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4 Retail Stocks That Hold Promise Despite Soft January Sales
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In a marked retreat from December's upbeat pace, Americans scaled back their spending in January. The latest report from the Commerce Department reveals a 0.8% drop in retail sales last month, contrasting with December's modest 0.4% uptick and defying market expectations.
While adverse weather conditions may have played a role in this contraction, mounting financial pressures, such as higher interest rates, likely contributed to dampened consumer enthusiasm.
Despite a strong job market and rising wages, consumers appeared to exercise caution in January following the holiday splurge. Economists had foreseen a slowdown toward the end of last year, given factors such as increased credit card debt and diminished savings. However, resilient household spending persisted, driven by favorable employment conditions.
January saw an unexpected surge in hiring, with employers adding 353,000 jobs, indicating an economy still adjusting to the Federal Reserve's interest rate hikes. Yet, consumer inflation, though moderating somewhat, remained elevated, with prices up by 3.1% last month compared to the previous year.
Federal Reserve officials have expressed cautious optimism regarding inflation and growth, hinting at the potential conclusion of the current rate-hiking cycle. However, they remain vigilant, emphasizing the need for sustained evidence of inflation aligning with the central bank's target before considering policy adjustments.
A Peek Into Retail Sales Numbers
The Commerce Department reported a sequential decline of 0.8% in U.S. retail and food services sales for January, reaching a total of $700.3 billion.
Breaking down the figures, motor vehicle and parts dealers experienced a notable 1.7% decline in sales. Building material and supplies dealers witnessed a significant 4.1% drop, while clothing and clothing accessories outlets saw a slight decrease of 0.2%. Miscellaneous stores reported a sharp 3% decrease, and sales at sporting goods, hobbies, musical instruments, and bookstores fell by 0.2%.
Electronics and appliance stores experienced a marginal decline of 0.4% in sales, while gasoline stations witnessed a more pronounced drop of 1.7% in receipts. Sales at health and personal care stores declined by 1.1%, and non-store retailers, representing the online sphere, reported a 0.8% decrease.
On the flip side, sales at furniture and home furnishing stores surged by 1.5%. Food and beverage stores demonstrated modest growth of 0.1%, and food services and drinking places registered a 0.7% rise in sales. General merchandise stores reported unchanged sales last month.
Past-Year Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Abercrombie & Fitch Co. (ANF - Free Report) is a potential pick. The company's ability to adapt, innovate and connect with customers positions it for a prosperous future. Abercrombie & Fitch’s regional operating model, with a focus on the Americas, the EMEA and the APAC, provides a solid foundation for global expansion. Its strong brand portfolio, operational efficiency and regional strategy make it an attractive investment opportunity as it continues to navigate and thrive in the evolving retail landscape.
This leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids delivered a trailing four-quarter earnings surprise of 713%, on average. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 14.9% from the year-ago period. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can count on Target Corporation (TGT - Free Report) . 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 38.4% from the year-ago reported figure. TGT, which carries a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 30.8%, on average.
Casey's General Stores, Inc. (CASY - Free Report) is worth considering. 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 #2 company has a trailing four-quarter earnings surprise of 17.8%, on average.
Sprouts Farmers Market, Inc. (SFM - Free Report) is worth betting on. The company’s focus on product innovation, technology and targeted marketing with everyday great pricing bodes well. It has been steadily expanding its presence in the natural organic space, given the huge demand in the segment. Management has been lowering operational complexity, optimizing production, improving the in-stock position and updating to smaller-format stores. Apart from these, the company has been trying to expand private-label offerings.
The Zacks Consensus Estimate for Sprouts Farmers’ current fiscal sales and EPS suggests growth of 6.6% and 17.2%, respectively, from the year-ago reported figure. SFM, which carries a Zacks Rank #2, delivered a trailing four-quarter earnings surprise of 11.2%, on average.
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4 Retail Stocks That Hold Promise Despite Soft January Sales
In a marked retreat from December's upbeat pace, Americans scaled back their spending in January. The latest report from the Commerce Department reveals a 0.8% drop in retail sales last month, contrasting with December's modest 0.4% uptick and defying market expectations.
While adverse weather conditions may have played a role in this contraction, mounting financial pressures, such as higher interest rates, likely contributed to dampened consumer enthusiasm.
Despite a strong job market and rising wages, consumers appeared to exercise caution in January following the holiday splurge. Economists had foreseen a slowdown toward the end of last year, given factors such as increased credit card debt and diminished savings. However, resilient household spending persisted, driven by favorable employment conditions.
January saw an unexpected surge in hiring, with employers adding 353,000 jobs, indicating an economy still adjusting to the Federal Reserve's interest rate hikes. Yet, consumer inflation, though moderating somewhat, remained elevated, with prices up by 3.1% last month compared to the previous year.
Federal Reserve officials have expressed cautious optimism regarding inflation and growth, hinting at the potential conclusion of the current rate-hiking cycle. However, they remain vigilant, emphasizing the need for sustained evidence of inflation aligning with the central bank's target before considering policy adjustments.
A Peek Into Retail Sales Numbers
The Commerce Department reported a sequential decline of 0.8% in U.S. retail and food services sales for January, reaching a total of $700.3 billion.
Breaking down the figures, motor vehicle and parts dealers experienced a notable 1.7% decline in sales. Building material and supplies dealers witnessed a significant 4.1% drop, while clothing and clothing accessories outlets saw a slight decrease of 0.2%. Miscellaneous stores reported a sharp 3% decrease, and sales at sporting goods, hobbies, musical instruments, and bookstores fell by 0.2%.
Electronics and appliance stores experienced a marginal decline of 0.4% in sales, while gasoline stations witnessed a more pronounced drop of 1.7% in receipts. Sales at health and personal care stores declined by 1.1%, and non-store retailers, representing the online sphere, reported a 0.8% decrease.
On the flip side, sales at furniture and home furnishing stores surged by 1.5%. Food and beverage stores demonstrated modest growth of 0.1%, and food services and drinking places registered a 0.7% rise in sales. General merchandise stores reported unchanged sales last month.
Past-Year Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Abercrombie & Fitch Co. (ANF - Free Report) is a potential pick. The company's ability to adapt, innovate and connect with customers positions it for a prosperous future. Abercrombie & Fitch’s regional operating model, with a focus on the Americas, the EMEA and the APAC, provides a solid foundation for global expansion. Its strong brand portfolio, operational efficiency and regional strategy make it an attractive investment opportunity as it continues to navigate and thrive in the evolving retail landscape.
This leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids delivered a trailing four-quarter earnings surprise of 713%, on average. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 14.9% from the year-ago period. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors can count on Target Corporation (TGT - Free Report) . 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 38.4% from the year-ago reported figure. TGT, which carries a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 30.8%, on average.
Casey's General Stores, Inc. (CASY - Free Report) is worth considering. 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 #2 company has a trailing four-quarter earnings surprise of 17.8%, on average.
Sprouts Farmers Market, Inc. (SFM - Free Report) is worth betting on. The company’s focus on product innovation, technology and targeted marketing with everyday great pricing bodes well. It has been steadily expanding its presence in the natural organic space, given the huge demand in the segment. Management has been lowering operational complexity, optimizing production, improving the in-stock position and updating to smaller-format stores. Apart from these, the company has been trying to expand private-label offerings.
The Zacks Consensus Estimate for Sprouts Farmers’ current fiscal sales and EPS suggests growth of 6.6% and 17.2%, respectively, from the year-ago reported figure. SFM, which carries a Zacks Rank #2, delivered a trailing four-quarter earnings surprise of 11.2%, on average.