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5 Retail Picks to Boost Your Confidence Ahead of the Holidays

U.S. consumer confidence — a key determinant of the economy’s health — stumbled to its lowest level since February 2021, thanks to the contagious Delta variant of coronavirus and rising inflation. Economists cautioned that back-to-back drop in consumer sentiment spells trouble for the market and overall spending activity. We note that fading of stimulus boost, supply chain bottlenecks and shortages of labor as well as key manufacturing components are dampening the economy's near-term prospects.

Per the Conference Board, the Consumer Confidence Index fell to 109.3 in September from August’s reading of 115.2. Lynn Franco, senior director of economic indicators at the Conference Board said, “Concerns about the state of the economy and short-term growth prospects deepened, while spending intentions for homes, autos, and major appliances all retreated again. Short-term inflation concerns eased somewhat, but remain elevated.”

While challenges related to the rapidly-spreading Delta variant and its impact on consumer sentiment persist, retailers are still optimistic about a fabulous holiday season, backed by mass vaccinations and pent-up savings by households. No doubt, retailers need to address logistics as well as inventory issues to meet the demand efficiently.

Retailers are looking for an early start to the festive season and ensuring they stock enough to fulfill predicted consumer demand. They are increasing product visibility on online platforms, enhancing customer engagement on social channels and recruiting a reasonable number of seasonal associates to deal with curbside and in-store pickup of online purchases as well as doorstep delivery.

Per Mastercard SpendingPulse, U.S. retail sales — excluding automotive and gas — for the “75 Days of Christmas” that runs from Oct 11-Dec 24 are anticipated to increase 6.8% from a year earlier. With e-commerce still being one of the preferred modes for shopping, Mastercard SpendingPulse foresees online sales to rise by 7.5% during the aforementioned period.

That said here we have highlighted five stocks from Retail-Wholesale sector that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance Year to Date

 

Image Source: Zacks Investment Research

5 Prominent Picks

We suggest betting on Best Buy Co., Inc. BBY. This specialty retailer of consumer electronics and related services has been witnessing robust demand across channels. Continued growth in online revenues backed by robust omni-channel capabilities and customer-centric approach is a key upside. During second-quarter fiscal 2022, Best Buy witnessed robust sales across the Domestic and the International segments, owing to strong demand for technology products and services. It is on track with programs like Total Tech Support, which provides support for fixing computers, laptops, appliances, smart home devices and connected devices. The company has expanded its In-Home Advisor program that includes advisors who guide customers to select the right technology solution. The stock has a Zacks Rank #1 and a VGM Score of A. The company has a trailing four-quarter earnings surprise of 31.9%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 9.5% and 25.8%, respectively, from the year-ago period.

Macy's, Inc. M, one of the nation’s premier omni-channel retailers, is worth betting on. In spite of a tough retail landscape, the company has managed to stay afloat, courtesy of its Polaris Strategy. The strategy includes rationalizing store base, revamping assortments and managing costs prudently. Customers have been responding well to the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. Macy's also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. The company is constantly improving its mobile and website features to deliver enhanced shopping experience. This Zacks Rank #1 company with a VGM Score of B has a trailing four-quarter earnings surprise of 269.8%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 37.3% and 269.7%, respectively, from the year-ago period.

Investors can count on Signet Jewelers Limited SIG, a renowned jewelry retailer. The company has been gaining market share, backed by growth across stores and digital platforms. Prudent efforts undertaken as part of the Inspiring Brilliance strategy have also been yielding results. This strategy focuses on expanding big banners, boosting service revenues, broadening the Accessible Luxury and Value segments, and accelerating digital commerce, among others. As part of the Inspiring Brilliance growth strategy, the company makes use of data-driven insights to target new and existing customers. The company has been expanding assortments across its Zales, Kay and Jared brand lines. Impressively, this Zacks Rank #1 company with a VGM Score of A has a trailing four-quarter earnings surprise of 77.5%, on average. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 33% and 329.4%, respectively, from the year-ago period.

We also suggest betting on 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. While exploring growth opportunities in apparel is crucial to the company, it is emphasizing on boosting its accessories business including leather goods and handbags. The company has been constantly deploying resources to expand product offerings, upgrade distribution infrastructure, create seamless omni-channel capabilities and deepen engagement with customers. The stock has a Zacks Rank #2 and a VGM Score of A. The company’s bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 30.8% and 138.4%, respectively, from the year-ago period.

You may invest in Costco Wholesale Corporation COST. The company’s growth strategies, better price management, decent membership trends and increasing penetration of the e-commerce business have been contributing to its upbeat performance. Cumulatively, these factors have been aiding the Issaquah, WA-based company in registering impressive sales numbers. Costco’s net sales increased 16.2% to $15.75 billion for the retail month of August — the four-week period ended Aug 29, 2021 — from $13.56 billion in the last year. This followed an improvement of 16.6%, 16.9% and 24.2% in July, June and May, respectively. Remarkably, the company has a trailing four-quarter earnings surprise of 7.7%, on average. The stock has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for its current financial year sales and earnings suggests growth of 7.9% and 7%, respectively, from the year-ago period.


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Macys, Inc. (M): Free Stock Analysis Report
 
Best Buy Co., Inc. (BBY): Free Stock Analysis Report
 
Costco Wholesale Corporation (COST): Free Stock Analysis Report
 
Signet Jewelers Limited (SIG): Free Stock Analysis Report
 
Capri Holdings Limited (CPRI): Free Stock Analysis Report
 
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