Retail winners during the Holiday Season
Holiday season has already kicked off with Thanksgiving, Black
Friday and hot Cyber Monday deals. Taking a cue from 2012 holiday
season, retailers are leaving no stone unturned to woo consumers
this time as well. Early-hour store openings, huge discounts,
promotional activities and free shipping for online purchases are
on the cards for both brick-and-mortar as well as e-commerce
retailers. However, this might hurt margins and in turn the
On Market Front
The overall scenario doesn't seem too convincing as of now with the
Federal Reserve continuing with its $85 billion monthly stimulus
program to keep interest rates low and boost economic growth. The
Dow Jones Industrial Average lost 77.64 points (or 0.48%) yesterday
before closing at 16,008.77. The Standard & Poor's 500 Index
shed 4.91 points (or 0.27%) to finish the trading session at
1,800.90. The Nasdaq Composite Index fell 14.63 points (or 0.36%)
to end the day at 4,045.26.
The economic data has not yet reached the central bank's desired
level. Unemployment rate is currently hovering at around 7.3%,
which is still well above the Fed's target. Further, consumer
confidence appears to have taken a hit as a result of the political
impasse in Washington DC. The Conference Board's Consumer
Confidence Index fell drastically to 70.4 in Nov 2013, following a
sharp dip to 72.4 in October.
Retailers need to be 'hawk-eyed' this holiday season to make the
most of it. They need to grab every opportunity as and when they
come, and try all means to drive in cautious, budget-constrained
consumers to the shop as the season may be a tough one.
On Retail Front
Interestingly, the current situation as of now seems to be a mixed
one on the retail front. According to National Retail Federation
(NRF), the survey performed by Prosper Insights & Analytics
revealed that sales on the Thanksgiving weekend dropped 2.7% to
$57.4 billion from $59.1 billion in the year-ago period. However,
according to ShopperTrak, retail sales at bricks-and-mortar outlets
rose 2.3% to $12.3 billion on Thanksgiving and Black Friday. This
leading provider of shopper analytics also disclosed that retail
sales on Black Friday alone plunged 13.2%, while foot traffic
declined 11.4%. Analysts believe that Thanksgiving Day attracted
some sales from Black Friday due to the early offerings of best
On the contrary, online spending is making headway, helped by
tech-savvy consumers buying best online deals through their
smartphones, tablets and computers. The data compiled by NRF
suggested that average online spending increased 3% to $177.7 from
the corresponding period last year. As indicated by comScore, Black
Friday witnessed online retail spending of $1,198 million, up 15%;
whereas Thanksgiving Day saw a 21% jump in online spending to $766
As per comScore, online sales are projected to touch $2 billion
mark on "Cyber Monday". A surge in e-shopping will definitely
benefit online retailers as well as brick-and-mortar chains that
have well knitted their online and in-store operations.
Consumer spending is a primary component of the economy, and the
way consumers behave during the holiday season will give a rough
idea to investors about the health of the U.S. economy. The
political tussle and the 16-day partial U.S. government shutdown,
uneven economic recovery, and soft job opportunities are keeping
Amid such a scenario, NRF is anticipating consolidated sales for
November and December to grow approximately 3.9% to $602.1 billion.
Data compiled by ShopperTrak suggest that retail sales are
projected to increase 2.4% this holiday season. However, the
expected growth rate has tempered down from 3% registered in 2012,
4% in 2011 and 3.8% in 2010, hinting at a stiff competition.
Retail Still a Lucrative Investment Opportunity
Banking on its wide spectrum, the Retail/Wholesale sector still
remains a lucrative investment opportunity for investors. A
reflection of that is evident from the
SPDR S&P Retail
Market Vectors Retail ETF
(RTH) surging roughly 40.5% and 37.1% year-to-date, respectively,
outperforming the S&P 500 that has gained 23.1% so far this
Thus, identifying the future winners from the sector would be a
prudent idea to make an investment decision.
The Future Winners among the Crowd
Picking the best stocks from the Retail/Wholesale space for one's
portfolio is a fairly simple task. One way to narrow down the list
of choices during this earnings season is by looking at stocks that
have the combination of a favorable Zacks Rank - Zacks Rank #1
(Strong Buy), #2 (Buy) or #3 (Hold) - and a positive Zacks
Earnings ESP is our proprietary methodology for identifying stocks
that have the best chance to surprise with their next earnings
For investors seeking to apply this strategy to their portfolio, we
have highlighted 3 Retail/Wholesale stocks that may stand out this
Five Below, Inc.
) is a Zacks Rank #2 stock having an Earnings ESP of +25.00%. The
current Zacks Consensus Estimate for third-quarter fiscal 2013 is 4
cents a share, portraying a 44.4% surge from the prior-year period.
This Philadelphia, Pennsylvania based specialty value retailer had
registered an average positive earnings surprise of 62.5% over the
trailing four quarters, and has a long-term earnings expectation of
33.7%. The company is scheduled to report on Dec 5, 2013.
The Kroger Co.
) is a Zacks Rank #3 stock with an Earnings ESP of +1.89%. The
current Zacks Consensus Estimate for third-quarter fiscal 2013 is
pegged at 53 cents a share, reflecting an increase of 15.2% year
over year. This Cincinnati, Ohio based retail food and
multi-department store operator had registered an average positive
earnings surprise of 9.7% over the trailing four quarters, and has
a long-term earnings expectation of 7.3%. The company is slated to
report results on Dec 5, 2013.
American Eagle Outfitters, Inc.
) is a Zacks Rank #3 stock and has an Earnings ESP of +5.56%. The
current Zacks Consensus Estimate for third-quarter fiscal 2013 is
18 cents a share. This Pittsburgh, Pennsylvania based apparel and
accessories retailer had registered an average positive earnings
surprise of 5.5% over the trailing four quarters, and has a
long-term earnings expectation of 9.4%. The company will report on
Dec 6, 2013.
We believe that the above stocks that boast strong fundamentals and
growth prospects are capable of quenching investors' search for the
market winners. As the U.S. stocks look for a survival strategy, a
sneak peek into the space for some possible outperformers backed by
a favorable Zacks Rank and a positive Zacks Earnings ESP could be
handy for investors.
AMER EAGLE OUTF (AEO): Free Stock Analysis
FIVE BELOW INC (FIVE): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
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