The U.S. retail sector has shown immense courage amid price pressures and higher borrowing rates that took a toll on overall sales. However, the sector has witnessed steady growth in sales over the past few months as inflation continued to cool and the rate cuts by the Federal Reserve eased price pressures.

Retail sales jumped more than expected in November as households spent lavishly on a variety of goods and merchandise, proving that the economy is still on solid ground. As the retail sector shows signs of a solid rebound and the Federal Reserve hints at more rate cuts in 2025, investing in retail stocks will be a wise decision.

We have selected five retail stocks, namely Amazon.com, Inc. AMZN, The Gap, Inc. GAP, Williams-Sonoma, Inc. WSM, Tapestry, Inc. TPR and Urban Outfitters URBN for investors.These stocks have seen positive earnings estimate revisions in the last 60 days, carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) each and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank stocks here .

Retail Sales Jump in November

The Commerce Department reported on Tuesday that retail sales jumped 0.7% sequentially in November, after rising 0.5% in October and beating economists’ expectations of a rise of 0.5%. Year over year, retail sales increased 3.8% in November.

A robust 2.4% jump in motor vehicle and auto parts sales coupled with a 1.8% rise in online sales, drove overall retail sales in November. The solid jump in November retail sales also indicated an impressive start to the holiday season.

The rise in retail sales signals a robust consumer sector as it accounts for the majority of the nation’s overall economic activity. Consumers are spending more freely as price pressures have eased substantially.

The Federal Reserve started its easing cycle with 50 basis point rate cut in September, followed by a quarter percentage point rate cut in November. Investors are now hopeful of another 25 basis point rate cut in the Federal Reserve’s two-day policy meeting in December, which is underway. Also, the Federal Reserve has hinted at more rate cuts in 2025 as it believes that inflation, despite rising slightly in November, is on track to reach its 2% target.

5 Retails Stocks With Upside

Amazon.com, Inc.

Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. AMZN’s online retail business revolves around the Prime program well-supported by the company’s massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish a footprint in the physical grocery supermarket space. AMZN also enjoys a dominant position in the cloud-computing market, particularly in the Infrastructure as a Service space, thanks to Amazon Web Services.