Big American retailer Macy’s, Inc. (M - Free Report) recently announced plans to close a fifth of its department stores over the next three years. What’s more, the retail organization will slash another 2,000 corporate jobs. Macy’s also plans to abandon its dual headquarters in Cincinnati but has assured to keep nearly 400 of its namesake locations running. Nonetheless, the closing of the stores is mostly due to the drastic rise in online shopping.
Other department-store chains like J.C. Penny and Sears have also lost customers in recent times to e-commerce giants Amazon and eBay. Only the smart ones like Walmart survived by investing profusely in technology to deliver an enriching shopping experience for customers. However, e-commerce players can’t be solely blamed for the dismal performance by department chains. Unreasonable expansion of shopping malls, rising rent, collapse of leveraged buyouts and cash-strapped consumers have played a role in squeezing brick-and-mortar retailers’ revenues and profit margins.
Fed’s policies, by the way, have impacted brick-and-mortar retailers as well. Since 2008, the Fed helped retailers borrow a lot of money at almost zero interest rates and that resulted in an enormous retail bubble. No doubt, many private retail chains have gone bankrupt since 2012. And with weaker wage growth in the last couple of years, there are far more problems retailers have to face than just structural issues.
But those eager to invest heavily in brick-and-mortar retailers, shouldn’t lose hope. Take Macy’s for instance! The 161-year old retail chain is expected to open smaller stores in open-air shopping centers, which are seeing more footfall nowadays. Macy’s also expects to save almost $1.5 billion annually by 2022, much of which will be reinvested in upgrading technologies.
And talking about the bigger picture, American consumers continue to be confident about their well-being. Per the Conference Board, the consumer confidence index jumped to 131.6 in January from 128.2 in December. Consumer confidence touched the highest level in five months, indicating the economy’s regaining momentum. Americans’ assessment about the economy for the next six months is also promising. The expectations index edged up to 102.5 from 100.
Lynn Franco, director of economics at the Conference Board, added “optimism about the labor market should continue to support confidence in the short-term and, as a result, consumers will continue driving growth and prevent the economy from slowing in early 2020.”
Such a record consumer confidence number is a significant reading since it has been, historically, good at predicting future consumer spending for the next three to six months. More the confidence household generates, more will they spend and in the process benefit brick-and-mortars.
5 Brick-And-Mortar Retailers to Snap Up
We have, thus, selected five brick-and-mortar retailers that will make the most of the strength in consumer confidence. These stocks also boast a Zacks Rank #1 (Strong Buy) and 2 (Buy).
Rite Aid Corporation (RAD - Free Report) operates a chain of retail drugstores in the United States. The company operates through two segments, Retail Pharmacy and Pharmacy Services. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved more than 100% up over the past 60 days. The company, which is part of the Retail - Pharmacies and Drug Stores industry, is expected to record earnings growth of 70.6% next year.
Big Lots, Inc. (BIG - Free Report) , through its subsidiaries, operates as a retailer in the United States. The company offers products under various merchandising categories. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 0.2% north over the past 60 days. The company, which is part of the Retail - Discount Stores industry, is expected to witness earnings growth of 6.5% next quarter.
Costco Wholesale Corporation (COST - Free Report) , together with its subsidiaries, operates membership warehouses. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 0.6% over the past 60 days. The company, which is part of the Retail - Discount Stores industry, is expected to see earnings growth of 6.4% and 5.1% in the next quarter and current year, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ross Stores, Inc. (ROST - Free Report) operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brands. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has climbed 1.6% over the past 90 days. The company, which is part of the Retail - Discount Stores industry, is expected to record earnings growth of 9.7% and 7.3% in the next quarter and current year, respectively.
TravelCenters of America Inc. (TA - Free Report) operates travel centers. It has operated 258 travel centers and under the TravelCenters of America, TA, TA Express, Petro Stopping Centers, and Petro brand names. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has risen 1.7% over the past 60 days. The company, which is part of the Retail - Convenience Stores industry, is expected to see earnings growth of 17.8% and 24.1% in the next quarter and current year, respectively.
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