5 Stocks to Make the Most of Booming Retail Sales

Retail sales in the United States picked up in July as Americans splurged on online items and dined out more. This calls for investing in retailers such as American Eagle Outfitters AEO, Urban Outfitters URBN, Kohl’s KSS, Carrols Restaurant Group TAST and BJ’s Restaurants BJRI that are positioned to gain even more.

Promising Retail Sales Scenario

Sales at U.S. retailers increased 0.7% in July from the previous month, more than the Dow Jones estimate of 0.4%, per the Commerce Department. It’s also the best monthly gain since January. Last month, retail sales rose a robust 3.2% year over year. In reality, retail sales advanced by 2.3% from May through July compared to the same period a year ago.

The so-called core retail sales that omit auto sales rose a solid 1%, easily beating estimates of a gain of 0.4%, and posted its biggest jump in six months. This figure is undoubtedly more dependable in assessing the underlying consumer demand.

Nonetheless, retail sales were broad-based, with sales at internet retailers increasing by 1.9%, primarily due to momentous spending during the Amazon Prime Day period.

Similarly, sales at eateries and bars rose 1.4%, a tell-tale sign that Americans are feeling self-assured about their financial well-being. Sales, by the way, have also improved at gas stations, clothing stores, departmental stores, grocery stores, and home centers, to name a few.

What’s Driving Retail Sales?

Sales at U.S. retailers were mostly lackluster in the past year; however, things have improved considerably this year due to a change in consumer spending patterns.

Consumers are willing to open up their wallets largely due to a solid labor market, increase in wages, and savings that they amassed during the pandemic period.

Consumers’ confidence improved last month as inflationary pressure remains significantly less than a year ago, which in turn has given households the wherewithal to spend. The consumer price index (CPI) may have increased 3.2% year over year in July, but it’s way less than the 40-year high of 9.1% it had touched in mid-2022.

The Big Winners

Given the positives, it’s judicious for astute investors to invest in sound retailers who are the direct beneficiaries of this encouraging economic backdrop and an uptick in retail sales.

These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). Such stocks also have a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.

American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. AEO currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased nearly 3% over the past 60 days. The company’s expected earnings growth for the current year is 7.2%.

Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gift products. URBN currently has a Zacks Rank #2 and VGM Score of B. The Zacks Consensus Estimate for its current-year earnings has increased 2.2% over the past 60 days. The company’s expected earnings growth for the current year is 60.6%.

Kohl’s operates specialty department stores and an e-commerce site in the United States. KSS currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 1.7% over the past 60 days. The company’s expected earnings growth for the current year is 1,713.3%.

Carrols Restaurant Group is the largest BURGER KING franchisee in the United States. Currently, TAST sports a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 1,800% over the past 60 days. The company’s expected earnings growth for the current year is 124.3%.

BJ’s Restaurants owns and operates a chain of high-end casual dining restaurants in the United States. BJRI currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 27.1% over the past 60 days. The company’s expected earnings growth for the current year is 423.5%.

Shares of American Eagle Outfitters, Urban Outfitters, Kohl’s, Carrols Restaurant Group and BJ’s Restaurants have gained 14.3%, 49.8%, 8.5%, 437.5% and 24.7%, respectively, so far this year.
BJ’s Restaurants, Inc. (BJRI): Free Stock Analysis Report