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Holiday Retail Spending to Rise in 2018: 5 Picks

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Total holiday retail sales are projected to jump 5-5.6% in 2018, per Deloitte’s 33rd annual Holiday Survey. Also, retail spending is projected to increase this year, with online spending expected to increase further. Most of the spending will be on socializing and gifting that comprise gift cards, clothing, toys and books. Also, U.S. consumers are likely to spend more online.

Understandably, with the economy flourishing and consumer confidence touching a two-decade high, an increasing number of Americans are willing to spend more during the holiday season. Per the National Retail Federation (NRF), retail sales during the holiday season are expected to reach around $721 billion. This certainly is a good sign for retailers. Given this scenario, investing in retail stocks looks like a profitable option.  

Holiday Spending to Grow

Per Deloitte’s 33rd annual Holiday Survey, average U.S. consumer is likely to spend $1,536, up from $1,226 last year. The report also says that sales during the holiday retail season are expected to rise 5-5.6% in 2018, with online sales jumping 17-22%. Online purchases will account for 57% of the total against 36% in stores.

Per the survey, 60% of consumers will shop at online retailers and auction sites, up from 55% in 2017. On the other hand, 32% are likely to shop at traditional department stores, reflecting an increase of 4% from 2017. Understandably, online retailers are giving brick-and-mortar stores stiff competition, which continues to increase.

Moreover, 40% of the holiday spending will go to experiences like entertainment at home and socializing, while 35% ($525) will account for gifting via gift cards, clothing, toys, books and liquor. Per PwC’s 2018 Holiday Outlook, consumers plan to spend $1,250 on gifts, travel and entertainment, an increase of 5% from 2017. It goes without saying that with a flourishing economy and consumer confidence touching record highs, consumers are more confident about spending this holiday season.

Holiday Sales to Grow, Boost Hiring

Per leading global outplacement firm Challenger, Gray & Christmas Inc, retailers in the United States would be hiring 704,000 workers ahead of the holiday season. This reflects an increase of 1.2% from the previous best figures in 2014.

A large number of retailers such as Target Corporation (TGT - Free Report) , Macy’s, Inc. (M - Free Report) and Amazon.com, Inc. (AMZN - Free Report) are aggressively hiring ahead of the holiday season between Thanksgiving and Christmas. Understandably, this is giving U.S. retailers the much-required confidence, which has resulted in companies stocking up more and going on a hiring spree.   

Our Choices

This is giving retailers the due confidence, which is likely to give retail spending and sales a boost this holiday season. This is why, picking retail stocks looks like a smart option now. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a good VGM Score. You can see the complete list of today’s Zacks #1 Rank stocks here.

RH (RH - Free Report) is a luxury brand in the home furnishings marketplace, offering product assortments across a number of categories. 

RH has a Zacks Rank #1 and VGM Score of A. The company’s projected growth rate for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved 0.1% in the last 60 days.

Boot Barn Holdings, Inc. (BOOT - Free Report) operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. 

Boot Barn Holdings carries a Zacks Rank #2 (Buy) and has a VGM Score of B. The company’s projected growth rate for the current year is 77.1%. The Zacks Consensus Estimate for the current year has improved 7.8% in the last 60 days.

Express, Inc. (EXPR - Free Report) is a specialty retailer of women's and men's apparel in the United States. 

Express Inc has a Zacks Rank #2 and VGM Score of A. The company’s projected growth rate for the current year is 30.6%. The Zacks Consensus Estimate for the current year has improved 2.2% in the last 60 days.

Genesco Inc. (GCO - Free Report) , a Nashville-based specialty retailer, sells footwear, headwear and accessories in retail stores in the United States and Canada. 

Genesco has a Zacks Rank #2 and VGM Score of A. The company’s projected growth rate for the current year is 3.18%. The Zacks Consensus Estimate for the current year has improved 1.6% in the last 60 days.

Movado Group, Inc. (MOV - Free Report) is one of the world's premier watchmakers. Movado Group designs, manufactures and distributes watches from 10 of the most recognized and respected names in time.

Movado has a Zacks Rank #2 and VGM Score of B. The company’s projected growth rate for the current year is 27%. The Zacks Consensus Estimate for the current year has improved 0.8% in the last 60 days.

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