5 Solid Retail Stocks to Buy Ahead of the Holiday Season

The holiday season is around the corner and retailers are upbeat about sales getting a boost from aggressive buying on important days like Black Friday, Cyber Monday and Christmas Eve. Retail sales had taken a hit last year but the holiday season proved to be good.

With economic reopening in progress and the vaccination drive in full swing, the picture looks a lot brighter this year. This is likely to further aid the retail sector this year as predictions are of record sales both in percentage points and dollars spent.

Holiday Season to Boost Retail Sales

Despite the pandemic hitting retailers hard last year, the holiday season came as a savior, with sales hitting record high. E-commerce was largely responsible for this. Experts predict that this year too will be equally great, with the holiday season starting early.

According to Deloitte, retail sales are projected to jump between 7% and 9% and will exceed 2020’s increase of 5.8%. However, Deloitte isn’t the only one that sees retail sales getting a boost this holiday season.

According to Mastercard (NYSE:MA) SpendingPulse, holiday season retail sales are projected to grow 7.4% on a year-over-year basis and grow 11.1% from 2019. One of the major reasons for the jump will be due to a rebound in in-store shopping, which was not possible last year due to the pandemic. The ‘75 Days of Christmas’ holiday season will begin in October, with sales expected to grow 6.8% during this period, according to Mastercard SpendingPulse.

Much like these two firms, Bain also predicts 7% year-over-year growth in retail sales this holiday season, reaching $800 billion.

Great Holiday Season Ahead

Retailers bank heavily on the holiday season every year. This time they are likely to flourish particularly after a difficult 2020. Black Friday is projected to be the biggest shopping day this holiday season. Pent-up savings and government stimulus are expected to further strengthen the spending power of consumers.

That said, e-commerce will continue to play an important role in this year’s sales. Last year, e-commerce came as a savior not only during the holiday season but all through the pandemic. Although in-store sales will pick up this year following the economic reopening, people will prefer shopping online given that the fears of the pandemic are far from over. Moreover, shopping habits have also changed since the onset of the pandemic, as people have realized the ease of shopping online.

According to Mastercard SpendingPulse, online revenues are projected to grow 7.6% year over year and a whopping 57% from 2019. In fact, retail sales are being driven by e-commerce for the past several months now. Online sales in August jumped 8.1% month over month and 82% from the previous year.

Our Choices

Given this scenario, it would be ideal to invest in retail stocks with a strong online presence. We have hand-picked five stocks for you. Each of the stocks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Walmart (NYSE:WMT) Inc. WMT has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. In this regard, the acquisitions of Bonobos, Moosejaw and Parcel; partnership with Shopify (NYSE:SHOP) and Goldman Sachs (NYSE:GS); delivery programs like Walmart + and Express Delivery; and investment in the online e-commerce platform Flipkart are noteworthy.

The company’s expected earnings growth rate for the current year is 15.5%. The Zacks Consensus Estimate for current-year earnings has improved 6% over the past 60 days.

Macy's (NYSE:M), Inc. M is in the process of a complete makeover and has outlined plans under its three-year Polaris (NYSE:PII) Strategy to adapt better to the new retail ecosystem. Notably, the company is banking on Backstage locations, Vendor Direct, Store Pickup, Loyalty Program, Growth150 stores, ‘mobile first’ strategy and Destination Businesses.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 74.4% over the past 60 days.

Buckle (NYSE:BKE), Inc. The BKE is a leading retailer of medium to better-priced casual apparel, footwear and accessories for fashion-conscious young men and women.

The company’s expected earnings growth rate for the current year is 59.4%. The Zacks Consensus Estimate for current-year earnings improved 13.1% over the past 60 days.

Best Buy Co (NYSE:BBY)., Inc. BBY is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services.

The company’s expected earnings growth rate for next year is 26.2%. The Zacks Consensus Estimate for current-year earnings has improved 17.3% over the past 60 days.

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

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings improved 27.3% over the past 60 days.

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Macy's, Inc. (M): Free Stock Analysis Report

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