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4 Retail Stocks That May Be Good Buys Ahead of Holiday Season

With 2022 approaching its tail end, all eyes are glued on the most crucial part of the year for retailers — the holiday season. Players in the industry need to walk a tightrope this festive season to woo budget-conscious shoppers. Truly speaking, rising prices of groceries and other essentials are compelling consumers to hold back on discretionary spending, and industry participants might turn to promotions and discounts to attract bargain hunters.

Retailers are keeping their fingers crossed and pinning hopes on stimulus savings from last year, steady wage gains and a lower unemployment rate that should help keep demand alive. Per Mastercard SpendingPulse, U.S. retail sales, excluding automotive, are anticipated to increase 7.1% from a year earlier during the traditional holiday period that runs from Nov 1-Dec 24. While in-store retail sales are projected to increase 7.9%, e-commerce is expected to rise 4.2%.

According to Mastercard SpendingPulse, “With holiday shopping slated to begin early again this year, some of the season’s retail growth is expected to be pulled forward in October as consumers hunt for early deals. Key promotional days like Black Friday weekend are also expected to make a strong return along with Christmas Eve, which falls on a Saturday, slated to be among the biggest days for retailers and last-minute shoppers.”

No wonder, the season, which accounts for a sizable chunk of yearly revenues, is a make or break for retailers. Evidently, retailers need to channelize their strength and make strategic investments to provide consumers fast, convenient and safe shopping experience, be it offline or online. Ulta Beauty, Inc. ULTA, Arhaus, Inc. ARHS, Designer Brands Inc. DBI and Boot Barn Holdings, Inc. BOOT look well poised to tap favorable consumer demand.

Keeping in mind consumers’ product preferences, retailers are replenishing shelves with in-demand merchandise. They are increasing product visibility on online platforms, enhancing customer engagement on social channels, making logistics improvements and offering flexible payment options. That said, we have highlighted four stocks from the Retail - Wholesale sector that look well positioned based on their sound fundamentals.

Past Year Price Performance


Image Source: Zacks Investment Research

4 Prominent Picks

Ulta Beauty is worth betting on. The company has been strengthening its omni-channel business and exploring the potential of both physical and digital facets. It has been implementing various tools to enhance guests' experience, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Ulta Beauty focuses on offering customers a curated and exclusive range of beauty products through innovation.

This beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products and salon services has a trailing four-quarter earnings surprise of 32.8%, on average. We note that this Zacks Rank #1 (Strong Buy) company has an estimated long-term earnings growth rate of 13.9%. The Zacks Consensus Estimate for Ulta Beauty’s current financial year sales suggests growth of 13.7% from the year-ago period. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arhaus is another potential pick. Strong consumer demand, new collections, brand awareness and ramp-up of new showrooms have been driving Arhaus’ top-line performance. The company plans to have 165 total traditional showrooms over the period from the current count of 80 showrooms, with plans to add five to seven new traditional showrooms per year. Arhaus estimates fiscal 2022 net revenues in the band of $1,173 million to $1,193 million and foresees comparable growth in the bracket of 43% to 48%.

This lifestyle brand and premium retailer has a trailing four-quarter earnings surprise of 92%, on average, and an estimated long-term earnings growth rate of 14.3%. The Zacks Consensus Estimate for Arhaus’ current financial year sales and EPS suggests growth of 49.2% and 5.8%, respectively, from the year-ago period. The stock carries a Zacks Rank #2 (Buy).

Investors can count on Designer Brands. The company’s flexible business model, best-in-class omnichannel capabilities and Owned Brands portfolio have been the key drivers of growth. The company’s efforts to expand sourcing and supply chain capabilities have been leading to speed to market with new designs and faster delivery times.

This designer, producer and retailer of footwear and accessories has a trailing four-quarter earnings surprise of 55.1%, on average. The Zacks Consensus Estimate for Designer Brands’ current financial year sales and EPS suggests growth of 6.9% and 23.5%, respectively, from the year-ago period. The stock carries a Zacks Rank #2.

You may invest in Boot Barn Holdings, a lifestyle retailer of western and work-related footwear, apparel and accessories. The company has been successfully navigating through the challenging environment, courtesy of merchandising strategies, omni-channel capabilities and better expense management as well as marketing. This, combined with the expansion of the store base, has helped Boot Barn Holdings gain market share and strengthen its position in the industry.

Impressively, Boot Barn Holdings carries a Zacks Rank #2. The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales suggests growth of 13.1% from the year-ago period.

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Ulta Beauty Inc. (ULTA): Free Stock Analysis Report
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Arhaus, Inc. (ARHS): Free Stock Analysis Report
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