U.S. retail sales grew in June, as energy costs eased and online sales surged. The retail sector has been making a steady rebound amid high inflation and ongoing geopolitical tensions. Despite these challenges, spending has remained resilient, boosting the sector.
Given this situation, it would be ideal to invest in retail stocks with a strong online presence. We have selected five stocks, namely, Amazon.com, Inc. AMZN, Five Below, Inc. FIVE, Dollar Tree, Inc. DLTR, Target Corporation TGT and The TJX Companies, Inc. TJX.
Retail Sales Surge
Retail sales rose 0.2% in June after increasing 1% in the prior month, the Commerce Department reported on Thursday. The rise came in line with analysts’ expectations. On a year-over-year basis, retail sales climbed 6.7%.
The monthly gain was the slowest in five months, yet the sector continued to perform well. One of the biggest boosts came from lower gasoline prices after tensions between the United States and Iran eased in mid-June. Receipts at gas stations fell 5.3% last month, after jumping 2.6% in May.
Receipts at auto dealerships rose 1.9% in June. Also, online retail sales rose 1.9% last month, driven by Amazon Prime Day sales.
Sales at electronics and appliance stores advanced 0.8% in June, while receipts at sporting goods, hobby, musical instrument and book stores rose an impressive 1.3%.
Higher prices due to high tariffs have been weighing on household budgets, but higher incomes are boosting spending. Also, impressive tax refunds this year have been helping consumers spend more freely.
The U.S. economy grew 2.1% in the first quarter. Also, inflation declined sharply in June after surging for three months. The consumer price index declined 0.4% month over month, surpassing analysts’ expectations of a decline of 0.2%. Year over year, CPI fell to 3.5% in June, beating analysts’ expectations of a reading of 3.8%.
The sudden decline in inflation has also raised hopes that the Federal Reserve could wait for a longer period before deciding on whether to hike interest rates. Lower interest rates are likely to boost the sector further.
5 Retail Stocks With Upside
Amazon.com, Inc.
Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. AMZN’s online retail business revolves around the Prime program, well-supported by the company’s massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish a footprint in the physical grocery supermarket space. AMZN also enjoys a dominant position in the cloud-computing market, particularly in the Infrastructure as a Service space, thanks to Amazon Web Services.
Amazon.com has an expected earnings growth rate of 23.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. AMZN presently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Five Below, Inc
Five Below, Inc. is a specialty value chain retailer that provides a wide range of premium quality and trendy merchandise for $5 or below. FIVE mainly targets teenagers or pre-teen shoppers for its products, which include certain brands and licensed merchandise. Notably, these products belong to categories such as Style, Room, Sports, Tech, Create, Party, Candy and Now.
Five Below’s expected earnings growth rate for the current year is 35.1%. The Zacks Consensus Estimate for current-year earnings has improved 10.7% over the past 60 days. FIVE presently carries a Zacks Rank #1.
Dollar Tree
Dollar Tree, Inc. is an operator of discount variety stores offering merchandise and other assortments. DLTR’s stores successfully operate in major metropolitan areas, mid-sized cities and small towns. Dollar Tree offers a wide range of quality everyday general merchandise in many categories, including houseware, seasonal goods, candy and food, toys, health and beauty care, gifts, party goods, stationery, books, personal accessories, and other consumer items.
Dollar Tree’s expected earnings growth rate for the current year is 21.7%. The Zacks Consensus Estimate for Dollar Tree’s current-year earnings has improved 3.7% over the past 60 days. DLTR has a Zacks Rank #2.
Target Corporation
Target Corporation has evolved from being a pure brick & mortar retailer to an omni-channel entity. TGT has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.
Target Corporation’s expected earnings growth rate for the current year is 10.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the past 60 days. Target currently carries a Zacks Rank #2.
The TJX Companies
The TJX Companies, Inc.i s a leading off-price retailer of apparel and home fashions in the United States and worldwide. TJX’s broad range of assortments at varying prices helps it reach out to a broad range of consumers. In addition, The TJX Companies tries to attract consumers through a rapid turn of inventories.
The TJX Companies’ expected earnings growth rate for the current year is 9.3%. The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the past 60 days. TJX presently has a Zacks Rank #2.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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