Fears of a possible recession, given the yield-curve inversion, gripped the stock market lately. However, economists are ruling out the possibility of the same and expecting an economic slowdown instead. Further, the Fed at its recent meeting took a more dovish stance and decided not to raise the interest rate in 2019. The policymakers also trimmed growth projection for the economy. These along with sluggishness in the global economy raise concerns about the near-term market gyrations.
Nonetheless, some experts still believe that the U.S. economy remains fundamentally sound given strong labor market and healthy consumer environment. These together with gradual wage acceleration are working in tandem for the Zacks Retail & Wholesale Sector. The sector has showcased an improvement of 15% in the past three months, outperforming the S&P 500’s rally of 13%.
The sector has a direct correlation with the purchasing power of consumers, which is one of the major factors impacting the performance of retailers. We note that U.S. retail sales rose 0.2% in the month of January, after declining 1.6% in the preceding month. Moreover, the National Retail Federation’s projection of a tick-up in U.S. retail sales in the band of 3.8-4.4% to more than $3.8 trillion in 2019 hints at increasing basket size and more traffic with retailers as ultimate gainers.
In fact, retailers are enhancing omni-channel capacities, introducing new brands, remodeling or refurbishing stores and expanding same-day delivery options to expedite the shopping process. No wonder, fueled by the aforementioned underlying strengths, a significant number of companies in the industry have been on a tear. Per the latest Earnings Preview, the sector is likely to register top and bottom line growth of 7.4% and 3.7%, respectively, in the first quarter of this year.
5 Prominent Picks
Here we have highlighted five Retail-Wholesale stocks with a favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
RH RH, a home furnishing retailer, is a solid bet with a long-term earnings growth rate of 17.5% and a VGM Score of A. This Zacks Rank #1 company has delivered average positive earnings surprise of 23.5% in the trailing four quarters. Moreover, the stock has soared approximately 78% in a year.
Foot Locker, Inc. FL, which operates as an athletic shoes and apparel retailer, is a solid pick with a Zacks Rank #1 and a VGM Score of B. The stock has a long-term earnings growth rate of 9.2% and increased 32% in a year. It has recorded average positive earnings surprise of 9.7% in the trailing four quarters.
Boot Barn Holdings, Inc. BOOT, with a long-term earnings growth rate of 20.7% and a VGM Score of A, is a stock worth considering. This operator of specialty retail stores delivered average positive earnings surprise of 14.6% in the trailing four quarters. The stock, which carries a Zacks Rank #2, has surged roughly 63% in a year.
Investors can also count on Darden Restaurants, Inc. DRI, which owns and operates full-service restaurants. This Zacks Rank #2 company has a long-term earnings growth rate of 10.3% and a VGM Score of A. The company has delivered average positive earnings surprise of 3.7% in the trailing four quarters and advanced about 41% in a year.
You can also add Costco Wholesale Corporation COST to your portfolio. The company’s shares have surged about 29% in a year. This operator of membership warehouses has a VGM Score of B and a long-term earnings growth rate of 8.9%. This Zacks Rank #2 company delivered average positive earnings surprise of 5.5% in the trailing four quarters.
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Foot Locker, Inc. (FL): Free Stock Analysis Report
Costco Wholesale Corporation (COST): Free Stock Analysis Report
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Restoration Hardware Holdings Inc. (RH): Free Stock Analysis Report
Boot Barn Holdings, Inc. (BOOT): Free Stock Analysis Report
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