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Renewed Consumer Confidence Spells Good Times for Retailers

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After the sales uptick in March, retailers now have another reason to cheer. Consumer confidence rebounded in the month of April after a decline in the last month and the index even inched close to its 18-year high level. Courtesy of a strengthening labor market, tax reform and rising income, Americans are way more confident now, brushing aside recent hiccups like the U.S.-China face-off, apprehensions of a tighter monetary policy and rising bond yields.

Per the Conference Board data, the Consumer Confidence Index surged to 128.7 this month from March’s revised reading of 127.0. Analysts pointed that sales pickup and rising consumer confidence underscore the underlying strength in the economy. Certainly, this positive sentiment is likely to translate into higher consumer spending — one of the pivotal factors driving the economy. An uptick in this metric is welcome news for retailers.

More confident consumers also bode well as the fortunes of retailers depend on their willingness to spend. Consumers nowadays have clearly taken a liking to online shopping over visiting brick-and-mortar stores. With the evolving shopping patterns, retailers are getting smarter embracing the omni-channel mantra to provide a seamless shopping experience, whether in stores or online or through smartphones via apps.

Given the favorable backdrop, the Retail-Wholesale sector is likely to catch investors’ attention. The sector has gained roughly 11% in the past six months, outpacing the S&P 500’s growth of 3%. Per the latest Earnings Preview, the sector is likely to witness bottom-line growth of 11.7% in the current reporting cycle, faring better than the last reported quarter’s rise of 3%. The top line is also projected to climb 7.6% compared with 9.7% increase registered in the last reported quarter.

With the earnings season picking up pace, it seems prudent to snap up some retail stocks that are likely to beat estimates. These are stocks with a favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ruth's Hospitality Group, Inc. (RUTH - Free Report) has an Earnings ESP of +1.70% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

KAR Auction Services, Inc. (KAR - Free Report) has an Earnings ESP of +5.41% and a Zacks Rank #1.

Urban Outfitters, Inc. (URBN - Free Report) has an Earnings ESP of +0.62% and a Zacks Rank #2.

Nordstrom, Inc. (JWN - Free Report) has an Earnings ESP of +8.97% and a Zacks Rank #2.

Tapestry, Inc. (TPR - Free Report) has an Earnings ESP of +1.83% and a Zacks Rank #2.

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