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5 Retail Stocks to Buy Ahead of Black Friday

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The countdown for Black Friday has begun, and retailers have well placed their arsenal to fire on all cylinders -- both brick-and-mortar stores as well as online. The day following Thanksgiving Day is the busiest shopping day of the entire year and so retailers are leaving no stone unturned to make the most it.

Over the last decade, Black Friday retailers have been racing to open earlier and earlier. This year, as in recent years past, many big box stores will kick off Black Friday sales on Thanksgiving Day.

Retailers have some very good reasons to cheer. A rebounding economy, falling unemployment rate and increasing consumer sentiment all point to solid sales this year. The Thomson Reuters/University of Michigan preliminary October consumer sentiment reading came in at 93.1, up from the previous month's figure of 90. The preliminary reading was also higher than the consensus estimate of 91.2.

On the other hand, data compiled by eMarketer suggests a 5.7% jump in holiday sales (November and December) to $885.7 billion against 3.2% growth projected earlier. Retail e-commerce holiday season sales are anticipated to increase 13.9%, and represent approximately 9% of total sales this season (or $79.4 billion), up from 8.3% last year.

Data compiled by the nation's largest retail trade group, National Retail Federation (NRF), projects a 3.7% sales jump for the period to $630.5 billion (excluding autos, gas and restaurant sales), shy of 4.1% growth registered last year but better than the 10-year average sales increase of 2.5%. Online sales for the season are expected to increase 6-8% to approximately $105 billion.

There is no doubt that competition among retailers during the holiday season is going to be intense, and aggressive pricing may hurt margins to some extent. However, at the end of the day consumers will be the real gainers. Here, we present five retail stocks that could enrich your Black Friday shopping list.

5 Prominent Picks

We suggest investing in online retail giant, Amazon.com, Inc.AMZN which holds a Zacks Rank #2 (Buy). The company, which has a long-term earnings growth rate of 35.6%, has skyrocketed over 115% year to date. The Seattle-based company has delivered positive earnings surprises in all of the past four quarters, with an average earnings surprise of 148%.

The Kroger Co.KR , one of the nation's largest grocery retailers, is another stock to bet on. Carrying a Zacks Rank #2 (Buy) and with a long-term earnings growth rate of 9.9%, so far this year the company has gained more than 16%. Based in Cincinnati, Kroger delivered an average positive earnings surprise of 9.6% over the trailing four quarters.

You may bet on eBay Inc.EBAY , as well. The stock carries a Zacks Rank #2 and has long-term earnings growth rate of 7.1%. The company has amassed a year-to-date return of 23%. The San Jose, CA-based company delivered an average positive earnings beat of 8.9% over the trailing four quarters.

American Eagle Outfitters, Inc.AEO has a Zacks Rank #2 (Buy). The company's long-term earnings growth rate stands at 10% and it has posted an average positive earnings surprise of 15.9% over the trailing four quarters. The company's shares have rallied nearly 13.5% so far in 2015.

Another stock that investors may look forward to is Ross Stores Inc.ROST , with a Zacks Rank #2 (Buy). The company, which operates off-price retail apparel as well as home fashion stores has long-term earnings growth rate of 11.3% and has gained more than 14% in the past one year. This Dublin, CA-based company has surpassed the Zacks Consensus Estimate in all of the trailing four quarters, with an average earnings surprise of 5.6%.

Summing Up

We believe that the above stocks boast of strong fundamentals and growth prospects that can satisfy investor appetite for equity market winners. So, it's better to grab these retail stocks now before they start touching new highs in the near future.

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KROGER CO (KR): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

EBAY INC (EBAY): Free Stock Analysis Report

AMER EAGLE OUTF (AEO): Free Stock Analysis Report

ROSS STORES (ROST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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