We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Giant Retailers to Buy on Stable Retail Sales in June
Read MoreHide Full Article
On Jul 16, the Department of Commerce reported that retail sales in June remained almost the same month over month, compared with the consensus estimate of a decline of 0.3%. The metric for May was also revised upward to an increase of 0.3% from 0.1% reported earlier. Year over year, retail sales were up 2.3% in June.
Core retail sales (excluding auto) increased 0.4% in June over May, beating the consensus estimate of 0.2%. The reading for May was also revised upward to an increase of 0.1% in contrast to a decrease of 0.1% reported earlier.
Stable retail sales in June came as a relief to market participants. Better-than-expected retail sales indicate solid consumer expenditure, which is the largest driver of the U.S. GDP.
Moreover, following the release of PCE and core PCE inflation data for May and CPI and core CPI inflation data for June, market participants have currently assigned a 100% probability of a 25-basis point cut in the benchmark lending rate by the Fed in September.
A dwindling inflation rate, sky-high expectations of a rate cut in September, gradually declining yield on the benchmark 10-Year U.S. Treasury Note along with steady consumer spending are likely to ensure the Fed’s much-hyped “soft-landing” of the U.S. economy.
On Jul 15, speaking at the Economic Club of Washington D.C., Fed Chairman Jerome Powell said that the central bank may not wait for the inflation rate to cool to its 2% target before implementing an interest rate cut.
According to Powell, “The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%. The Fed is looking for greater confidence and what increases that confidence in that is more good inflation data, and lately here we have been getting some of that.”
Our Top Picks
We have narrowed our search to five retail behemoths that have strong growth potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Walmart Inc. (WMT - Free Report) has been gaining from its highly diversified business with contributions from various segments, channels and formats. WMT has been benefiting from an increase in in-store and digital channel traffic due to its robust omnichannel initiatives. Store-fulfilled delivery sales jumped 50% in the first quarter of fiscal 2025.
Walmart’s strategic focus on enhancing delivery services has also been rewarding, as evidenced by the constant increase in the market share for groceries. Upsides like these, along with growth in the advertising business, fueled WMT’s first-quarter results and led to an encouraging fiscal 2025 view.
Walmart has an expected revenue and earnings growth rate of 4.3% and 9.5%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 3% over the last 60 days.
Burlington Stores Inc. (BURL - Free Report) achieved improved sales while effectively managing expenses, leading to margin expansion and surpassing earnings expectations. Despite cautious sentiments, BURL’s upward revision of its earnings outlook signals optimism for growth prospects. The acquisition of BBBY leases, while initially affecting earnings, presents strategic opportunities for store expansion and potential revenue growth.
We expect BURL’s comps to improve 1.8% in the current fiscal year. Moreover, BURL’s assessment that lower-income consumer spending, although impacted by inflationary pressures, has stabilized, suggests cautious yet manageable market conditions going forward.
Burlington Stores has an expected revenue and earnings growth rate of 9.5% and 25.4%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the last 60 days.
Costco Wholesale Corp.’s (COST - Free Report) key strengths are strategic investments, a customer-centric approach, merchandise initiatives, and an emphasis on membership growth. These factors have been helping COST to register decent sales and earnings numbers. We expect COST to register an 8.6% adjusted earnings per share improvement in fiscal 2024 on 4.8% revenue growth.
This outlook reflects COST’s ability to navigate the challenging operating environment, generate solid sales, and register high membership renewal rates. A favorable product mix, steady store traffic, pricing power, and strong liquidity position should help COST keep outperforming.
Costco Wholesale has an expected revenue and earnings growth rate of 7.2% and 8.9%, respectively, for next year (ending August 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.3% over the last seven days.
Ross Stores Inc. (ROST - Free Report) continues to benefit from positive customer response for its merchandise across both banners, which has been boosting the comps performance. This led ROST to report its fourth consecutive top and bottom-line beat in first-quarter fiscal 2024.
Results reflected benefits from higher sales, as well as lower distribution expense, domestic freight and buying expense. Backed by the ongoing sales momentum, ROST remains optimistic about its top and bottom-line performance for fiscal 2024.
Ross Stores has an expected revenue and earnings growth rate of 4.1% and 7.4%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the last 60 days.
Deckers Outdoor Corp. (DECK - Free Report) has strong potential for further expansion and market resilience. Key strategic initiatives, including product innovation and brand assortment expansion, coupled with a robust focus on direct-to-consumer channels, drive DECK’s growth trajectory. Successful international market penetration and a strong wholesale segment contribute to DECK’s market diversification.
Additionally, proactive consumer engagement strategies and omni-channel distribution bolster its competitive edge. DECK’s commitment to elevating renowned brands like UGG and HOKA into global lifestyle icons enhances brand equity and market reach. We expect net sales of DECK’s UGG and HOKA brands to increase of 5% and 20%, respectively, in fiscal 2025.
