled $709.9 billion, increasing 0.6% month over month in December, beating expectations of a rise of 0.4%. The unexpected jump came as inflationary worries eased, making consumers more confident about the economy’s future.
Our Choices
Given this situation, investing in retail stocks like Wingstop Inc. (WING - Free Report) , Target Corporation (TGT - Free Report) , Casey's General Stores, Inc. (CASY - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) looks like an ideal choice. 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.
Wingstop Inc. franchises and operates restaurants. WING’s operating segment consists of the Franchise and Company segments. Wingstop offers cooked-to-order, hand-sauced and tossed chicken wings.
Wingstop’sexpected earnings growth rate for the current year is 30.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. WING currently carries a Zacks Rank #2.
Target Corporation has evolved from just being a pure brick & mortar retailer to an omni-channel entity. TGT has been making investments in technologies, improving websites and mobile apps and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players. Target Corporation provides an array of goods ranging from household essentials and electronics to toys and apparel for men, women and kids.
Target Corporation’s expected earnings growth rate for the current year is 38.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. TGT has a Zacks Rank #2.
Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY also operates two stores under the name "Tobacco City," selling primarily tobacco and nicotine products, one liquor store and one grocery store.
Casey's General Stores’ expected earnings growth rate for next year is 9%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. CASY presently sports a Zacks Rank #1.
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 and is well supported by its 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 278.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. AMZN presently sports a Zacks Rank #1.
Deckers Outdoor Corporation is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. DECK sells products primarily under five proprietary brands — UGG, HOKA, Teva, Sanuk and Other brands (mainly comprising Koolaburra).
Deckers Outdoor’sexpected earnings growth rate for the current year is 21.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. DECK currently has a Zacks Rank #2.