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4 Retail Stocks Riding the Wave of Consumer Confidence
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The Conference Board's Consumer Confidence Index for January registered an impressive 114.8, marking a significant increase from the downwardly revised figure of 108.0 in December. This marks the third consecutive monthly rise in consumer confidence, reflecting a trend that could contribute to sustained momentum in household spending throughout the year.
Dana Peterson, the Chief Economist at The Conference Board, attributes the surge in consumer confidence to various factors. These include a slowdown in inflation, expectations of lower interest rates in the near future and overall favorable employment conditions. As businesses continue to maintain a robust labor force, consumers are finding reassurance in the stability of the job market.
With consumer confidence hitting a two-year high, economists anticipate a positive ripple effect on spending habits. Consumer spending plays a pivotal role in the US economy, constituting about 70% of economic activity. The combination of resilient demand, a healthy job market and improved inflation expectations has the potential to keep the economy on an upward trajectory.
The robust consumer confidence figures align with recent positive economic reports. Gross Domestic Product, a key measure of goods and services produced, increased at a notable 3.3% annualized rate in the final quarter of 2023. This growth exceeded expectations and showcased the resilience of the U.S. economy, dispelling earlier fears of an imminent recession.
With the economic backdrop in favor, now is an opportune time for investors to explore retail stocks. That said, we have highlighted four stocks from the sector that look well-positioned based on their sound fundamentals.
Past 6-Month Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Target Corporation (TGT - Free Report) is worth considering. This Minneapolis, MN-based company has been making multiple changes to its business model to adapt and stay relevant in the dynamic retail landscape. Target has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. These have been contributing to the top line.
The Zacks Consensus Estimate for Target’s current financial-year EPS suggests growth of 38.5% from the year-ago reported figure. TGT, which sports a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 30.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Casey's General Stores, Inc. (CASY - Free Report) is also a potential pick. Casey's price and product optimization strategies, increased penetration of private brands and digital engagements comprising the mobile app and online ordering capabilities are commendable. As the third-largest convenience retailer and the fifth-largest pizza chain, its distinctive self-distribution model, robust Inside category performance and strategic acquisitions are noteworthy strengths.
The Zacks Consensus Estimate for Casey's current fiscal sales and EPS suggests growth of 0.3% and 9%, respectively, from the year-ago reported figure. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 17.8%, on average.
Urban Outfitters, Inc. (URBN - Free Report) is worth betting on. URBN's marketing efforts and product offerings have driven customer growth and engagement, particularly for the Anthropologie and Free People brands. This success in marketing indicates a strong connection with the target audience and effectiveness in brand positioning. The company sees a lot of opportunity from its rental subscription business, Nuuly. Strong execution, a focus on customer value and curated assortments have been pivotal to its success.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal sales and EPS calls for growth of 7.5% and 85.7%, respectively, from the year-ago reported figure. URBN has a trailing four-quarter earnings surprise of 22%, on average. The stock carries a Zacks Rank #2 (Buy).
Investors can count on Hibbett, Inc. (HIBB - Free Report) , a leading athletic-inspired fashion retailer. Hibbett boasts distinct competitive advantages, including superior customer service, a best-in-class omnichannel shopping experience, strong vendor relationships, strategic in-store placement and a presence in underserved markets. These advantages contribute to the company's ability to maintain and grow its market share. The company’s focus on improved expense management and disciplined inventory controls demonstrates a commitment to operational efficiency.
The Zacks Consensus Estimate for Hibbett’s current fiscal sales suggests growth of 1.7% from the year-ago reported figure. This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 24.2%, on average.
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4 Retail Stocks Riding the Wave of Consumer Confidence
The Conference Board's Consumer Confidence Index for January registered an impressive 114.8, marking a significant increase from the downwardly revised figure of 108.0 in December. This marks the third consecutive monthly rise in consumer confidence, reflecting a trend that could contribute to sustained momentum in household spending throughout the year.
Dana Peterson, the Chief Economist at The Conference Board, attributes the surge in consumer confidence to various factors. These include a slowdown in inflation, expectations of lower interest rates in the near future and overall favorable employment conditions. As businesses continue to maintain a robust labor force, consumers are finding reassurance in the stability of the job market.
With consumer confidence hitting a two-year high, economists anticipate a positive ripple effect on spending habits. Consumer spending plays a pivotal role in the US economy, constituting about 70% of economic activity. The combination of resilient demand, a healthy job market and improved inflation expectations has the potential to keep the economy on an upward trajectory.
The robust consumer confidence figures align with recent positive economic reports. Gross Domestic Product, a key measure of goods and services produced, increased at a notable 3.3% annualized rate in the final quarter of 2023. This growth exceeded expectations and showcased the resilience of the U.S. economy, dispelling earlier fears of an imminent recession.
With the economic backdrop in favor, now is an opportune time for investors to explore retail stocks. That said, we have highlighted four stocks from the sector that look well-positioned based on their sound fundamentals.
Past 6-Month Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Target Corporation (TGT - Free Report) is worth considering. This Minneapolis, MN-based company has been making multiple changes to its business model to adapt and stay relevant in the dynamic retail landscape. Target has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. These have been contributing to the top line.
The Zacks Consensus Estimate for Target’s current financial-year EPS suggests growth of 38.5% from the year-ago reported figure. TGT, which sports a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 30.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Casey's General Stores, Inc. (CASY - Free Report) is also a potential pick. Casey's price and product optimization strategies, increased penetration of private brands and digital engagements comprising the mobile app and online ordering capabilities are commendable. As the third-largest convenience retailer and the fifth-largest pizza chain, its distinctive self-distribution model, robust Inside category performance and strategic acquisitions are noteworthy strengths.
The Zacks Consensus Estimate for Casey's current fiscal sales and EPS suggests growth of 0.3% and 9%, respectively, from the year-ago reported figure. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 17.8%, on average.
Urban Outfitters, Inc. (URBN - Free Report) is worth betting on. URBN's marketing efforts and product offerings have driven customer growth and engagement, particularly for the Anthropologie and Free People brands. This success in marketing indicates a strong connection with the target audience and effectiveness in brand positioning. The company sees a lot of opportunity from its rental subscription business, Nuuly. Strong execution, a focus on customer value and curated assortments have been pivotal to its success.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal sales and EPS calls for growth of 7.5% and 85.7%, respectively, from the year-ago reported figure. URBN has a trailing four-quarter earnings surprise of 22%, on average. The stock carries a Zacks Rank #2 (Buy).
Investors can count on Hibbett, Inc. (HIBB - Free Report) , a leading athletic-inspired fashion retailer. Hibbett boasts distinct competitive advantages, including superior customer service, a best-in-class omnichannel shopping experience, strong vendor relationships, strategic in-store placement and a presence in underserved markets. These advantages contribute to the company's ability to maintain and grow its market share. The company’s focus on improved expense management and disciplined inventory controls demonstrates a commitment to operational efficiency.
The Zacks Consensus Estimate for Hibbett’s current fiscal sales suggests growth of 1.7% from the year-ago reported figure. This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 24.2%, on average.