Holiday Sales Surge: Take Advantage With These 3 Strong Buys

U.S. consumers returned to stores this holiday season as overall sales from Nov. 1^st to Dec. 24^th grew 8.5% relative to 2020. A report from Mastercard (NYSE:MA) SpendingPulse showed department stores witnessed a 21% surge from last year and a gain of 11% from pre-pandemic levels.

Sales jumped across the board as consumers spent more money on apparel, jewelry and electronics. Clothing sales spiked 47%, while jewelry sales leapt 32% and electronics grew by 16% compared to 2020 levels. The supply chain issues that have been plaguing the global economy caused consumers to start shopping earlier than normal. Mastercard observed this trend starting last year as the pandemic shifted some shopping to the earlier months.

Online shopping also grew by double digits, climbing 11% versus last year. The share of overall holiday sales from e-commerce has steadily grown over the last decade, now accounting for approximately 21% of all holiday sales.

Retailers have been some of the biggest beneficiaries of the spending surge. The Zacks Retail – Apparel and Shoes industry group is ranked in the top 18% of all 253 industry groups and contains all three companies we will discuss below. This industry group is part of the Zacks Retail and Wholesale sector, currently ranked #3 out of all 16 sectors.

The Zacks Retail – Apparel and Shoes industry group is showing some favorable characteristics including an average 12.29 P/E as well as projected EPS growth of 126.92% - far above the S&P’s 21.15%. Quantitative research has shown that approximately half of a stock’s future price appreciation is due to its industry grouping.

As investors, we want to target stocks that are in high-performing industry groups. As this industry group is within the top 50% of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months. Let’s take a peek behind the curtain on three individual stocks within this industry group that sport a Zacks #1 Strong Buy ranking and are all outperforming the market.

The Buckle (NYSE:BKE), Inc. (BKE)

The Buckle operates as a leading retailer of casual apparel, footwear, and accessories for fashion-conscious young men and women in the United States. The company markets denims, tops, sportswear, outerwear, and footwear under a host of brand names and private labels. Founded in 1948 and headquarter in Kearney, NE, Buckle operates 443 retail stores in 42 states.

BKE has topped earnings estimates in each of the last five quarters and is averaging a 42.84% beat over the past year. The stock trades at an attractive valuation (8.59 forward P/E) while advancing over 68% on the year. BKE most recently reported EPS in November of $1.26, a 26% positive surprise over consensus.

Buckle, Inc. The Price, Consensus and EPS Surprise

Buckle, Inc. The Price, Consensus and EPS Surprise

The current-year earnings consensus among analysts covering BKE has increased by 12.26% in the past 60 days. The Zacks Consensus Estimate for BKE EPS now stands at $4.76, representing growth of 78.95% relative to 2020 earnings. BKE’s next earnings announcement is slated for March 11^th, 2022.

Boot Barn (NYSE:BOOT) Holdings, Inc. (BOOT)

Boot Barn Holdings is a lifestyle retail chain and operates specialty retail stores domestically. The company offers work-related footwear and apparel including boots, denims, western shirts, cowboy hats, belts, buckles, and jewelry. Founded in 1978 and based in Irvine, CA, BOOT operates 275 stores in 36 states. The company also sells its products through its e-commerce websites, including bootbarn.com; sheplers.com; and countryoutfitter.com.

BOOT has either met or exceeded earnings expectations in each of the past six quarters. The company most recently reported EPS in October of $1.22, a +29.79% surprise over consensus. BOOT has delivered an average positive surprise of 35.29% over the past four quarters, aiding the stock’s 180% return this year.

Boot Barn Holdings, Inc. Price, Consensus and EPS Surprise

Boot Barn Holdings, Inc. Price, Consensus and EPS Surprise

What the Zacks Model Reveals

The Zacks Earnings ESP (Expected Surprise Prediction) seeks to find companies that have recently seen positive earnings estimate revision activity. This more recent information has proven to be an accurate predictor of the future, giving investors a leg up during earnings season. When combining a Zacks Rank #3 or better, stocks have produced a positive surprise 70% of the time according our 10-year backtest.

With a Zacks #1 (Strong Buy) ranking and a +0.91% Earnings ESP, our proprietary model predicts an earnings beat for BOOT for the upcoming earnings announcement.

Analyst covering BOOT are in agreement in terms of recent earnings revisions, upping their estimates by 25.68% over the past 60 days. The Zacks Consensus Estimate for fiscal 2022 EPS now stands at $5.53, translating to growth of 188.02% compared to last year. BOOT is scheduled for its next quarterly earnings report on January 24^th.

Tilly’s, Inc. (TLYS)

Tilly’s operates as a specialty retailer in the action sports industry, selling apparel, footwear and accessories domestically for young men and women. Tilly’s merchandise includes tops, outerwear, bottoms and dresses. TLYS also sells backpacks, hats, sunglasses, handbags, watches and jewelry. Founded in 1982 and headquartered in Irvine, CA, Tilly’s operates 238 stores in 33 states. The company also retails its products via its website, tillys.com.

Trading at a relatively undervalued 7.16 forward P/E, TLYS has surpassed earnings estimates in each of the past five quarters. The company has a trailing four-quarter average earnings surprise of 296.16%, supporting the stock’s 120% return this year. TLYS most recently reported EPS earlier this month of $0.66, a 100% surprise over consensus.

Tilly's (NYSE:TLYS), Inc. Price, Consensus and EPS Surprise

Tilly's, Inc. Price, Consensus and EPS Surprise

Analysts covering TLYS have increased their fiscal 2022 EPS estimates by 25.88% in the past 30 days. The Zacks Consensus Estimate is now $2.14, a phenomenal 5,450% growth rate relative to last year. TLYS is due to report earnings on March 10^th, 2022.

These three retailers have benefitted from the surge in holiday spending and look to continue their strong momentum heading into the new year.

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