The holiday season is approaching but retailers’ worries continue as there are no signs of the coronavirus subsiding. Retail sales have been somewhat increasing over the past few months but are still way behind the year-ago level. However, the good sign is that economies are reopening and people have once again started visiting physical stores.
According to Deloitte, holiday retail sales this year are forecast to increase, although not like the previous year. So, it is a good sign that people are optimistic about spending. Moreover, despite low morale and millions of job losses, the retail sector has somewhat bounced back, thanks to e-commerce sales, and rising consumer spending.
Holiday Sales Projected to Rise
Deloitte forecasts retail sales to rise 1-1.5% to between $1.147 trillion and $1.152 trillion during the November-to-January time frame. That, however, is much lower compared with growth of 4.1% in 2019, when sales were nearly $1.14 trillion, according to the U.S. Census Bureau.
The range of 1% to 1.5% is derived by blending two different scenarios, driven by big and small spenders, Deloitte explained. First, Deloitte expects a relatively stable 0% to 1% jump in sales during the holidays, if consumers — especially lower-wage earners — remain nervous about their finances and health, and commit more of their spending toward necessities.
However, a bigger 2.5% to 3.5% increase could occur if wealthier consumers gain even more confidence in the back half of 2020. Factors that could bolster confidence within this group include shrinking unemployment, additional government stimulus and an effective COVID-19 vaccine.
E-Commerce, Other Factors to Boost Sales
According to Deloitte, holiday e-commerce sales are forecast to surge 25% to 35%, amounting to between $182 billion and $196 billion. In 2019, year-over-year growth in online sales was 14.7%, with sales reaching $145 billion. However, this means that retailers could start feeling the pressure to prepare for an onslaught of online orders, which could start as early as next month and run until last-minute shipping deadlines arrive.
Retailers Go on a Hiring Spree
Retailers have already started hiring ahead of the holiday season to manage the rush and ensure smooth on-time delivery. Walmart (NYSE:WMT), Inc. WMT said on Sep 23 that it will hire 20,000 seasonal staff members to prepare for an expected surge in online shopping ahead of the holidays in the United States. This will be Walmart's first large seasonal hiring in five years.
Also, Best Buy, Inc. BBY is looking to hire thousands of new employees. Starting this week, individual stores will be holding job fairs to start the process of hiring for the holiday season.
Our Choices
Now that economies are opening and the Trump administration has assured that a vaccine will most likely be available by the end of this year, consumers are gradually showing confidence in spending. Investors hopeful of a fruitful holiday season for retailers should tap the following retail stocks.
Sportsmans Warehouse Holdings, Inc. SPWH is an outdoor sporting goods retailer. Its stores offer camping products, fishing products, and hunting and shooting products. The company's stores also provide clothing products, footwear products and optics, electronics, and accessories.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 91.4% over the past 60 days. Sportsmans Warehouse Holdings carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Tapestry (NYSE:TPR), Inc. TPR is a designer and marketer of fine accessories and gifts for women and men in the United States and internationally. The company offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches.
The company’s expected earnings growth rate for the current year is 90.7%. The Zacks Consensus Estimate for current-year earnings has improved 16.4% over the past 60 days. Tapestrycarries a Zacks Rank #2 (Buy).
Best Buy Co (NYSE:BBY)., Inc. is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services.
The company’s expected earnings growth rate for next year is 17.3%. The Zacks Consensus Estimate for current-year earnings has improved 26.1% over the past 60 days. Best Buy presently carries a Zacks Rank #2.
Target Corporation (NYSE:TGT) TGT has evolved from just being a pure brick & mortar retailer to an omni-channel entity. The company 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.
The company’s expected earnings growth rate for next year is 11.9%. The Zacks Consensus Estimate for current-year earnings has improved 44.2% over the past 60 days. Target sports a Zacks Rank #1.
DICKS Sporting Goods, Inc. DKS operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc.
The company’s expected earnings growth rate for the current year is 3%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 30 days. Dicks Sporting currently has a Zacks Rank #1.
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