Retail Sales Exceed Expectations in March: 5 Top Picks

U.S. retail sales were better than expected in March after returning to a growth trajectory in February. On Apr 15, the Department of Commerce reported that retail sales grew 0.7% month over month in March, well above the consensus estimate of 0.3%. Moreover, February’s data was revised upward to an increase of 0.9% from 0.6% reported earlier.

Year over year, retail sales increased 3.6% in March primarily owing to a resilient labor market and a higher-than-expected rise in wage rates. Notably, the metric for both January and December was negative.

Core retail sales (excluding auto) grew 1.1% month over month in March, well above the consensus estimate of 0.5%. Moreover, February’s data was revised upward to an increase of 0.6% from 0.3% reported earlier. In March, online retail sales climbed 2.7% and 11.3%, respectively, sequentially and year over year.

Another measure of retail sales (excluding automobiles, gasoline, building materials and food services) also increased 1.1% month over month in March. This so-called core retail sales measure corresponds most closely with the consumer spending component of gross domestic product. The Zacks-defined Retail and Wholesale sector has rallied 30.7% in the past year and 7.9% year to date.

Our Top Picks

We have narrowed our search to five retailers with strong potential in 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past three months.

Zacks Investment Research
Image Source: Zacks Investment Research

Burlington Stores Inc. BURL is dynamically transitioning toward an off-price model under its Burlington 2.0 initiative, focusing on key areas like marketing, merchandising and store layout to enhance customer value and operational efficiency.

The strategy has garnered investor confidence, as reflected in BURL’s stock performance and positive fiscal 2024 outlook, with expected sales growth of 9-11%. BURL aims to reach $16 billion in sales by 2028, supported by strategic expansions.

Zacks Rank #1 Burlington Stores has an expected revenue and earnings growth rate of 10.2% and 22.3%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days.

Groupon Inc. GRPN is benefiting from growing momentum across local and travel categories, particularly in the North America region. Increasing gift orders on the back of its v1.0 offering and growing focus on enhancing GRPN’s sorting and ranking algorithms to generate giftable deal feeds, is a positive.

Solid demand across GRPN’s enterprise customers is a plus. Groupon’s growing efforts to improve deal recommendation and quality assurance on the back of AI are contributing well to its top-line growth. GRPN’s cost reduction initiatives, such as the cloud cost optimization and ERP simplification projects, are acting as a tailwind.

Zacks Rank #1 Groupon has an expected revenue and earnings growth rate of 2.7% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for next-year earnings has improved more than 100% over the last 30 days.

eBay Inc. EBAY is benefiting from the solid momentum among advertising offerings. EBAY’s strong traction across its Promoted Listings remains a positive. This is driving EBAY’s momentum among first-party advertising products.

We note that strength in advertising business and managed payments offerings is one of EBAY’s key growth drivers. Additionally, growth initiatives based on enhancing seller experience through innovative seller tools and structured data, are major positives.

Zacks Rank #2 eBay has an expected revenue and earnings growth rate of 1.3% and 9.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days.

Target Corp. TGT is poised to capture market share over time, driven by its compelling value proposition and a spectrum of initiatives. These encompass TGT’s expansion of new stores, innovations in owned brands, partnerships with popular brands, and the enhancement of same-day services to drive traffic.

TGT is likely to register margin expansion thanks to clean inventory as well as lower supply chain and freight costs. We anticipate a gross margin expansion of 170 basis points and 260 basis points in the final quarter and fiscal year 2023, respectively.

Zacks Rank #2 Target has an expected revenue and earnings growth rate of 1% and 5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days.

1stdibs.Com Inc. DIBS operates an online marketplace for vintage, antique, and contemporary furniture, home décor, jewelry, watches, art, and fashion products worldwide. DIBS offers an online marketplace that enables commerce between sellers and buyers.

Zacks Rank #2 1stdibs.Com has an expected revenue and earnings growth rate of 3.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 17% over the last 60 days.

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Target Corporation (TGT) : Free Stock Analysis Report

eBay Inc. (EBAY) : Free Stock Analysis Report

Groupon, Inc. (GRPN) : Free Stock Analysis Report

Burlington Stores, Inc. (BURL) : Free Stock Analysis Report

1stdibs.com, Inc. (DIBS) : Free Stock Analysis Report

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Zacks Investment Research

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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