5 Top-Rated Stocks To Buy Despite February Retail Sales Dip

On Mar 14, the U.S. Commerce Department reported that retail sales declined 0.1% for the month of February. This marked the third straight month of decline for the metric since April 2012. However, core retail sales increased, and the economic picture remains promising. This indicates that the headline number is likely to pick up in the near term.

Despite overall retail sales decline, a closer look of the report reveals some specific retail segments have performed well. This provides a silver lining to an otherwise grim scenario. These include building materials and clothing stores as well as restaurants and bars. Given that economic fundamentals remain strong, betting on retail segments which have performed well despite February’s decline in overall sales makes for a smart choice.

Core Retail Sales Improve

Retail sales have dipped by 0.1% in February 2018. This was in sharp contrast to the consensus estimate of an increase of 0.4%. Notably, U.S. consumer spending accounts for nearly two-thirds of its GDP. However, January retail sales data was revised to reflect a 0.1% decline instead of the previously reported drop of 0.3%.

The Commerce Department report shows that core retail sales inched up 0.1% last month after remaining unchanged in the prior month. Core retail sales data excludes sales figures of automobiles, gasoline, building materials and food services. This is a major positive since it closely corresponds to the consumer expenditure component of U.S. GDP.

However, certain specific industries performed well last month. Sales at building material stores increased 1.9%. Further, sales at clothing stores, online retailers, restaurants and bars and sporting goods and hobby stores were up 0.4%, 1%, 0.2% and 2.2% respectively.

U.S. Economy Remains Strong

On Feb 8, a survey among economists conducted by The Wall Street Journal predicted U.S. GDP to rise 2.8% in 2018, better-than 2.5% in the fourth quarter of 2017. Jobs data released on Mar 9 showed that the economy added 313,000 jobs in February 2018, exceeding the consensus estimate of 208,000. However, wages increased by only 2.6% on an annualized basis compared with 2.9% in the prior month. Consequently, investors’ apprehensions over rising inflation were significantly dispelled.

On Mar 8, a report of Federal Reserve stated that the U.S. household wealth moved further into record territory of $98.75 trillion in the fourth quarter of 2017. This big push in household wealth was primarily driven by stock market rally and soaring real estate prices. Substantial increase in wealth is likely to make many Americans more confident and help them spend more fueling economic growth.

Our Top Picks

U.S. consumer spending increased at an annualized pace of 3.8% in the fourth quarter of 2017, the fastest in more than a year. This is one of the many economic measures which indicate that the decline in retail sales is likely a temporary phenomenon. Sales are likely to pick up once consumers feel the positive impact of tax cuts and increased government spending.

In anticipation, it makes good sense to buy stocks from those retail segments which performed well last month despite the negative headline figure. We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and provides strong growth potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

Builders FirstSource Inc. (NASDAQ:BLDR) is a leading supplier and manufacturer of structural and related building products for residential new construction in the United States. The company expects earnings growth of 40.9% for current year. The Zacks Consensus Estimate for the current year has improved by 7.8% over the last 30 days.

Deckers Outdoor Corp. (NYSE:DECK) is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories. The company expects earnings growth of 42.2% for current year. The Zacks Consensus Estimate for the current year has improved by 3% over the last 30 days.

Rocky Brands Inc. (NASDAQ:RCKY) is a leading designer, manufacturer and marketer of premium quality footwear and apparel. The company expects earnings growth of 20.7% for current year. The Zacks Consensus Estimate for the current year has improved by 19.7% over the last 30 days.

Ruth’s Hospitality Group Inc. (NASDAQ:RUTH) is the largest fine dining steakhouse company in the United States as measured by the total number of company-owned and franchisee-owned restaurants. It expects earnings growth of 20.9% for current year. The Zacks Consensus Estimate for the current year has improved by 9.9% over the last 30 days.

DineEquity Inc. (NYSE:DIN) is a full-service dining company. It operates and franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands. The company expects earnings growth of 22.7% for current year. The Zacks Consensus Estimate for the current year has improved by 21.5% over the last 30 days.

Can Hackers Put Money INTO Your Portfolio?

Earlier this month, credit bureau Equifax (NYSE:EFX) announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.

Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.

Download the new report now>>