Pick These 4 Stocks To Counter Soft August Retail Sales

Back-to-back hurricanes disrupted activity and caused damage to homes, vehicles, commercial real estate and public infrastructure. The impact was visible to an extent in the soft August retail sales. The Commerce Department stated that U.S. retail and food services sales declined 0.2%, as people refrained from buying motor vehicles and spent less at clothing & clothing accessories stores and electronics shops. However, retail sales rose 3.2% from August 2016.

Market experts asserted that while recent hurricanes resulted in short-term derailment in the economic activity, a lift in the later part of the year remains on the cards with construction activities and business investments likely to steam up along with an expected boom in auto sales. However, they cautioned that a surge in gasoline prices will pinch the pockets of consumers who make bulk purchases during the holiday season.

Per National Retail Federation’s latest forecast retail sales — excluding autos, gas and restaurant — are expected to jump in the band of 3.2-3.8% in 2017. Data compiled by eMarketer expects sales to jump 3.8% to $5.048 trillion this year, with e-commerce sales expected to account for approximately 9% of total sales.

Changing Retail Dynamics

Let’s have a sneak peek of the changing dynamics of the Retail-Wholesale sector. Although the sector has not been a spectacular performer, it still holds some promise, given some favorable economic indicators such as improving labor market and gradual recovery in the housing market. We note that so far in the year, the sector has advanced 18.8% compared with the S&P 500’s gain of roughly 11.7%.

The retail landscape has been undergoing a fundamental change, with technology playing a major role and the focus shifting to online shopping. Amazon.com Inc. (NASDAQ:AMZN) has been in the spotlight for the last few years, as changing customer patterns made the retail industry more dependent on e-commerce.

This transition in consumer shopping pattern is compelling retailers to rapidly adapt to the changes in the ecosystem. Retailers now have no option left but to keep pace with the changing retail scenario or get eliminated. They are now focusing more on enhancing omni-channel capabilities, optimizing store fleet and restructuring activities.

Retailers are efficiently allocating a large chunk of capital toward a multi-channel growth strategy focused on improving merchandise offerings, as well as developing IT infrastructure to enhance the web and mobile experience of customers. Further, the retailers are renovating stores, developing fulfillment centers to enable speedy delivery, implementing an enterprise-wide inventory management system along with enhancing relationship with existing and new customers.

4 Prominent Picks

If soft retail sales have put you in a spot of bother, we advise you to dismiss concerns about its impact on your portfolio and locate greener pastures. These are stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.

Rush Enterprises, Inc. (NASDAQ:RUSHA) has emerged as a strong contender with a long-term earnings growth rate of 15% and a VGM Score of A. In a year, the stock has surged roughly 76.9%, comfortably outperforming the industry’s growth of 10%. This integrated retailer of commercial vehicles and related services delivered an average positive earnings surprise of 27% in the trailing four quarters and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

You may also consider Aaron's, Inc. (NYSE:AAN) , an omni-channel provider of lease-purchase solutions. The stock sports a Zacks Rank #1 and has a VGM Score of B. The company posted an average positive earnings surprise of 14% in the trailing four quarters. In a year, the stock has displayed a fabulous bull run on the index and has risen 53.6%, while the industry increased 42.1%.

We also suggest investing in Five Below, Inc. (NASDAQ:FIVE) with a long-term earnings growth rate of 28.5% and a VGM Score of A. In a year, this Zacks Rank #2 stock has increased roughly 22.2%, while the industry witnessed a decline of 11.5%. This specialty value retailer delivered an average positive earnings surprise of 8.7% in the preceding four quarters.

Investors can count on Herbalife Ltd. (NYSE:HLF) , which develops and sells weight management, sports and fitness, and nutritional and personal care products. The company pulled off an average positive earnings surprise of 25.1% in the trailing four quarters and has a VGM Score of A. In the trailing six months, this Zacks Rank #2 stock has exhibited a bullish run and surged roughly 18.8%, while the industry gained 0.1%.

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