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5 Online Retail Stocks to Buy as Sales Pick Up in April

Zacks

After a dismal start to the year, retail sales rose considerably in April. The retail figures were close to estimates and indicated little more than steady demand at the beginning of the second quarter.

While sales rose in nine out of the 13 major categories, consumers continue to shift to online platforms for shopping. And with steady job additions, persistently low unemployment and gradual wage acceleration, the background looks promising for consumers. This calls for investing in the retail space, with major focus on Internet players.

April Retail Sales Gain Pace

Sales at U.S. retailers increased 0.4% in April and were 4.5% higher compared to year-ago levels. It was the strongest sales gain in three months. March sales were also stronger than originally reported. A monthly decline of 0.2% in March was revised higher to show a 0.1% uptick.


Purchases at auto dealers and service stations increased 0.7% in April, while industry data had already showed that sales of cars and light trucks rose to a 16.8 million pace last month after March’s 16.5 million rate, the slowest in more than two years. Sales, particularly, in gas stations were 12.3% higher in April than a year ago as the price of oil strengthened.

But monthly spending patterns were mixed. While sales at building materials and garden equipment and supplies outfits rose 1.2%, sales at furniture and home furnishings stores fell 0.5%. Similarly, sales at food and beverage store sales were down 0.3%, while health and personal care store sales increased 0.8%. Sporting goods, hobby, book and music shops also enjoyed a gain of 0.6%.

Consumers Shift Online

Brick and Mortar retailers including Sears Holdings Corp SHLD, Macy’s Inc M and J C Penney Company Inc JCP seem to be losing out to steady gains in e-commerce. Non-store retailers, which include online shopping outlets, saw sales growth of 1.4% in April to lead all retail segments. The segment jumped almost 12% this year and has been one of the retail sectors’ most consistent performers.

Online retail sales, actually, have been 10.7% higher in the first four months of this year compared with the same period last year. On the other hand, department stores were 5.2% lower. In fact, the online retail market in the U.S. is expected to grow at a CAGR of close to 16% during the period 2017–2021, according to Technavio market research analysts.

Online sales during festive seasons have increased in recent years, while online payment options, facilities to track shipments, 24/7 customer support and low costs are contributing to growth of the market. Online home furnishings shop Wayfair W posted first-quarter results that beat estimates last week, driving the stock over 70% higher for this year.

Consumption Growth in Q2

For the first three months of the year, domestic consumer spending was almost negligible. Consumption spending expanded only 0.3% in the first quarter of the year. But, improvement in retail sales in April painted a stronger picture of the American consumer than earlier projected.

Also, the backdrop is favorable for consumers, thanks to unemployment rate slipping to a 10-year low of 4.4%, gradual improvement in wage growth, low borrowing costs and high household wealth. Delayed tax refunds this year is also helping American save, providing scope for purchasing discretionary items and in turn boosting retail sales.

Add Online Retail Businesses to Your Cart: 5 Choices

Retail sales picked up last month after a soft start to 2017, with Americans stepping up their spending at e-commerce outlets. Hence, investing in such stocks seems to be prudent. We have, thus, selected five stocks from the aforesaid segments that boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Autobytel Inc. ABTL operates as an automotive marketing services company in the U.S. It assists automotive retail dealers and the automotive manufacturers market which deals in new and used vehicles through the programs for online lead referrals, dealer marketing products and services, and online advertising programs and mobile products.

Autobytel has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings rose 7.8% over the last 30 days. The company has given a solid return of 5.5% in the last one-month period.

Mercadolibre Inc MELI is an e-commerce company in Latin America. It also operates online commerce platforms in the U.S. It offers MercadoLibre Marketplace, an automated online commerce service for businesses and individuals to list items and conduct their sales and purchases online in a fixed-price or auction-based format.

Mercadolibre has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings increased 7.7% over the last 30 days. The company has returned 30.2% in the last one month.

Petmed Express Inc PETS is America’s largest pet pharmacy, delivering prescription and non-prescription pet medications and health and nutritional supplements for dogs and cats at competitive prices direct to the consumer through its 1-800-PetMeds toll free number and on the Internet. The company exhibited a better-than-expected fourth quarter and exited the fiscal 2017 on a strong note. The reorder sales and new order sales increased significantly in the quarter.

Petmed sports a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings jumped 11.8% over the last 30 days. The company has given a whopping return of 55.8% in the last one month. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stamps.com Inc. STMP is a provider of Internet-based mailing and shipping solutions in the U.S.

The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current year earnings climbed 10.6% over the last 30 days. The company has given a sturdy return of 9.2% in the last one month.

JD.Com Inc JD is China’s second-largest e-commerce company. The company has expanded its operations in the U.S. It has a development facility in Santa Clara, CA — right in the centre of Silicon Valley.

JD.Com has a Zacks Rank #2. The Zacks Consensus Estimate for its current year earnings gained more than 100% over the last 30 days. The company has yielded an amazing return of 24% in the last one month.

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