Deckers Outdoor has an expected revenue and earnings growth rate of 11.1% and 4.9%, respectively, for the current year (ending March 2025). The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the last 60 days.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 Giant Retailers to Buy on Stable Retail Sales in June
On Jul 16, the Department of Commerce reported that retail sales in June remained almost the same month over month, compared with the consensus estimate of a decline of 0.3%. The metric for May was also revised upward to an increase of 0.3% from 0.1% reported earlier. Year over year, retail sales were up 2.3% in June.
Core retail sales (excluding auto) increased 0.4% in June over May, beating the consensus estimate of 0.2%. The reading for May was also revised upward to an increase of 0.1% in contrast to a decrease of 0.1% reported earlier.
Stable retail sales in June came as a relief to market participants. Better-than-expected retail sales indicate solid consumer expenditure, which is the largest driver of the U.S. GDP.
Moreover, following the release of PCE and core PCE inflation data for May and CPI and core CPI inflation data for June, market participants have currently assigned a 100% probability of a 25-basis point cut in the benchmark lending rate by the Fed in September.
A dwindling inflation rate, sky-high expectations of a rate cut in September, gradually declining yield on the benchmark 10-Year U.S. Treasury Note along with steady consumer spending are likely to ensure the Fed’s much-hyped “soft-landing” of the U.S. economy.
On Jul 15, speaking at the Economic Club of Washington D.C., Fed Chairman Jerome Powell said that the central bank may not wait for the inflation rate to cool to its 2% target before implementing an interest rate cut.
According to Powell, “The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%. The Fed is looking for greater confidence and what increases that confidence in that is more good inflation data, and lately here we have been getting some of that.”
Our Top Picks
We have narrowed our search to five retail behemoths that have strong growth potential for the rest of 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Walmart Inc. (WMT - Free Report) has been gaining from its highly diversified business with contributions from various segments, channels and formats. WMT has been benefiting from an increase in in-store and digital channel traffic due to its robust omnichannel initiatives. Store-fulfilled delivery sales jumped 50% in the first quarter of fiscal 2025.
Walmart’s strategic focus on enhancing delivery services has also been rewarding, as evidenced by the constant increase in the market share for groceries. Upsides like these, along with growth in the advertising business, fueled WMT’s first-quarter results and led to an encouraging fiscal 2025 view.
Walmart has an expected revenue and earnings growth rate of 4.3% and 9.5%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 3% over the last 60 days.
Burlington Stores Inc. (BURL - Free Report) achieved improved sales while effectively managing expenses, leading to margin expansion and surpassing earnings expectations. Despite cautious sentiments, BURL’s upward revision of its earnings outlook signals optimism for growth prospects. The acquisition of BBBY leases, while initially affecting earnings, presents strategic opportunities for store expansion and potential revenue growth.
We expect BURL’s comps to improve 1.8% in the current fiscal year. Moreover, BURL’s assessment that lower-income consumer spending, although impacted by inflationary pressures, has stabilized, suggests cautious yet manageable market conditions going forward.
Burlington Stores has an expected revenue and earnings growth rate of 9.5% and 25.4%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 3.7% over the last 60 days.
Costco Wholesale Corp.’s (COST - Free Report) key strengths are strategic investments, a customer-centric approach, merchandise initiatives, and an emphasis on membership growth. These factors have been helping COST to register decent sales and earnings numbers. We expect COST to register an 8.6% adjusted earnings per share improvement in fiscal 2024 on 4.8% revenue growth.
This outlook reflects COST’s ability to navigate the challenging operating environment, generate solid sales, and register high membership renewal rates. A favorable product mix, steady store traffic, pricing power, and strong liquidity position should help COST keep outperforming.
Costco Wholesale has an expected revenue and earnings growth rate of 7.2% and 8.9%, respectively, for next year (ending August 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.3% over the last seven days.
Ross Stores Inc. (ROST - Free Report) continues to benefit from positive customer response for its merchandise across both banners, which has been boosting the comps performance. This led ROST to report its fourth consecutive top and bottom-line beat in first-quarter fiscal 2024.
Results reflected benefits from higher sales, as well as lower distribution expense, domestic freight and buying expense. Backed by the ongoing sales momentum, ROST remains optimistic about its top and bottom-line performance for fiscal 2024.
Ross Stores has an expected revenue and earnings growth rate of 4.1% and 7.4%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the last 60 days.
Deckers Outdoor Corp. (DECK - Free Report) has strong potential for further expansion and market resilience. Key strategic initiatives, including product innovation and brand assortment expansion, coupled with a robust focus on direct-to-consumer channels, drive DECK’s growth trajectory. Successful international market penetration and a strong wholesale segment contribute to DECK’s market diversification.
Additionally, proactive consumer engagement strategies and omni-channel distribution bolster its competitive edge. DECK’s commitment to elevating renowned brands like UGG and HOKA into global lifestyle icons enhances brand equity and market reach. We expect net sales of DECK’s UGG and HOKA brands to increase of 5% and 20%, respectively, in fiscal 2025.
Deckers Outdoor has an expected revenue and earnings growth rate of 11.1% and 4.9%, respectively, for the current year (ending March 2025). The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the last 60 days.