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3 Industries Riding on Holiday Cheer

Better late than never.

The National Retail Federation, which usually offers its holiday forecast at the beginning of the fourth quarter, has now announced that it expects the 2020 holiday season to be very strong after all.

So this year, holiday sales (in November and December) will grow 3.6% to 5.2% compared to the 3.5% average in the last five years and 4% last year. What’s more, social distancing and preference for digital channels will lead to a 20-30% increase in non-store sales (including ecommerce, curbside pickup, etc.).

The strength in demand is totally welcome if not totally unexpected considering that the uncertainties thrown up by the pandemic and the elections are rapidly giving way to renewed hope from the positive vaccine news, improving economy, strong stock markets, rising home values and record personal savings.

With most travel plans having been shelved, there’s even more pent-up desire to spend money for the holidays. The bottom line: consumers have money to spend and they’re eager to do it.

Of course, there’s both the demand and the supply side to understand. On the one hand, we have consumers wanting to spend and on the other, we have retail distribution lines under tremendous pressure because so many people are doing so much of their shopping online.

Retailers have been up to the challenge thus far, starting their typical holiday discounting well in advance, so holiday sales could be spread out over a larger number of days. And consumers have lived up to this expectation. The NRF says that 42% of consumers started early this year, with 59% having begun by early November (about half of the shopping generally starts in early November).

The strength in retail is underscored by the fact that retail sales in aggregate have grown both month-over-month and year-over-year each month since June. But retail isn’t the only sector that’s benefiting from the holiday cheer. Here are three industries from three different sectors that are looking particularly good right now-

First on the list is the Retail - Home Furnishings industry, which is in the top 3% of 250+ Zacks-ranked industries. After returning 44.5% year to date, the industry continues to hold promise for the rest of the year. Of the five companies that have reported thus far, four have topped analyst estimates, while one missed.

At 1.06X forward sales, the industry trades between its median and high values over the past year. The S&P 500 is trading closer to its median value, although at 4.06X sales, it can be considered a richer valuation.

As far as stock picks are concerned, there’s a whole bunch to choose from. Haverty Furniture Companies, Inc. HVT and WilliamsSonoma, Inc. WSM are Zacks #1 (Strong Buy) ranked from among them as they’ve recently had their estimates raised. Other #2 (Buy) ranked stocks that are also worth buying would be Ethan Allen Interiors Inc. ETH, RH RH and Tempur Sealy International, Inc. TPX.

Second, you may want to look at the Leisure and Recreation Products industry, which is in the top 13% of Zacks-ranked industries. The industry has returned 90.5% year to date. 11 of the 13 companies that have reported so far have topped estimates, with one meeting and the other missing.

At 3.60X forward sales, the industry is trading closer to its high value of 3.76X than its median value of 2.94X over the past year. The S&P 500 is trading closer to its median value.

There are a large number of stocks worth buying here, but I’m pulling out a few like Acushnet Holdings Corp. GOLF, Vista Outdoor Inc. VSTO, both of which have a Zacks #1Rank. #2-ranked Escalade Inc. ESCA as well as boating companies Brunswick Corp. BC and Mastercraft Boat Holdings, Inc. MCFT also look good.

Third on my list is the Textile – Apparel industry, which is in the top 18% of Zacks-ranked industries. It has returned just 2.9% this year, but looks set for a turnaround, helped by the holiday season. Nine of the companies in this industry have reported thus far, out of which eight have topped estimates while one missed.

At 2.73X forward sales, the industry is trading closer to its high value of 2.81X than its median value of 2.38X over the past year. The S&P 500 is trading closer to its median value although its multiple of 4.06X sales makes the industry look cheap.

#1 ranked Crocs, Inc. CROX and Delta Apparel, Inc. DLA and #2 ranked Duluth Holdings Inc. DLTH are part of a large group of stocks that are worth buying today.

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RH (RH): Free Stock Analysis Report
 
Ethan Allen Interiors Inc. (ETH): Free Stock Analysis Report
 
WilliamsSonoma, Inc. (WSM): Free Stock Analysis Report
 
Crocs, Inc. (CROX): Free Stock Analysis Report
 
Tempur Sealy International, Inc. (TPX): Free Stock Analysis Report
 
Acushnet Holdings Corp. (GOLF): Free Stock Analysis Report
 
Brunswick Corporation (BC): Free Stock Analysis Report
 
Vista Outdoor Inc. (VSTO): Free Stock Analysis Report
 
Escalade, Incorporated (ESCA): Free Stock Analysis Report
 
Haverty Furniture Companies, Inc. (HVT): Free Stock Analysis Report
 
MASTERCRAFT BOAT HOLDINGS, INC. (MCFT): Free Stock Analysis Report
 
Duluth Holdings Inc. (DLTH): Free Stock Analysis Report
 
Delta Apparel, Inc. (DLA): Free Stock Analysis Report
 
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