Looking For Great Returns This April? 4 Retail Stocks To Buy

A number of factors have kept investors on their toes — thanks to elevated U.S-China trade war tensions, possibilities of three or more rate hikes by the Fed this year, and tech stock related concerns amid stringent regulations related to data privacy and antitrust risks. Without doubt, these issues have spooked the Wall Street. However, market pundits have been shrugging off such gyrations as April has traditionally been a favorable month for investors.

Why the Retail Sector?

Among the 16 Zacks sectors, we are focusing on the Retail-Wholesale sector, which has advanced roughly 8% in the past six months and has comfortably outperformed the S&P 500’s gain of 1.3%.

With unemployment rate still at 17-year low, initial jobless claims plunging to 45-year low, consumer spending being favorable and government expenditure increasing, things appear to be fairly rosy for the U.S. economy. Notably, a strengthening labor market may lead to gradual wage acceleration, and in turn boost consumer confidence. All these sound constructive for retailers.

Per the University of Michigan's report, consumer sentiment in March reached the highest level in almost 13 years. We expect this positive sentiment to translate into higher consumer spending, which accounts for more than two-thirds of U.S. economic activity. We note that consumer spending ticked up 0.2% in February, following an equal rise in January. Meanwhile, personal income surged $67.3 billion or 0.4% in February, marking the third straight month of a similar percentage increase.

All these factors paint a bright picture for retailers, who are also benefitting from the corporate tax rate cut. Analysts believe that a lower tax burden is likely to allow the retailers to channelize the surplus money to best possible options. They may go for a dividend hike, or reduce debt load, or create a corpus to fund acquisitions, or invest in enhancing omni-channel capabilities, new product launches and any other innovations.

Tune in to These 4 Retail Stocks

We have identified four Retail-Wholesale stocks based on a favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. These stocks are backed by sound fundamentals and a track record of better-than-expected results.

We suggest investing in Macy's, Inc. (NYSE:M) with a long-term earnings growth rate of 8.5% and a VGM Score of A. This seller of apparel and accessories, cosmetics, home furnishings and other consumer goods, delivered positive earnings surprises in the last three quarters. This Zacks Rank #1 stock has rallied 18.4% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another stock worth considering is Ruth's Hospitality Group, Inc. (NASDAQ:RUTH) , which has a long-term earnings growth rate of 14.3% and a VGM Score of B. This operator of fine dining restaurants delivered a positive earnings surprise of 12.8% last quarter. This Zacks Rank #1 stock has advanced 17.1% in the past three months.

Investors can also count on Dillard's, Inc. (NYSE:DDS) — a fashion apparel, cosmetics, and home furnishing retailer. This Zacks Rank #1 company posted positive earnings surprises in the last two quarters and has a VGM Score of A. The stock has surged 33.5% in the past three months.

Kohl's Corporation (NYSE:KSS) , which operates department stores, is a solid bet with a Zacks Rank #2 and a VGM Score of A. The company posted an average positive earnings surprise of 11.6% in the trailing four quarters and has a long-term earnings growth rate of 6.7%. The stock has gained 17.1% in the past three months.

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Ruth's Hospitality Group, Inc. (RUTH): Free Stock Analysis Report

Macy's, Inc. (M): Free Stock Analysis Report

Dillard's, Inc. (DDS): Free Stock Analysis Report

Kohl's Corporation (KSS): Free Stock Analysis Report

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