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U.S. Retail Sales Tick Up for 4 Straight Months: 5 Top Picks

Americans continued with their spending spree in November, amid lingering supply chain challenges and rising prices. Impressively, U.S. retail sales grew for the fourth successive month, albeit at a lower rate from the month before. The Commerce Department stated that U.S. retail and food services sales in November rose 0.3% sequentially to $639.8 billion, following a revised reading of a 1.8% jump in October.

NRF President and CEO Matthew Shay said, “We expect demand will remain strong through December, even though consumers started holiday shopping earlier than ever this year. Despite the rise of the omicron variant, increased vaccination rates combined with retailers’ ongoing safety protocols and procedures have resulted in consumers who feel they can continue to shop safely and conveniently.”

On a broader note, pent-up savings from stimulus payments and rising wages have been acting as tailwinds for the uptick in retail sales. Markedly, U.S. retail sales climbed 18.2% from November last year.

Category-Wise Sales

The Commerce Department’s report suggests that sales at building material & supplies dealers rose 0.7%, the same at clothing & clothing accessories outlets jumped 0.5% on a sequential basis. While sales at food & beverage stores climbed 1.3%, sales at food services & drinking places grew 1%. Again, at sporting goods, hobby, musical instrument, & book stores, the metric advanced 1.3%. Meanwhile, receipts at gasoline stations were up 1.7%.

However, sales at health & personal care stores declined 0.6%, while the same at electronics & appliance stores fell 4.6%. Sales at motor vehicle & parts dealers and general merchandise stores decreased 0.1% and 1.2%, respectively. Sales at miscellaneous store retailers dipped 0.3%.

We note that sales at furniture & home furnishings stores as well as non-store retailers were unchanged on a month-on-month basis.

Will the Momentum Last?

Undoubtedly, the industry is currently dealing with supply chain bottlenecks, rising freight charges and labor shortages. Inability to meet the demand, failure to restock inventory at fair prices or delay in getting the products delivered to consumers’ doorsteps could compound retailers’ woes.

Nonetheless, retailers are finding innovative ways to navigate through these challenges. They are increasing product visibility on online platforms, enhancing customer engagement on social channels and making logistics improvements. Companies are deploying a reasonable number of associates to deal with the curbside and in-store pickup of online purchases as well as doorstep delivery. The industry players are even rapidly embracing the “buy now, pay later” model to entice shoppers amid higher retail prices.

That said, we have highlighted five stocks from the Retail - Wholesale sector that look well-positioned based on their sound fundamentals and earnings growth prospects. These stocks have either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance Past One Year

Zacks Investment ResearchImage Source: Zacks Investment Research

5 Prominent Picks

You may invest in Capri Holdings Limited CPRI. The company has been reinforcing its position in the luxury fashion space, and looks to maximize the potentials of Versace, Jimmy Choo and Michael Kors brands through expanded products and categories.

Capri Holdings’ bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. This Zacks Rank #1 company has an estimated long-term earnings growth rate of 32.2%. The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 33.2% and 181.1%, respectively, from the year-ago period.

We suggest betting on Genesco Inc. GCO. This Nashville-based specialty retailer of footwear and accessories is poised to benefit from digital and omnichannel potential, robust full-priced selling, merchandise offerings and cost management. Strong vendor relationships and close consumer connections also bode well. The company recently entered into a new three-year licensing agreement with heritage running brand ETONIC.    

Genesco’s bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. The Zacks Consensus Estimate for current financial year sales and EPS suggests growth of 34.9% and 669.5%, respectively, from the year-ago period. Genesco sports a Zacks Rank #1.

The Children's Place, Inc. PLCE, a pure-play children’s specialty apparel retailer, is worth betting on. The company has been constantly deploying resources to expand product offerings, upgrade distribution channels, create seamless omni-channel capabilities and deepen engagement with customers. Structural changes made in business last year and incremental digital investments made pre-pandemic have been contributing to its performance.

The Children's Place’s bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. This Zacks Rank #2 company has an estimated long-term earnings growth rate of 8%. The Zacks Consensus Estimate for The Children's Place’s current financial year sales and EPS suggests growth of 27.4% and 464.9%, respectively, from the year-ago period.

Target Corporation TGT has been making investments to enhance omni-channel capabilities, develop new brands, refurbish stores and expand same-day delivery options to provide a seamless shopping experience to customers. Markedly, this general merchandise retailer has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape.

Impressively, Target has a trailing four-quarter earnings surprise of 19.7%, on average. This Zacks Rank #2 company has an estimated long-term earnings growth rate of 14.4%. The Zacks Consensus Estimate for Target’s current financial year sales and EPS suggests growth of 13.9% and 40%, respectively, from the year-ago period.

Costco Wholesale Corporation’s COST growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its performance. Cumulatively, these factors have been aiding this operator of membership warehouses in registering an impressive comparable sales run. Costco has been rapidly adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in stores.

Costco has a trailing four-quarter earnings surprise of 8.3%, on average. This Zacks Rank #2 company has an estimated long-term earnings growth rate of 8.8%. The Zacks Consensus Estimate for Costco’s current financial year sales and EPS suggests growth of 10.7% and 13.2%, respectively, from the year-ago period.


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Target Corporation (TGT): 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.

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