U.S. consumers returned to stores this holiday season as overall sales from Nov. 1st to Dec. 24th grew 8.5% relative to 2020. A report from Mastercard (NYSE:MA) SpendingPulse showed department stores witnessed a 21% surge from last year and a gain of 11% from pre-pandemic levels.
Sales jumped across the board as consumers spent more money on apparel, jewelry and electronics. Clothing sales spiked 47%, while jewelry sales leapt 32% and electronics grew by 16% compared to 2020 levels. The supply chain issues that have been plaguing the global economy caused consumers to start shopping earlier than normal. Mastercard observed this trend starting last year as the pandemic shifted some shopping to the earlier months.
Online shopping also grew by double digits, climbing 11% versus last year. The share of overall holiday sales from e-commerce has steadily grown over the last decade, now accounting for approximately 21% of all holiday sales.
Retailers have been some of the biggest beneficiaries of the spending surge. The Zacks Retail – Apparel and Shoes industry group is ranked in the top 18% of all 253 industry groups and contains all three companies we will discuss below. This industry group is part of the Zacks Retail and Wholesale sector, currently ranked #3 out of all 16 sectors.
The Zacks Retail – Apparel and Shoes industry group is showing some favorable characteristics including an average 12.29 P/E as well as projected EPS growth of 126.92% - far above the S&P’s 21.15%. Quantitative research has shown that approximately half of a stock’s future price appreciation is due to its industry grouping.
As investors, we want to target stocks that are in high-performing industry groups. As this industry group is within the top 50% of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months. Let’s take a peek behind the curtain on three individual stocks within this industry group that sport a Zacks #1 Strong Buy ranking and are all outperforming the market.
The Buckle (NYSE:BKE), Inc. (BKE)
The Buckle operates as a leading retailer of casual apparel, footwear, and accessories for fashion-conscious young men and women in the United States. The company markets denims, tops, sportswear, outerwear, and footwear under a host of brand names and private labels. Founded in 1948 and headquarter in Kearney, NE, Buckle operates 443 retail stores in 42 states.
BKE has topped earnings estimates in each of the last five quarters and is averaging a 42.84% beat over the past year. The stock trades at an attractive valuation (8.59 forward P/E) while advancing over 68% on the year. BKE most recently reported EPS in November of $1.26, a 26% positive surprise over consensus.
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