4 Retail Stocks to Buy Now for Strong Holiday Season Gains
As the holiday season approaches, retailers are bracing up for modest growth amid a tough economic backdrop. Factors such as inflation, ongoing geopolitical tensions and a contentious presidential election are expected to influence consumer behavior, leading to cautious spending activity. The National Retail Federation (NRF) projects that holiday sales will increase between 2.5% and 3.5%, the lowest growth rate seen in six years.
Despite the anticipated slowdown, holiday spending will still be substantial. The NRF estimates total sales during the November-December period to be between $979.5 billion and $989 billion, reflecting a slight increase from last year's total of $955.6 billion. This growth, however, trails behind the 3.9% increase recorded in 2023.
Retailers such as Abercrombie & Fitch Co. ANF, Costco Wholesale Corporation COST, Burlington Stores, Inc. BURL and Boot Barn Holdings, Inc. BOOT are preparing to adapt to these challenging conditions and capitalize on potential opportunities. Decent job growth and steady wage gains should support consumer spending. Moreover, the recent 50-basis point cut in the interest rate has lifted confidence.
Holiday Season: Trends and Insights
This year's holiday season is six days shorter than last year, reducing the number of shopping days between Thanksgiving and Christmas to 26. With fewer days to shop, consumers are expected to be more frugal with their spending, opting for budget-friendly alternatives. In response, retailers are likely to introduce deeper discounts and promotions to attract price-sensitive shoppers.
Online shopping once again is expected to be a bright spot for retailers. The NRF predicts that online and non-store sales will grow by 8% to 9% to $295.1 billion to $297.9 billion. This indicates a significant increase from last year’s $273.3 billion, reflecting the ongoing shift toward online shopping as consumers prioritize convenience.
In anticipation of increased holiday demand, retailers are expected to hire between 400,000 and 500,000 seasonal workers. While this is slightly below last year’s 509,000 hires, it reflects the need for additional staff to manage early holiday events and promotions. Many companies have already begun their seasonal hiring to win over early-bird shoppers.
That said, we have highlighted four stocks from the Retail - Wholesale sector that look well-positioned based on their sound fundamentals.
Past-Year Stock Price Performance of ANF, COST, BURL & BOOT
Image Source: Zacks Investment Research
4 Prominent Retail Stocks
Abercrombie & Fitch: Brand Visibility & Global Expansion
Abercrombie & Fitch stands out as a strong investment choice. The company excels in integrating digital and physical retail channels, offering a seamless shopping experience and driving higher customer satisfaction and loyalty. Strategic marketing initiatives, particularly targeted campaigns in key markets, have been effective in boosting brand visibility and customer acquisition. The introduction of innovative product lines meets specific customer needs and broadens the brand's appeal. Abercrombie & Fitch’s regional operating model, with a focus on the Americas, the EMEA (Europe, the Middle East and Africa) and the APAC (Asia-Pacific), provides a solid foundation for global expansion.
This leading, global, omnichannel specialty retailer of apparel and accessories for men, women and kids has a trailing four-quarter earnings surprise of 28%, on average. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings per share (EPS) suggests growth of 13% and 63.4% from the year-ago period. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Costco: Leveraging Membership Model for Success
Costco has been navigating the market’s ups and downs pretty well. Strategic investments, a customer-centric approach, merchandise initiatives and an emphasis on memberships have been this discount retailer’s primary strengths. Costco's distinctive membership business model and pricing power set it apart from traditional players. Through a calculated approach that involves identifying untapped markets and tailoring offerings to meet customer preferences, Costco has managed to deepen its roots.
The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS implies growth of 7.4% and 10.1%, respectively, from the year-ago period’s actuals. This Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 2%, on average.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Image Source: Zacks Investment Research
Burlington: Merchandising Enhancements & Store Productivity
Burlington Stores is a nationally recognized off-price retailer. The company has demonstrated a strong ability to adapt to consumer trends, which gives it a competitive edge. By staying in tune with customer preferences and adjusting its product offerings, Burlington Stores is well-positioned to capture market share. The company has balanced promotions with regular price sales, appealing to budget-conscious shoppers while protecting margins. Its strategic initiatives, including enhancing merchandising capabilities and optimizing store operations, have supported revenue growth. With targeted store openings, relocations and real-time inventory management, Burlington Stores has seized opportunities and improved store productivity.
The Zacks Consensus Estimate for Burlington Stores’ current financial-year sales and EPS suggests growth of 10.1% and 30.5%, respectively, from the year-ago reported figures. This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 18.4%, on average.
Image Source: Zacks Investment Research
Boot Barn Holdings: A Diverse Product Portfolio
Boot Barn Holdings’ diverse product offerings, which include western wear, boots and outdoor apparel, align well with seasonal trends and attract a broader customer base. The company’s continued investment in enhancing the omnichannel shopping experience allows customers to transition seamlessly between online and physical stores. Targeted marketing campaigns designed to resonate with consumers, along with the introduction of exclusive product lines, distinguish Boot Barn from its competitors. Customer loyalty programs incentivize repeat purchases, while a recovering economy fosters increased consumer confidence and discretionary spending, creating an ideal environment for sales growth.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial-year sales and EPS suggests growth of 12% and 10.5%, respectively, from the year-ago reported figures. This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 7.1%, on average.
Image Source: Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report