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US Retail Sales May Grow Despite Hurdles in 2020: 5 Picks

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Retailers in the United States expect upbeat sales this year, supported by strong consumer sentiment. In fact, retailers believe that headwinds from coronavirus and election year turmoil will be overshadowed by a fundamentally sound U.S. economy.

Retailers Optimistic on 2020 Sales

On Feb 26, the National Retail Federation (NRF) forecast retail sales to increase in the range of 3.5% to 4.1% to more than $3.9 trillion this year. In fact, e-commerce and non-store sales are expected to lead the way with expected growth between 12% and 15% to $870.6 billion to $893.9 billion. However, this forecast data excludes automobiles, gasoline stations and restaurants.

Additionally, the report also suggests that retailers can leverage on data and make use of transformative commerce to turn potential customers into repeat customers. Retailers can use data to personalize and create 1:1 dialogue, which will help in offering enhanced customer experience and draw them close to the brand.

What’s more? The report also reflects a solid labor market and low interest rates that drive growth and help consumers stay confident and eventually spend more.

NRF Forecasts Gain Despite Obstacles

With the trade conflict easing and Fed trimming rates three times last year, the economy grew at a steady pace. Additionally, confident American consumers have been spending money delightfully, fueled by steady wage growth and a strong job market.

However, fears of coronavirus pandemic and a politically charged election year may hinder growth in sales. But NRF president and chief executive Matthew Shay believes, “when it comes to the fundamentals, our economy is sound and consumers continue to lead the way.”

Why? It is not possible to gauge the impact of the outbreak on retailers and it is quite early to expect shortage of goods. However, some facts cannot be overlooked. For instance, at the beginning of the last week of February 2020, in a large toy trade show, some companies stressed that their factories in China are either still closed or are only 20 or 25% operational due to lack of workers and raw materials.

In fact, NRF officials believe that the spread of the novel coronavirus in China and other countries gives U.S. companies more time to prepare and calculate the potential impact of virus on their sales.

Meanwhile, on the brighter side, the U.S. economy is expected to boost retail sales. The economy is still on track to achieve record-long expansion, having expanded for 11 straight years. On Feb 27, the Commerce Department reported its second estimate of fourth-quarter gross domestic product (GDP). GDP increased at an annualized rate of 2.1%.

Despite the headwinds faced last year due to the trade tussle, American consumers have been driving growth. Shay in the NRF report said, “with gains in household income and wealth, lower interest rates and strong consumer confidence, we expect another healthy year ahead.”

And why not? The unemployment rate is currently quite low at 3.6% and is projected to drop to 3.5% by the end of the year. The economy has added 150,000 and 170,000 jobs per month in January and February, respectively.

5 Stocks to Buy

Given the positive forecast from the NRF and considering the health of the U.S. economy, we have selected five Zacks Rank #1 (Strong Buy) stocks that yield impressive returns on investment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our first choice is e-commerce platform giant, eBay Inc. EBAY. The Zacks Consensus Estimate for its current-year earnings has risen nearly 7% over the past 60 days. In fact, eBay’s expected earnings growth rate for the current quarter is 10.5% against the Zacks Internet - Commerce industry’s projected earnings decline of 31.8%.

Chico's FAS, Inc. CHS operates as an omnichannel specialty retailer for women's private branded clothing, intimates, and complementary accessories.

TheZacks Consensus Estimate for its current-year earnings has jumped 57.1% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 100% against the Zacks Retail - Apparel and Shoes industry’s projected earnings decline of 65.9%.

Nautilus, Inc. NLS is a consumer fitness products company, designs, develops, sources, and markets cardio and strength fitness products, and related accessories for consumer and commercial use.

The Zacks Consensus Estimate for its current-year earnings has risen 17.9% over the past 60 days. The company’s expected earnings growth rate for the current quarter is 34.5% against the Zacks Retail - Mail Order industry’s projected earnings decline of 4.4%.

Performance Food Group Company PFGC markets and distributes food and food-related products. The Zacks Consensus Estimate for its current-year earnings has jumped 10% over the past 60 days. The company’s expected earnings growth rate for the current year is 24.9% compared with the Zacks Food - Natural Foods Products industry’s projected earnings growth of 6.6%.

Lastly, we have one of the top specialty retailers of apparel, footwear, accessories and hardgoods for young men and women, Zumiez Inc. ZUMZ. The Zacks Consensus Estimate for its current-year earnings has been revised higher by 2.5% over the past 60 days. The company’s expected earnings growth rate for the current quarter is 15.3% against the Zacks Retail - Apparel and Shoes industry’s projected earnings decline of 13.4%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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