5 Retail Stocks to Buy Ahead of Holiday Season on Rebounding Sales

Zacks

2024-10-19

The retail sector is rebounding strongly. The Commerce Department reported on Thursday that retail sales jumped sharply in September, proving that the economy is on solid ground. E-commerce played a major role in driving September retail sales.

The retail sector is poised to grow in the coming months as the holiday season approaches, with sales projected to hit record highs.

Given the positive scenario, investing in retail stocks such as Abercrombie & Fitch ANF, Casey's General Stores, Inc. CASY, Boot Barn Holdings, Inc. BOOT, JD.com, Inc. JD and The Gap, Inc. GAP is a wise decision. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Retail Sales Jump in September

The Commerce Department reported that retail sales rose 0.4% in September after increasing 0.1% in the prior month, and surpassing the consensus estimate of a rise of 0.3%. Excluding autos, retail sales jumped 0.5%, sharply higher than analysts’ expectations of a rise of just 0.1%.

Lower gasoline prices allowed consumers to spend more lavishly at bars and restaurants, clothing stores, and miscellaneous store retailers.

The retail sector suffered in 2023 as consumers cut down on expenses owing to high interest rates. The Federal Reserve has increased interest rates by 525 basis points since March 2022 to a 23-year high in its bid to fight sky-high inflation.

The Federal Reserve finally started its easing cycle last month, announcing a 50-basis point rate cut, its first since March 2020. Lower interest rates are likely to ease price pressures, which will allow consumers to spend more freely.

Holiday Season Sales to Help Retail Stocks

The U.S. holiday season, which falls between Nov. 1 and Dec. 31, is likely to help the retail sector further. Retailers look forward to this two-month period as millions of Americans indulge in shopping.

E-commerce has been playing a major role in driving holiday retail sales over the past several years. This year isn’t going to be any different. According to a new forecast from Adobe Analytics, online sales are projected to jump 8.4% from the year-ago levels, hitting $240.8 billion this holiday season.

Online holiday sales totaled $221.8 billion last year, increasing 4.9% annually. Shopping on mobile devices is projected to hit a new record high of $128.1 billion, increasing 12.8% year over year.

Online sales during Cyber Week, which is a five-day shopping period, including Thanksgiving, Black Friday and Cyber Monday, are expected to grow 7% year over year, hitting $40.6 billion and accounting for 16.9% of the overall holiday season sales.

Given this situation, it would be ideal to invest in retail stocks with a strong online presence.

5 Retail Stocks With Growth Potential

Abercrombie & Fitch

Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids through a network of approximately 850 stores across North America, Europe, Asia and the Middle East. ANF's product portfolio includes knit and woven shirts, graphic T-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products and accessories for men, women and kids, under the Abercrombie & Fitch, Abercrombie kids and Hollister brands.

Abercrombie & Fitch’s expected earnings growth rate for the current year is 63.4%. The Zacks Consensus Estimate for current-year earnings has improved 8.1% over the past 60 days. ANF currently sports a Zacks Rank #1.