November Retail Sales Add Extra Jingle To Christmas Carols

After the news of an uptick in the U.S. consumer confidence to a 17-year high and the latest tax reform that is likely to lower the burden, retailers got another reason to smile as retail sales increased for the third straight month. The better-than-expected November retail sales added extra jingle to the holiday season that is approaching its crescendo with Christmas just a week away.

A solid start to the shopping season highlights the underlying economic strength that paved the way for a rate hike for the third time this year. Analysts believe that a buoyant stock market, gradual wage acceleration, improved employment picture and modest inflation are enough to trigger consumer spending. All these sound favorable for retailers, who try to make the most of the season that accounts for a sizeable chunk of yearly revenues and profits.

Sturdy Retail Sales

The Commerce Department stated that U.S. retail and food services sales in November advanced 0.8% to $492.7 billion — following a revised reading of 0.5% increase registered in October. Retail sales improved 5.8% from November 2016. The report suggests that sales at electronics & appliance stores rose 2.1%, while receipts at gasoline stations and sales at building material dealers jumped 2.8% and 1.2%, respectively.

Sales at motor vehicles and parts dealers dipped 0.2%, while at clothing shops the same rose 0.7%. Meanwhile, sales at food & beverage stores and receipts at restaurants witnessed growth of 0.2% and 0.7%, respectively. Sales at non-store retailers climbed 2.5% and increased 10.4% from the prior-year period.

Holiday Season: Likely Bonanza for Retailers

Healthy November retail sales only raises hope for a blissful holiday season. A blockbuster Thanksgiving weekend and buoyant Cyber Monday also echo the festive spirit. Be it early-hour store openings, huge discounts, promotional strategies, price matching and free shipping on online purchases, retailers are going that extra mile.

Online sales on Thanksgiving Day surged 18.3% to $2.87 billion, per Adobe Analytics. Bargain hunters bought $5.03 billion worth of products online on Black Friday, an increase of 16.9% from last year. The euphoria did not end here, as the shopping frenzy was palpable on Cyber Monday when online sales soared 16.8% to $6.59 billion.

Per National Retail Federation (“NRF”) an American spent about an average of $335.47 during the five-day period. Further, shopping through mobile devices was the most prominent trend which developed during this year’s Black Friday and Cyber Monday shopping period, as nearly 63% of customers used their smart phones to make buying decisions, while 29% used it to actually buy goods.

Overall, NRF projects a 3.6-4% rise in November and December sales (excluding autos, gas and restaurant sales) to $678.75-$682 billion, up from $655.8 billion last year and better than the five-year average sales growth of 3.5%. Data compiled by eMarketer forecasts 3.1% jump in holiday sales (November and December) to $923.15 billion, while retail e-commerce holiday season sales are anticipated to rise 16.6%.

Wrapping Up

Retail sector is hogging all the attention, and this time for good reasons. For the time being, the expression "retail apocalypse” appears to be a thing of past. The sector has certainly been facing the brunt of heightened online competition, lower footfall and changing consumer spending patterns but of late the tables are turning in favor of the retailers.

From Amazon (NASDAQ:AMZN) to Wal-Mart (NYSE:WMT) , Target (NYSE:TGT) to Macy’s (NYSE:M) and Gap (NYSE:GPS) to Best Buy (NYSE:BBY) retailers are gearing up for the busiest part of the year. With digital transformation in shopping retailers are fast adopting the omni-channel mantra. The Retail-Wholesale sector has gained roughly 30% so far in the year, outperforming the S&P 500 index, which advanced 20.7%.

As you can see, there are plenty of reasons to be optimistic about the retail sector but what about investing in the space right now? Out of the stocks mentioned above, Wal-Mart carries a Zacks Rank #2 (Buy), while Amazon, Target, Macy’s, Best Buy and Gap carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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