November Sales Lift Retailers' Holiday Spirit: 5 Picks For You

While concerns related to trade war, falling crude prices and geopolitical issues that raise apprehensions of an economic slowdown, an uptick in November retail sales has provided some solace. Rise in sales not only add to the holiday euphoria but also bolster the case of another rate hike this year.

Americans continued their shopping spree supported by strengthening labor market and rising disposable income. Certainly, consumer spending — one of the pivotal factors driving the economy — is likely to remain strong. This is evident from the drop in the number of Americans claiming unemployment benefits that slipped to near a 49-year low last week.

Experts believe that the underlying economic fundamental are stable as of now. However, they highlighted that the pace of growth in the final quarter of 2018 is likely to moderate from the third quarter. During the July-September period, GDP advanced at an annualized rate of 3.5%. Moreover, consumer spending continues to be strong, up 3.6% in the quarter.

Retail Sales Tick Up

The Commerce Department stated that U.S. retail and food services sales in November advanced 0.2% to $513.5 billion, following an upwardly revised reading of 1.1% gain in October. Notably, retail sales improved 4.2% from November 2017.

The report suggests that sales at motor vehicles and parts dealers rose 0.2%, while at electronics & appliance stores the metric increased 1.4%. Meanwhile, sales at food & beverage stores rose 0.4%, while at furniture & home furnishing stores sales improved 1.2%.

Sales at sporting goods, hobby, book & music stores and health & personal care stores grew 0.4% and 0.9%, respectively. General merchandise store sales grew 0.4%. Non-store retailers saw a 2.3% jump in sales, which surged 10.8% from the prior-year period.

However, sales at building material dealers and receipts at gasoline stations fell 0.3% and 2.3%, respectively. Sales at clothing & clothing accessories stores dropped 0.2%, while at food services & drinking places the same edged down 0.5%.

Retail Stocks to Sustain Momentum

A robust job market with unemployment rate at 3.7% and sound economic fundamentals are likely to keep consumer confidence high. This in turn will help maintain high retail sales, which depend on consumers’ willingness to spend.

Overall, National Retail Federation anticipates a rise of 4.3-4.8% in November and December sales (excluding autos, gas and restaurant) to $717.45-$720.89 billion. Data compiled by eMarketer suggests brick-and-mortar sales growth of 4.4% to $878.38 billion with retail e-commerce holiday season sales anticipated to increase 16.6% to $123.73 billion.

4 Prominent Picks

With U.S. retail sales picking up, the sector is likely to remain in the limelight. Consequently, choosing stocks from the space seems like a wise move. Here are four stocks you can count upon.

Fossil Group, Inc. (NASDAQ:FOSL) , which designs, develops, markets and distributes consumer fashion accessories, is a solid bet with a VGM Score of B. The company’s bottom line has outperformed the Zacks Consensus Estimate in the trailing four quarters. Moreover, this Zacks Rank #1 stock has more than doubled so far in the year. You can see the complete list of today’s Zacks #1 Rank stocks here.

RH (NYSE:RH) , a home furnishing retailer, is another lucrative option. The stock has a long-term earnings growth rate of 17.5% and a VGM Score of A. We note that year to date, the stock has soared about 47%. The company has delivered an average positive earnings surprise of 23.5% in the trailing four quarters and sports a Zacks Rank #1.

We also suggest investing in America's Car-Mart, Inc. (NASDAQ:CRMT) , with a long-term earnings growth rate of 19.5% and a VGM Score of B. So far this year, this Zacks Rank #2 stock has surged roughly 58%. Moreover, this automotive retailer delivered an average positive earnings surprise of 31.9% in the preceding four quarters.

Investors can count on Casey's General Stores, Inc. (NASDAQ:CASY) , whose shares have increased approximately 20% year to date. This operator of convenience stores has delivered positive earnings surprises in the last two reported quarter. This Zacks Rank #2 company has a long-term earnings growth rate of 8.9% and a VGM Score of A.

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>

America's Car-Mart, Inc. (CRMT): Free Stock Analysis Report

Fossil Group, Inc. (FOSL): Free Stock Analysis Report

Caseys General Stores, Inc. (CASY): Free Stock Analysis Report

Restoration Hardware Holdings Inc. (RH): Free Stock Analysis Report

Original post

Zacks Investment Research