Consumer confidence neared an 18-year high last month. Now it looks like the 2018 holiday shopping season is shaping up to be a big one. So, let’s dive into three retailers that seem like strong buys right now that might also get a boost from a rise in holiday season spending.
September’s Consumer Confidence Index closed in on an 18-year high and retailers from Target (TGT - Free Report) to Walmart (WMT - Free Report) proved they can thrive through e-commerce initiatives, improved stores, and new partnerships. And now that we have moved into October the holiday shopping period is on the minds of consumers, retailers, and investors.
The National Retail Federation announced earlier this week that it predicts that holiday retail sales in November and December, which excludes automobiles, gasoline and restaurants, will jump between 4.3% and 4.8% this year. The NRF projects that total sales could climb as high as $720.89 billion. Investors should note that this comes after 2017’s sales popped 5.3% to $687.87 billion.
“With this year’s forecast, we continue to see strong momentum from consumers as they do the heavy lifting in supporting our economy,” NRF chief economist Jack Kleinhenz said in a statement. “The combination of increased job creation, improved wages, tamed inflation and an increase in net worth all provide the capacity and the confidence to spend.”
The firm also noted that its holiday shopping season forecast nearly matches its overall 2018 retail forecast. Now let’s look at three retail stocks that appear to be solid buys at the moment.
Canada Goose (GOOS - Free Report)
Canada Goose, which sells high-priced down jackets, is coming off a strong start to the year in its “smallest fiscal quarter,” with total revenues up 58.5% last period. The firm’s direct-to-consumer business shined as did in-store sales. Looking ahead, Canada Goose is projected to see its current quarter revenues jump by nearly 9%, based on our current Zacks Consensus Estimate. But the real growth looks like it will come during its fiscal third-quarter, which includes the holiday shopping period, with revenues projected to jump over 25% to $262.15 million.
At the bottom end of the income statement, Canada Goose’s adjusted Q3 earnings are expected to soar 41.3% to reach $0.65 per share. Meanwhile, its full-year EPS figure is projected to jump 30%. Investors should also note that GOOS has seen nothing but positive earnings revisions for both its current year and the following fiscal year over the last 60 days. Canada Goose is currently a Zacks Rank #1 (Strong Buy) and sits below its 52-week high.
Lululemon (LULU - Free Report)
Lululemon is coming off an impressive second quarter that saw its revenues climb and its earnings skyrocket over 97%. The yoga apparel and athleisure power’s comp sales also jumped 10%. Plus, LULU’s direct-to-consumer revenues soared 48% as it pushes further into e-commerce along with the likes of Nike (NKE - Free Report) and Adidas (ADDYY - Free Report) . Lululemon’s core athleisure business is expected to grow as the overall market continues to thrive. The firm also reiterated its goal to expand its men’s category to $1 billion by 2020, which would be great for investors as men’s athleisure has more room to expand as evidenced by Gap’s (GPS - Free Report) launch of its new men’s brand Hill City.
Shares of LULU have skyrocketed over the last year, but it looks like the firm still has room to run. Our current Zacks Consensus Estimate is calling for the company’s Q3 revenues to jump by 18.4%, while full-year revenues are projected to climb 21.8% to hit $3.23 billion. More impressively, LULU’s full-year EPS figure is projected to jump over 38% to $3.58 per share. The athleisure giant has also received 20 upward earnings estimate revisions for fiscal 2018 and 23 for fiscal 2019 within the past 60 days, against zero downward changes.
Lululemon is currently a Zacks Rank #1 (Strong Buy) and also sports an “A” grade for Growth in our Style Scores system.
Urban Outfitters (URBN - Free Report)
Urban Outfitters has seen its stock price sink over 8% in the last month alone to help set up what could be a great buying opportunity because the company looks ready to keep on growing. The lifestyle and clothing retailer’s Q3 revenues are projected to pop by 8.7%. Plus, URBN’s current fiscal year revenues are expected to jump 9.6% to $3.96 billion.
Moving to the other end of the income statement, the company’s adjusted quarterly earnings are projected to surge by 53.7%. Meanwhile, URBN’s adjusted full-year EPS figure is expected to skyrocket by approximately 60%. Urban has also received 11 upward earnings estimate revisions for Q3 and 13 for its current fiscal year over the last 60 days, with 100% agreement to the upside.
Urban Outfitters is currently a Zacks Rank #1 (Strong Buy) and rocks an “A” grade for Growth and “Bs” for both Value and Momentum in our Style Scores system.
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