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4 Retail Stocks Looking Promising Ahead of Festive Season

Zacks

Sound economic fundamentals, gradual wage acceleration, steady job growth and improving consumer sentiment are working in tandem for Zacks Retail & Wholesale Sector, which usually takes the center stage during the holiday season. It also appears that, consumer spending — one of the prime factors shaping the economy — will remain strong. Indeed, this time around, retailers are especially upbeat.

Retailers are deploying resources to enhance omni-channel capacities, introducing brands, remodeling or refurbishing stores and expanding same-day delivery options to expedite the shopping process during the busiest part of the year. Additionally, retailers are rationalizing supply chain, improving store-related technology and augmenting ship-from-store capabilities.

Meanwhile, retail giants have announced hiring plans to cope with a busy holiday season. According to National Retail Federation (“NRF”), retailers are likely to appoint 585,000-650,000 temporary employees this festive season, up from 582,500 in the last year.

Going by the NRF’s recent sales projection, the retailers are all set to revel again in the euphoria of the upcoming holiday season. Data compiled by the nation's largest retail trade group calls for a 4.3-4.8% rise in November and December sales (excluding autos, gas and restaurant) to $717.45-$720.89 billion, up from $687.87 billion last year and better than the five-year average sales growth of 3.9%.

Deloitte’s recent holiday sales projection of a 5-5.6% increase also hints at happy times ahead for retailers. Holiday sales, excluding motor vehicles and gasoline, are likely to be more than $1.10 trillion between November 2018 and January 2019. Meanwhile, e-commerce sales are estimated to improve 17-22% to reach $128-$134 billion.



From the above discussion it is quite apparent that the retail sector holds the baton, and adding a few stocks from the space that are likely to ride high on these bullish sentiments would be a prudent decision.

4 Prominent Picks

We have identified four Retail-Wholesale Stocks based on a favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy), and VGM Score of A or B.

Investors can count on BJ's Restaurants, Inc. BJRI, whose shares have increased roughly 87% so far in the year. This operator of casual dining restaurants has delivered an average positive earnings surprise of 6.4% in the trailing four quarters. This Zacks Rank #1 company has a long-term earnings growth rate of 15.3% and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another stock worth considering is DSW Inc. DSW, which has a long-term earnings growth rate of 9% and a VGM Score of A. This branded footwear and accessories retailer delivered an average positive earnings surprise of 17% in the trailing four quarters. The stock, which flaunts a Zacks Rank #1, has surged roughly 51% year to date.

Target Corporation TGT, which operates as a general merchandise retailer, is also a solid bet with a Zacks Rank #2. The company has a long-term earnings growth rate of 6.7% and a VGM Score of A. It has recorded an average positive earnings surprise of 1.3% in the trailing four quarters. Moreover, the stock has surged about 31% year to date.

We also suggest investing in Kohl's Corporation KSS which has a long-term earnings growth rate of 6.7% and a VGM Score of A. This omni-channel retailer of apparel, footwear, accessories, beauty, and home products has delivered an average positive earnings surprise of 10% in the trailing four quarters. Moreover, this Zacks Rank #2 stock has soared approximately 33% so far in the year.

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