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5 Stocks That Make Great Buys This Black Friday

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It’s that time of the year when scores of people are expected to head to the stores after finishing their turkey or going online. After all, solid economic growth and a two-decade high consumer confidence on labor market strength are providing the wherewithal to consumers to spend more. Retailers are thus poised to see a substantial uptick in sales, which makes them solid bets for now.

Black Friday Sales Predictions

The National Retail Federation and Prosper Insights & Analytics (NRF) noted that this Black Friday, 116 million people are planning to shop. Thus, Black Friday will remain the busiest day during the Thanksgiving Day through Cyber         Monday holiday period.

Consumers are, in fact, willing to spend more on Black Friday compared with other discount days such as Small Business Saturday or Cyber Monday, per BlackFriday.com. Shoppers will most likely spend $472 on Black Friday, way more than $57 on Cyber Monday. Such stupendous spending on Black Friday is also up almost $5 from last year. Having said that, last year marked the first time when Black Friday online shopping topped $5 billion. And this time around, it is predicted to go beyond $5.8 billion, showing an increase of more than 15%.

Adobe Analytics chipped in and said that sales on Black Friday are expected to grow this year, bringing in an estimated $5.9 billion. But, this sales growth doesn’t end with Black Friday. As a matter of fact, retailers are expected to witness nearly $721 billion in sales through the end of December, a significant jump of 4.8% over last year, according to the NRF. The projections, in fact, show an average annual increase of 3.9% over the past five years.

 

(Source: National Retail Federation)

Retail Behemoths Offer Big Deals

Majority of shoppers are expected to make the most of the deals and promotions retailers will offer, while the rest said that the upcoming holiday season is traditionally the time to shop and they are pretty much willing to indulge.

To lure shoppers, retail bigwig Walmart Inc. (WMT - Free Report) is expected to offer average discounts of 30-35%. Target Corporation (TGT - Free Report) and Macy’s, Inc. (M - Free Report) are projected to provide average discounts of 35-40% and 45-50%, respectively. In fact, among the largest retailers, J. C. Penney Company, Inc. (JCP - Free Report) and Kohl’s Corporation (KSS - Free Report) are providing the biggest discounts at 65-70%.

Retailers have invested in new technologies to help buyers skip lines at the register. In order to speed up store checkouts, Target is allowing staffs scan products and accept credit cards anywhere in the store. Walmart has also adopted a more or less similar strategy and has provided a special Black Friday map on the Walmart app for smartphones. Rival Amazon.com, Inc. (AMZN - Free Report) , in the meantime, has provided several bonanzas with free shipping offers and special discounts on various gadgets, including Kindle tablets and Echo speakers.

Why Consumers Are Willing to Splurge

Upbeat economic conditions and a two-decade high consumer confidence are proving conducive for shoppers. In the last two quarters, the U.S. economy recorded the fastest six-month growth in four years and is on track to hit the Trump administration's annual growth target of 3%. If that happens, it would be the best yearly performance since 2005, two years before the Great Recession.

The U.S. economy got a boost in the third quarter, with GDP increasing at an annualized pace of 3.5%, per the U.S. Commerce Department. In fact, the country’s total output of goods and services followed an even stronger 4.2% growth in the second quarter.

At the same time, consumers in America are currently most confident in almost two decades, courtesy of a healthy labor market.The consumer confidence index climbed to 137.9 last month from 135.3 in September, per the Conference Board, a business research organization. People’s confidence in the present situations improved from 169.4 in September to 172.8 last month, matching the highest level reached in December 2000. The future expectations index also moved from 112.5 to 114.6, an 18-year high (read more: Consumer Confidence Leaps to 18-Year High: 5 Big Gainers).

 

(Source: The Conference Board)

5 Top Retail Picks for Now

Taking the expected bumper Black Friday sales into account, retailers are undoubtedly set to witness a strong year-end rally. Hence, it will be prudent to invest in five of the best retail stocks for handsome returns. The stocks also have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Boot Barn Holdings, Inc. (BOOT - Free Report) operates specialty retail stores in the United States. Currently, the company has a Zacks Rank #1. In the last 60 days, six earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 8.7% in the same period. The stock’s estimated growth rate for the next quarter is 41.2% versus the Retail - Apparel and Shoes industry’s projected decline of 49.9%.

Target operates as a general merchandise retailer in the United States. The company at present has a Zacks Rank #2. In the last 60 days, four earnings estimates moved up, while one moved down for the current year. The Zacks Consensus Estimate for earnings has risen 0.4% in the same period. The stock’s estimated growth rate for the next quarter is 11.4% versus the Retail - Discount Stores industry’s expected decline of 19.7%.

Burlington Stores, Inc. (BURL - Free Report) operates as a retailer of branded apparel products in the United States. Currently, the company has a Zacks Rank #2. In the last 60 days, four earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 0.5% in the same period. The stock’s estimated growth rate for the next quarter is 27.2% versus the Retail - Discount Stores industry’s expected decline of 19.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Macy’s sells a range of merchandise, such as apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods. The company at present has a Zacks Rank #2. In the last 60 days, six earnings estimates moved up, while none moved down for the current year. The Zacks Consensus Estimate for earnings has risen 4.7% in the same period. The stock’s estimated growth rate for the next quarter is 31.3% versus the  Retail - Regional Department Storess industry’s expected decline of 38.2%.

Tiffany & Co. (TIF - Free Report) designs, manufactures, and retails jewelry and other items in the Americas. Currently, the company has a Zacks Rank #2. In the last 60 days, two earnings estimates moved north, while none moved south for the current year. The Zacks Consensus Estimate for earnings has risen 0.2% in the same period. The stock’s estimated growth rate for the current year is 16.7% versus the Retail - Jewelry industry’s expected rally of 7.9%.

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