AMZN, ANF, TGT and CVNA retail stocks are looking to grow during the holiday season.
Retail sales grew in the past two months, boding well for holiday sales.
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The retail sector is showing signs of recovery, as the Federal Reserve’s rate cuts are allowing consumers to spend more freely. Retail sales increased in October, although at a slower pace, but came in higher than economists’ expectations. The jump in retail sales ahead of the all-important holiday season bode well for retailers. Also, holiday sales are forecast to see an impressive jump this year despite several challenges.
Given the positive sentiment, investing in retail stocks like Amazon.com, Inc. AMZN, Abercrombie & Fitch ANF, Target Corporation TGT and Carvana Co. CVNA would be a wise decision ahead of the holiday season. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Retail Sales Jump in October
Retail sales rose 0.4% on a month-over-month basis in October, beating analysts’ expectations of an advance of 0.3%, the Commerce Department said on Friday. Also, September’s increase was upwardly revised to 0.8% from the previously reported rise of 0.4%.
Sales increased across various segments. Sales at auto dealers rose 1.6%, while sales at electronics and appliance stores increased 2.3%. Receipts at food services and drinking places, the sole services category in the report, grew by 0.7% in October after climbing 1.2% in the month earlier. Economists consider dining out a significant indicator of household financial health.
Online sales grew 0.3% last month. A sharp rise in consumer spending is powering overall retail sales. Consumer spending had increased 0.5% sequentially in September and 3.7% from the year-ago levels. Also, easing price pressures is allowing consumers to spend more lavishly.
Holiday Season to Help Retail Stocks
The Federal Reserve cut interest rates by 50 basis points in September, followed by another 25 basis point cut earlier this month as part of its easing cycle after inflation showed signs of ebbing. Lower borrowing costs have been helping consumers with more spending power.
The retail sector suffered for months as the Federal Reserve increased interest rates by 525 basis points to fight decades-high inflation. A rate cut coupled with a jump in retail sales ahead of the holiday season bodes well for the retail sector.
Holiday sales are projected to rise 3.7% year over year in 2024 and hit $1 trillion, according to a new report from Forrester. Although the projected growth this year is slightly lower than in the past four years, it is sharply higher than in the pre-pandemic era.
Online retail sales are projected to jump 10.1% to $257 billion this year, growing at a faster pace than the previous two years. Online sales will account for 26% of the overall retail sales in 2024.
5 Retail Stocks With Growth Potential
Amazon.com, Inc.
Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. AMZN’s online retail business revolves around the Prime program well-supported by the company’s massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish a footprint in the physical grocery supermarket space. AMZN also enjoys a dominant position in the cloud-computing market, particularly in the Infrastructure as a Service space, thanks to Amazon Web Services.
Amazon.com has an expected earnings growth rate of 78.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the last 60 days. AMZN presently carries a Zacks Rank #2.
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Abercrombie & Fitch
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids through a network of approximately 850 stores across North America, Europe, Asia and the Middle East. ANF's product portfolio includes knit and woven shirts, graphic T-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products and accessories for men, women and kids, under the Abercrombie & Fitch, Abercrombie kids and Hollister brands.
Abercrombie & Fitch’s expected earnings growth rate for the current year is 64.2%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. ANF currently sports a Zacks Rank #1.
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Target Corporation
Target Corporation has evolved from being a pure brick & mortar retailer to an omni-channel entity. TGT has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.
Target Corporation’s expected earnings growth rate for the current year is 6.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. Target currently carries a Zacks Rank #2.
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Carvana Co.
Carvana Co. is a leading e-commerce platform for buying and selling used cars. CVNA’s end-to-end online business model, which covers every aspect of used-car retailing — including sales, financing, logistics, inspection and repair centers, as well as software development — has transformed traditional used-car sales in several ways.
Carvana’sexpected earnings growth rate for the current year is 38.7%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. CVNA currently sports a Zacks Rank #1.
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