Retailers Pin Hopes On Rising Consumer Sentiment: 5 Picks

After an upswing in retail sales numbers during the month of May, retailers now have another reason to cheer. Consumer sentiment rebounded in the month of June after witnessing a marginal decline last month. The index even inched close to its March level of 101.4, driven by strengthening labor market, tax reform and rising income.

Americans are way more confident now, brushing aside recent hiccups like the U.S.-China trade concerns, higher gasoline prices and tightening of monetary policy. Per the preliminary report released by the University of Michigan, Consumer Sentiment index increased to 99.3 in June from May’s reading of 98.0, and also came above analysts’ expectations of 98.3.

The current report follows Conference Board data that suggests Consumer Confidence Index rising to 128 in May, close to its 18-year high. Certainly, positive sentiment is likely to translate into higher consumer spending, which is expected to remain strong in the months ahead. Fall in the number of Americans claiming unemployment benefits and jobless rate hovering at an 18-year low are testimony to the same.

An uptick in consumer spending — one of the pivotal factors driving the economy — is welcome news for retailers, as this has a direct correlation to sales. Notably, U.S. retail and food services sales in May advanced 0.8% to $502 billion, following an upwardly revised reading of 0.4% gain in April, per the Commerce Department. Retail sales also improved 5.9% from May 2017.

Analysts pointed that improving consumer confidence and pickup in retail sales highlight the underlying strength in the economy. Evidently, the economic activity continues to gain pace with second-quarter GDP rate likely to come ahead of 4%, per industry experts. For obvious reasons, retailers are the end gainers. Notably, the Retail-Wholesale sector has advanced roughly 13% in the past six months outpacing the S&P 500’s growth of approximately 4%.

Given the favorable backdrop, the sector is likely to catch investors’ attention. So, picking up stocks from the space will be a prudent move. Here are five stocks you can count upon. We have shortlisted them on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.

5 Prominent Picks

Shoe Carnival (LON:CCL), Inc. (NASDAQ:SCVL) , which operates as a family footwear retailer, has a VGM Score of B and an expected EPS growth rate of 12% for 3-5 years. This Zacks Rank #1 stock has surged roughly 28% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Urban Outfitters, Inc. (NASDAQ:URBN) , a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gifts products, sports a Zacks Rank #1. The stock, which has soared approximately 32% in the past six months, has a VGM Score of B and an expected EPS growth rate of 12% for 3-5 years.

RH (NYSE:RH) , a home furnishings retailer, has a VGM Score of B. The stock has an expected EPS growth rate of 24% for 3-5 years. Shares of this Zacks Rank #1 company have rallied about 58% in the past six months.

Burlington Stores, Inc. (NYSE:BURL) , which operates as a retailer of branded apparel products, has a VGM Score of B and an expected EPS growth rate of 18.1% for 3-5 years. The stock currently has a Zacks Rank #2 and increased roughly 31% in the past six months.

Dillard's, Inc. (NYSE:DDS) , which operates retail department stores, has a VGM Score of A and an expected EPS growth rate of 9.9% for 3-5 years. This Zacks Rank #2 stock has shown a bullish run in the bourses and advanced about 50%.

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