Back to top

5 Stocks to Gain From Blockbuster Retail Sales Report

Read MoreHide Full Article

Sales from U.S. retailers ramped up the most in five months in October, primarily on higher purchases of building materials, motor vehicles and fuel. Strength in this metric bodes well for the Christmas shopping season, in which sales are predicted to surpass nearly $1 trillion.  

Consumer spending, which reflects nearly two-thirds of U.S. economic activity, grew at its best pace in almost four years in the third quarter. Of late, American consumers are on a spending spree, courtesy of a healthy workforce market scenario and tax cuts provided by the Trump administration.

Against this backdrop, it seems sensible to invest in retailing stocks that are likely to make the most of the bullish sentiments.

What do the Numbers Exhibit? 

Per the Commerce Department — U.S. retail sales secured a monthly gain of 0.8% in October and came in 4.6% higher than the year-ago tally. The so-called core retail sales that exclude food services, auto dealers, building materials stores and gasoline stations rose 0.3% in the past month.

Sales at the automobile parts and dealers rose 1.1%, its highest since March. Higher gasoline prices pushed up the receipts in filling-stations by 3.5% month over month. Building-material stores’ sales grew 1%, probably on the back of rebuilding efforts in the hurricane-devastated areas. The electronic and appliance stores recorded a monthly sales gain of 0.7%. Sporting goods, hobby, musical instruments and books; clothing; and general merchandise categories, each recorded 0.5% gain in October. 

Consumer activities at the restaurants and home furnishing stores had slightly weakened in the past month, possibly due to the impact of hurricane Florence and Michael. Nonetheless, the adverse fallout trends are likely temporary.

Factors Driving Spending Spree  

Blockbuster retail sales in October came on the back of upbeat consumer sentiment. U.S. consumption spending is gaining momentum on the back of increased employment opportunities and higher wage rates. The economy added 250,000 new jobs as joblessness dip to a 48-year low in the past month. Notably, wage rate growth touched 3% in the past 12-month period, for the first time since the end of the Great Recession. On Nov 15, a separate Labor Department report revealed that initial jobless claims in October neared its lowest level since 1969, indicating a healthy labor market going forward.

Additionally, the tax cuts have largely boosted Americans’ take-home pay and discretionary spending. While the top rate of individual income tax brackets got trimmed from 39.6% to 37%, the 33% bracket declined to 32%, the 28% bracket to 24%, the 25% bracket to 22% and the 15% bracket to 12%.

5 Top Winners

Taking the spending spree into account, retailers are set to witness a strong rally going forward. Hence, it will be prudent to invest in selective retailing companies from the categories that have witnessed a significant rise in receipts in the past month. In sync with this, we have shortlisted five stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and flaunt a VGM Score of A or B.

Conn's, Inc. (CONN - Free Report) is a specialty retailing company of durable consumer goods in the United States.

The Zacks Consensus Estimate for earnings has moved up 1.7% to $2.45 per share for fiscal 2019 (ending January 2019), in the last 60 days. Notably, its projected year-over-year earnings growth rate for fiscal 2019 is currently pegged at 157.9%. Conn’s shares have gained 7.5% in the past six months. The stock sports a Zacks Rank #1 and has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. (BURL - Free Report) provides branded apparel products in the United States.

The company carries a Zacks Rank #2 and has a VGM Score of B. The Zacks Consensus Estimate for earnings has moved up 0.5% to $6.23 per share for fiscal 2019 (ending January 2019), in the last 60 days. Notably, its projected year-over-year earnings growth rate for fiscal 2019 is currently pegged at 42.6%. Burlington Stores’ shares have gained 19.3% in the past six months.

AutoZone, Inc. (AZO - Free Report) sells and distributes automotive accessories and replacement parts in the market.

The company carries a Zacks Rank #2 and has a VGM Score of B. The Zacks Consensus Estimate for earnings has moved up 2.4% to $58.44 per share for fiscal 2019 (ending August 2019), in the last 60 days. Notably, its projected year-over-year earnings growth rate for fiscal 2019 is currently pegged at 16.1%. AutoZone’s shares have gained 25.2% in the past six months.

Nordstrom, Inc. (JWN - Free Report) is a premium fashion retailing company operating in Canada and the United States.

The company carries a Zacks Rank #2 and has a VGM Score of A. The Zacks Consensus Estimate for earnings has moved up 0.6% to $3.59 per share for fiscal 2019 (ending January 2019), in the last 60 days. Notably, its projected year-over-year earnings growth rate for fiscal 2019 is currently pegged at 21.3%. Nordstrom’s shares have gained 4.3% in the past six months.

Kohl's Corporation (KSS - Free Report) offers its services as an omni-channel retailer in the United States.

The company has a Zacks Rank #2 and VGM Score of A. The Zacks Consensus Estimate for earnings has moved up 0.6% to $5.48 per share for fiscal 2019 (ending January 2019), in the last 60 days. Notably, its projected year-over-year earnings growth rate for fiscal 2019 is currently pegged at 30.8%. Kohl's shares have gained 13.4% in the past six months.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>