Consumer Confidence Dips: Will It Dent Holiday Season Sales?

The Wall Street is juggling with various micro and macro issues, including the upcoming Presidential election, the Fed’s pending decision over the rate hike, and other major events like the recent surge in the dollar, consensus to curtail oil production, and softening job growth. These events will undoubtedly play a pivotal role in shaping the future course of the economy, but as of now they are dampening consumers’ mood, just ahead of the crucial part of the year, the holiday season.

A clear reflection of this was the recent outcome of the Consumer Confidence data that declined sharply in October, after reaching a pinnacle in September. According to the recent Conference Board data, the Consumer Confidence Index decreased to 98.6 in October from a downward revised September reading of 103.5. Another preliminary report from the University of Michigan unveils that consumer sentiment dropped to 87.9 this month from September’s final reading of 91.2.

Apparently, consumers’ expectations about the economy have somewhat retreated, after receiving a boost when U.S. retail sales rebounded sharply in September, and a pickup was noticed in the U.S. factory activity data and service-sector index. But a fall in consumer sentiment may impact consumers’ spending pattern, which accounts for over two-thirds of the U.S. economic activity, and this may not augur well for retailers.

Undoubtedly, reluctance on the part of consumers to spend more is the last thing retailers want, as they bank on the holiday season for a sizeable chunk of yearly revenues and profits. Data compiled by National Retail Federation projects a 3.6% jump in November and December sales (excluding autos, gas and restaurant sales) to $655.8 billion. Non-store sales for the season are expected to increase 7–10% to approximately $117 billion.

The holiday season is no less than a battlefield for retailers and only time will tell as to how the season will unfold. But for now, it will be prudent for you to divert your attention and focus on the Q3 earnings season, which is well underway, and hold on to some retail stocks that are likely to beat estimates.

These are stocks with a favorable combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Amazon.com, Inc. (NASDAQ:AMZN) has an Earnings ESP of +10.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marinemax Inc. (NYSE:HZO) has an Earnings ESP of +31.82% and a Zacks Rank #1.

Big 5 Sporting Goods Corp. (NASDAQ:BGFV) has an Earnings ESP of +3.33% and a Zacks Rank #1.

Big Lots Inc. (NYSE:BIG) has an Earnings ESP of +50.00% and a Zacks Rank #2.

Hibbett Sports, Inc. (NASDAQ:HIBB) has an Earnings ESP of +4.00% and a Zacks Rank #2.

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