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Retail Sales Jump in June on Post Lockdown Recovery: 5 Winners

U.S. retail sales jumped more than expected in June, following the biggest month-on-month rise ever in May, as coronavirus-related restrictions eased, and businesses and stores started reopening. The jump was already expected and once again proves that the economy is on track to recovery.

Although online sales somewhat declined as brick-and-mortar stores reopened, it came in 23.5% higher from a year ago. Also, spending at restaurants and bars, albeit lower year over year, surged last month. This is once again an indication that people are willing to spend in a reopened economy.

Retail Sales Jump Month Over Month

U.S. retail sales rose 7.5% on a monthly basis in June to $524.3 billion. The surge comes on the heels of a record jump of 18.2% in May, the Commerce Department said on Jul 16. May’s jump was the biggest gain since the government started tracking the series in 1992. Retail sales were expected to jump in June given that stores and other businesses started reopening after remaining closed for almost 10 weeks due to the coronavirus-led lockdown.

Moreover, June’s retail sales were 1.1% higher than their levels from a year ago, after a brutal plunge in March and April. However, non-store sales — which include online shopping — slumped 2.4% over the past month but are 23.5% higher from a year ago. Understandably, more people visited physical stores, which impacted online sales that have otherwise been boosting retail sales for the past few months.

Spending at Restaurants, Cafes Increase

Spending at restaurants and bars jumped 20% last month. However, sales are still down 26.3% from last year. Sales at clothiers more than doubled between May and June, yet they've collapsed 23.2% from a year ago. Sales at building materials stores were up 17.3% year over year. Stores in the sporting goods, musical instruments, books and hobbies categories enjoyed year over year growth of 20.6%.

The Commerce Department also said that grocery spending increased 11.7% year over year. It is evident that despite job losses, people have been spending. Grocery has been a major driver of retail sales during the coronavirus pandemic, as people stockpiled on essentials. Also, U.S. consumer confidence and consumer spending improved in May, indicating that life is somewhat going back to normal.

Our Choices

The jump in retail sales in June once again signals a steady recovery. With more stores likely to open in the coming weeks, it is expected that people will continue to go shopping. However, e-commerce will still play a dominant role. Given this situation it might be prudent to invest in retail stocks that also have a strong online presence.

The Kroger Co. KR operates supermarkets, multi-department stores, marketplace stores and price impact warehouse stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.

The company’s expected earnings growth rate for the current year is 29.1%. The Zacks Consensus Estimate for current-year earnings has improved 15% over the past 60 days. Kroger sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG is one of the largest discount retailers in the United States.  It offers a wider selection of merchandise, including consumable items, seasonal items, home products and apparel.

The company’s expected earnings growth rate for the current year is 31.4%. The Zacks Consensus Estimate for current-year earnings has improved 18.2% over the past 60 days. Dollar Generalhas a Zacks Rank #1.

Big Lots, Inc. BIG offers products under various merchandising categories, which include food, consumables, furniture, seasonal, soft home, hard home, electronics and toys and accessories. 

The company’s expected earnings growth rate for the current year is 66.2%. The Zacks Consensus Estimate for current-year earnings has improved 112.5% over the past 60 days. Big Lots carries a Zacks Rank #1.

Papa John’s International, Inc. PZZA operates and franchises pizza delivery and carryout restaurants in the United States and other specific international markets. The company’s dine-in and delivery restaurants operate under the brand name Papa John’s.

The company’s expected earnings growth rate for the current year is 8.6%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. Papa John’s holds a Zacks Rank #1.

BG Foods, Inc. BGS along with its subsidiaries manufactures, sells and distributes high-quality, shelf-stable, frozen food and household products across the United States, Canada and Puerto Rico.

The company’s expected earnings growth rate for the current year is 34.2%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. BG Foods carries a Zacks Rank #2 (Buy).

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