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June's Sales Spike Makes These 5 Retail Stocks Unmissable

U.S. retail sales rose for the second straight month in June as Americans continued to flock to restaurants and bars, buy apparels, spend on gasoline, and purchase sports equipment, furniture, and electronics and appliances. Resumption of business activities post the coronavirus lockdown as well as measures undertaken to support households such a stimulus checks and enhanced unemployment benefits triggered demand.

Clearly, consumer spending activity has ticked up, resulting in decent sales numbers in the last two months. The Commerce Department stated that U.S. retail and food services sales in June climbed 7.5% to $524.3 billion, following an upwardly revised gain of 18.2% in the month of May. The numbers showcased a sharp rebound from a steep fall witnessed in April and March, when strict lockdown measures were imposed to contain the spread of coronavirus and people largely stayed at home.



According to the report, 10 of 13 major categories showed sequential growth. Notably, U.S. retail sales improved 1.1% from June last year. Although sales at Internet retailers declined 2.4% during the month under review, the metric rose roughly 23.5% on a year-over-year basis as more and more people opted for e-retailing over physical retailing amid the pandemic.

Surge in retail sales added to the optimism stemming from the addition of 4.8-million jobs last month. The massive financial assistance — from business loans to stimulus checks for individuals — has acted as a tailwind and bolstered consumer sentiment that reached a three-month high in June. Per Conference Board data, the index rose to 98.1 last month from a revised reading of 85.9 in May.

However, market pundits cautioned that the path to recovery looks distant and bumpy, given millions of job losses since February, high unemployment rate of 11.1% and resurgence of coronavirus cases. Incidentally, new COVID-19 cases are compelling many states to reverse or slow reopening plans, jeopardizing the already-shattered job market further. Moreover, analysts believe that once the additional $600 a week unemployment benefit ends on Jul 31, consumer spending activity may drop. Cumulatively, these may impact demand and in turn sales.

Economists forecast a significant fall in U.S. GDP for the April-June quarter. Undoubtedly, policy makers have been frantically working toward urgent repairs. Experts believe that another new stimulus package and the discovery of a COVID-19 vaccine are paramount to shore up the economy.

Nonetheless, we have shortlisted five stocks from the Retail – Wholesale sector on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.

5 Prominent Picks

We suggest wagering a bet on SpartanNash Company SPTN, which distributes and retails grocery products. The stock has a Zacks Rank #1 and a VGM Score of A. The company has a trailing four-quarter earnings surprise of 17.1%, on average. Moreover, the Zacks Consensus Estimate for its current financial-year earnings indicates growth of 82.7% from the year-ago period. We note that the stock has surged 49.3% so far in the year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG, a discount retailer, is worth betting with a Zacks Rank #1 and a VGM Score of A. The company has a trailing four-quarter earnings surprise of 16.9%, on average. It has a long-term earnings growth rate of 12.3%. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 31.4% from the year-ago period. The stock has rallied 21.1% so far in the year.

You may also invest in Sportsman's Warehouse Holdings, Inc. SPWH, which carries a Zacks Rank #2 and a VGM Score of A. This outdoor sporting goods retailer has a trailing four-quarter earnings surprise of 32.5%, on average. Moreover, the Zacks Consensus Estimate for its current financial-year earnings suggests an improvement of 72.3% from the year-ago period.  The stock has displayed a bullish run on the bourses so far this year, gaining 98.1%.

We also suggest investing in Tractor Supply Company TSCO, which has a long-term earnings growth rate of 12.3%. This operator of rural lifestyle retail stores reported an earnings surprise of 1.4% in the last reported quarter. The stock has a Zacks Rank #2 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial-year earnings suggests an improvement of 19.4% from the year-ago period. The stock has advanced 52.1% so far in the year.

Investors can count on Domino's Pizza, Inc. DPZ, with a long-term earnings growth rate of 12.8%. This pizza company has a trailing four-quarter earnings surprise of 18.6%, on average. The stock has a Zacks Rank #2 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial-year earnings calls for growth of 18.5% from the year-ago period. Notably, the stock has surged 38.7% year to date.

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