As the year-end approaches, the Retail-Wholesale sector attracts investor attention, fueled by holiday shopping, promotional events and renewed consumer enthusiasm. The period encompassing Black Friday, Cyber Monday and Christmas is crucial for retailers, as it accounts for a sizable portion of annual revenues. This seasonal surge offers an opportunity to offset any volatility experienced earlier in the year.
Robust consumer spending during this time acts as a catalyst for companies such as Abercrombie & Fitch Co. ANF, Deckers Outdoor Corporation DECK, Sprouts Farmers Market, Inc. SFM, Urban Outfitters, Inc. URBN and Amazon.com, Inc. AMZN. These retailers are well-positioned to capitalize on increased demand, aided by festive shopping trends.
The combination of this demand surge and strategic marketing initiatives can drive strong fourth-quarter earnings, making these retail stocks attractive candidates for a year-end rally. By leveraging the holiday season and benefiting from operational improvements, these companies have the potential to see their stock prices rise and finish the year on a strong note.
Factors Shaping Year-End Retail Performance
A resilient labor market, rising wages and stable household finances are encouraging shoppers to spend freely. The easing of inflationary pressures, combined with the third successive cut in interest rates, has further boosted purchasing power. With Americans feeling more confident, they are likely to make big-ticket purchases and spend more on goods and services.
In response, retailers are embracing innovative strategies and enhancing delivery logistics to offer consumers a seamless shopping experience. The integration of in-store, online and mobile platforms is not only improving convenience but also driving higher conversion rates. Services like doorstep delivery, curbside pickup, and buy online, pick up in-store are providing shoppers with expedited delivery options and greater flexibility.
To strengthen their market position, retailers are implementing strategic pricing, running promotions and expanding private label offerings. They are also leveraging demand forecasting tools to optimize stock levels and using data analytics to better understand consumer behavior, streamlining purchasing processes.
The National Retail Federation forecasts total sales during the November-December period to range between $979.5 billion and $989 billion, reflecting a 2.5-3.5% increase over 2023. Furthermore, a recent report from the Commerce Department highlighted a 0.7% increase in November sales on a sequential basis, following October’s upwardly revised reading of 0.5%.
Abercrombie & Fitch: Brand Visibility & Global Expansion
Abercrombie & Fitch stands out as a strong investment choice. The company excels in integrating digital and physical retail channels, offering a seamless shopping experience and driving higher customer satisfaction and loyalty. Strategic marketing initiatives, particularly targeted campaigns in key markets, have been effective in boosting brand visibility and customer acquisition. The introduction of innovative product lines meets specific customer needs and broadens the brand's appeal. Abercrombie & Fitch’s regional operating model, with a focus on the Americas, the EMEA (Europe, the Middle East and Africa) and the APAC (Asia-Pacific), provides a solid foundation for global expansion.
This leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids has a trailing four-quarter earnings surprise of 14.8%, on average. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings per share (EPS) suggests growth of 14.9% and 69% from the year-ago period. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers' emphasis on expanding its brand presence and enhancing direct-to-consumer channels has been instrumental in driving sales. Coupled with a strong commitment to product innovation and a strategic push into international markets, particularly in the Asia-Pacific region, DECK is well-positioned for sustained growth. By focusing on premium products and full-price offerings for flagship brands like HOKA and UGG, Deckers continues to execute a winning strategy in a highly competitive market.
The Zacks Consensus Estimate for Deckers’ current financial-year sales and EPS suggests growth of 13.6% and 12.8%, respectively, from the year-ago reported figures. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 41.1%, on average.
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Sprouts Farmers: Enhancing Reach in Natural & Organic Space
Sprouts Farmers’ emphasis on product innovation, technology and targeted marketing with everyday competitive pricing bodes well. The company has been steadily increasing its footprint in the natural and organic space, driven by strong demand in this segment. The introduction of unique and health-oriented products attracts a diverse customer base and drives sales growth. The company has also made substantial investments in e-commerce platforms, online ordering and delivery services to meet the increasing demand for convenience.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and EPS suggests growth of 12.2% and 29.6%, respectively, from the year-ago reported figures. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 15.3%, on average.
URBN: Rapid Expansion of Nuuly
Urban Outfitters is positioned for sustained growth supported by solid sales across its brands, enhanced operational efficiency and significant margin improvements. The success of brands like Anthropologie and Free People, along with the rapid expansion of Nuuly, provides a diversified growth trajectory. Urban Outfitters' focus on enhancing margins, reducing markdowns, and optimizing its retail and wholesale operations strengthens its growth potential. The company’s focus on strategic marketing, inventory management and product innovation supports its profitability and long-term growth potential.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 6.6% and 19.7%, respectively, from the year-ago reported figures. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 22.8%, on average.
Amazon: Dominating With Robust Logistics Network
Amazon is also worth considering. The company’s robust e-commerce platform, renowned for its vast product selection and efficient delivery services, continues to be a primary driver of revenue growth. Prime membership, a cornerstone of Amazon's success, not only fosters customer loyalty but also drives recurring revenues through subscription fees, offering members exclusive access to a myriad of services, such as expedited shipping.
The Zacks Consensus Estimate for Amazon’s current financial-year sales and EPS suggests growth of 10.9% and 79%, respectively, from the year-ago reported figure. AMZN, which carries a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 25.9%, on average.
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