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Strong Economic Data to Propel Holiday Sales: 5 Top Picks

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The U.S. economy grew at a moderate pace in October, primarily boosted by an uptick in consumer spending. In fact, consumer outlays increased last month as well. Further, NRF had forecast a strong holiday season ahead, implying that consumers are quite willing to spend in the near future.

Given this rise in U.S. household spending, the retail sector is sure to flourish.

Strong Economic Data Indicates Growth

On Nov 27, the Commerce Department reported that the gross domestic product (GDP) increased at a 2.1% annualized rate in its second estimate of the third quarter. This not only surpassed analysts’ expectation of 1.9% growth, but also indicated that the U.S. economy expanded at a steady rate rather than slowing down as initially reported.

GDP grew from upward revisions in inventories and investment in structures. Inventories increased at a $79.8 billion pace, more than the previously reported figure of $69.0 billion. The main engine of growth, consumer spending grew at 2.9%.

American households’ spending increased in October on account of higher expenditure on electricity and gas. Per the Commerce Department’s report on Nov 27, household spending increased at a seasonally adjusted rate of 0.3% in October.

In fact, spending increased in October at the fastest rate in three months and is the best gain since July’s 0.5% rise. Sales of nondurable goods like food, clothing and services were noticeably higher and had offset the drop in sales of durable goods.

Strong Cyber Monday Sales Forecast

This year, consumer spending has been supported by the lowest unemployment rate in nearly 50 years. And with the holiday season around the corner, it is expected that consumer spending will keep driving the economy.

According to the annual survey released by the National Retail Federation and Prosper Insights & Analytics, “165.3 million people [are] likely to shop Thanksgiving Day through Cyber Monday”.

The survey reports that during the holiday weekend “39.6 million consumers are considering shopping on Thanksgiving Day, 114.6 million on Black Friday, 66.6 million on Small Business Saturday and 33.3 million on Sunday.” NRF expects the shopping weekend to wrap up on Cyber Monday, when 68.7 million customers will shop online.

Per the NRF’s annual forecast, this holiday season, retail sales in November and December will climb between 3.8% and 4.2% over the previous year, at an aggregate of $727.9 billion to $730.7 billion.

What’s more, president and CEO of NRF, Matthew Shay, in the report said that “younger consumers are significantly more likely to shop over the Thanksgiving weekend.” Traditional shopping activities likely to rise with consumers under the age of 25 opt for in-store purchase this Thanksgiving weekend.

According to NRF’s survey on 8,000 consumers, 47% plan to start in-store and 41% may start online shopping. Remarkably, the age group 18-24, known for their online fetish will go to brick and mortar shops to enjoy social involvement.

Grab These Stocks Now

Given the positive developments in the economy and NRF’s strong forecasts, it is likely that the retail sector will outperform over the upcoming weekend. Here are five retail stocks that flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings, Inc. (BOOT - Free Report) is a publicly traded lifestyle retail chain that offers western and work-related footwear, apparel and accessories for men, women and kids. The company’s expected earnings growth rate for the current year is 30.4% against the industry’s estimated earnings growth of 0.6%. The Zacks Consensus Estimate for its current-year earnings has moved up 6.7% over the past 60 days.

Boot Barn has outperformed the Retail - Apparel and Shoes industry in the past one-year period (+92.7% versus -33.2%).

 

Lithia Motors, Inc. (LAD - Free Report) is a publicly traded automotive retailer that offers new and used vehicles, vehicle financing services, and automotive repair and maintenance services. The company’s expected earnings growth rate for the next quarter is 25.4% against the industry’s estimated earnings growth of 1.1%. The Zacks Consensus Estimate for current-year earnings has moved up 4.9% over the past 60 days.

Lithia Motors has outperformed the Automotive - Retail and Whole Sales industry in the past one-year period (+95.7% versus +43.2%).

 

Target Corporation (TGT - Free Report) is a publicly traded general merchandise retailer that offers beauty and household essentials, food assortments, apparel, accessories, home décor products, electronics, toys, seasonal offerings and other merchandise. The company’s expected earnings growth rate for the current year is 18.4% against the industry’s estimated earnings growth of 8.9%. The Zacks Consensus Estimate for its current-year earnings has moved up 3.7% over the past 60 days.

Target has outperformed the Retail - Discount Stores industry in the past one-year period (+76.3% versus +40.9%).

 

Hibbett Sports, Inc. (HIBB - Free Report) is a publicly traded company that engages in the retail of athletic-inspired fashion products through its stores. The company’s expected earnings growth rate for the current year is 38.4% against the industry’s estimated earnings decline of 0.5%. The Zacks Consensus Estimate for its current-year earnings has moved up 11.4% over the past 60 days.

Hibbett Sports has outperformed the Retail – Miscellaneous industry in the past one-year period (+56.9% versus -13.1%).

 

Casey's General Stores, Inc. (CASY - Free Report) is a publicly traded convenience store company that offers a selection of food, including freshly prepared foods, beverages, tobacco, and nicotine products; health and beauty aids; automotive products; and other nonfood items. The company’s expected earnings growth rate for the current quarter is 17.8% against the industry’s estimated earnings growth of 9.7%. The Zacks Consensus Estimate for its current-year earnings has moved up 1.5% over the past 60 days.

Casey's has outperformed the Retail - Convenience Stores industry in the past one-year period (+38.7% versus+33.6%).

 

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