Retail sales saw robust growth during the holiday season as inflation eased, giving consumers the confidence to spend freely. E-commerce once again played a major role in boosting overall retail sales.
The trend has been continuing for the past few years as consumers shopped online, lured by hefty discounts and buy now, pay later offers. The retail sector, too, is showing impressive signs of a recovery after taking a hit owing to multi-decade high inflation. Given this situation, investing in stocks with a strong online arm like Amazon.com, Inc. AMZN, GameStop Corp. GME, Target Corporation TGT, Casey’s General Stores, Inc. CASY and Deckers Outdoor Corporation DECK looks like an ideal choice.
Holiday Sales Grow on Solid Online Purchases
Americans spent $222.1 billion on shopping online between Nov 1 and Dec 31, up 4.9% year over year and beating expectations of $221.8 billion, according to a report from Adobe Analytics. Online retail sales grew 3.5% in 2022. Like every year, the biggest shopping days were Cyber Monday, Thanksgiving and Black Friday.
Heavy discounts on a variety of items such as TVs, tablets and smart speakers to sporting goods and furniture lured consumers to spend more.
Also, buy now, pay later offers lured consumers to spend lavishly, which jumped a solid 14% year over year.
E-commerce prices had dropped 5.3% year over year in December, which was another reason why consumers got a chance to make more purchases.
Cyber Week, which takes into account five days from Thanksgiving to Cyber Monday, accounted for $38 billion of overall online holiday sales.
Overall retail sales were also impressive and came in higher than expectations. Total retail sales jumped 3.1% year over year during the holiday season, according to the initial Mastercard SpendingPulse.
The company also reported robust online sales. According to the Mastercard report, online sales surged 6.3% year over year compared to a meager 2.2% jump in in-store shopping.
E-commerce has been driving retail sales for the past few years, which gained further momentum during the pandemic. The trend has since then continued. Also, consumers are a lot more confident about spending now, given that inflation has been declining sharply over the past few months.
This has finally raised hopes that the Federal Reserve will soon end its monetary tightening campaign. The Fed has also indicated multiple rate cuts this year, which will further boost consumers’ confidence as lower borrowing costs will allow them to spend more freely.
Our Choices
We have chosen five retail stocks with a strong online arm. Each of these stocks carries a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America and 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 its footprint in the physical grocery supermarket space.
Amazon.com’sexpected earnings growth rate for the current year is 278.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the past 60 days. AMZN presently carries a Zacks Rank #2.
GameStop Corp. is the world's largest video game retailer. GME offers the best selection of new and pre-owned video gaming consoles, accessories and video game titles, in both physical and digital formats. GameStopalso publishes Game Informer, the world’s largest print and digital video game publication, featuring reviews of new title releases, game tips and news regarding current developments in the video game industry.
GameStop’s expected earnings growth rate for the current year is 98%. The Zacks Consensus Estimate for current-year earnings has improved 83.3% over the past 60 days. GME currently sports a Zacks Rank #1.
Target Corporation has evolved from just 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 provides an array of goods ranging from household essentials and electronics to toys and apparel for men, women and kids.
Target Corporation’s expected earnings growth rate for the current year is 38.5%. The Zacks Consensus Estimate for current-year earnings has improved 10.2% over the past 60 days. TGT has a Zacks Rank #2.
Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY also operates two stores under the name "Tobacco City," selling primarily tobacco and nicotine products, one liquor store and one grocery store.
Casey's General Stores’ expected earnings growth rate for next year is 9%. Shares of CASY have gained 10.3% in the past 60 days. CASY currently sports a Zacks Rank #1.
Deckers Outdoor Corporation is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. DECK sells products primarily under five proprietary brands — UGG, HOKA, Teva, Sanuk and Other brands (mainly comprising Koolaburra).
Deckers Outdoor’sexpected earnings growth rate for the current year is 21.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. DECK currently has a Zacks Rank #2.
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