Consumers have cut down on discretionary items lately as concerns about a slowing economy continue to dent their confidence. Despite the decline in spending, retail sales grew in February, giving a glimmer of hope that the economy’s health is not that bad.

The retail sector has shown immense resilience even during the peak of inflation and is making efforts to stage a rebound. Given this situation, it would be ideal to invest in retail stocks.

We have selected five retail stocks, namely JD.com, Inc.JD, Deckers Outdoor Corporation DECK, The Gap, Inc. GAP, Tapestry, Inc. TPR and Urban Outfitters, Inc. URBN for investors.These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

Retail Sales Jump in February

The Commerce Department reported on March 17 that retail sales grew 0.2% in February. Although the jump came in below the consensus estimate of a rise of 0.3%, retail sales made a solid rebound from the 1.2% decline recorded in January.

Excluding autos, retail sales jumped 0.3%. Year over year, retail sales rose 3.1% in February. Sales were powered by a 3.1% jump in sales at online stores. E-commerce has played a major role in driving overall retail sales over the past few years, and the trend has continued into 2025.

Sales at health and personal care stores increased 1.7% in February, while building materials and garden equipment sales climbed 0.2%.

Multiple Factors Hurting Sales

Uncertainty over the economy’s future owing to higher prices and President Donald Trump’s tariff policies has been denting consumer sentiment lately. Retail sales made a solid rebound in the second half of 2024 after the Federal Reserve started its easing cycle and cut interest rates by a total of 100 basis points.

The Fed, however, paused its rate cuts in January as inflation showed signs of escalating. However, inflation somewhat cooled in February, which is a good sign both for the economy and consumers and bodes well for the retail sector.

Also, investors are struggling to gauge Trump’s fast-changing tariff policies. However, Trump has put most of the proposed tariffs on hold for the time being, which is likely to bring relief to consumers. Also, the Federal Reserve is expected to resume its rate cuts once inflation cools further, which will give a major boost to the retail sector.

5 Retail Stocks With Growth Potential

JD.com

JD.com operates as an online direct sales company in China. JD, through its website www.jd.com and mobile applications, offers a selection of authentic products.

JD.com’s expected earnings growth rate for the current year is 7.5%. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the past 60 days. JD currently has a Zacks Rank #1.

Deckers Outdoor Corporation

Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. DECK sells products primarily under five proprietary brands — UGG, HOKA, Teva, Sanuk and Other brands (mainly Koolaburra).

Deckers Outdoor’sexpected earnings growth rate for next year is 21%. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the past 60 days. DECK currently has a Zacks Rank #2.

The Gap

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. GPS offers products for men, women and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix and Hill City brands.

The Gap’s expected earnings growth rate for next year is 7.7%. The Zacks Consensus Estimate for current-year earnings has improved 9.7% over the past 60 days. GPS currently has a Zacks Rank #1.

Tapestry

Tapestry is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. TPR offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrances and watches.

Tapestry’sexpected earnings growth rate for the current year is 14.5%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 60 days. TPR presently carries a Zacks Rank #2.

Urban Outfitters

Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gift products. URBN merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms. Urban Outfitters has operations in the United States, Canada and Europe.

Urban Outfitters’ expected earnings growth rate for the current year is 11.8%. The Zacks Consensus Estimate for current-year earnings has improved 8.1% over the past 60 days. URBN currently carries a Zacks Rank #2.

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Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report

The Gap, Inc. (GAP) : Free Stock Analysis Report

JD.com, Inc. (JD) : Free Stock Analysis Report

Tapestry, Inc. (TPR) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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