December 24, 2024
As the year comes to an end, trading volume will likely be low, with people getting into the holiday mood. The post-election euphoria appeared to have fizzled out over the past 10 days with indexes retreating from their earlier highs attained over the past month after the Federal Reserve indicated fewer rate cuts next year.
However, the holiday season is still not over, and people are spending aggressively, thanks to a steady rise in personal income over the past several months. This has been aiding the retail sector, with sales soaring in November. Also, fresh data showed that inflation cooled in November after moving sideways for a couple of months.
Given this situation, it would be ideal to invest in retail stocks. We have selected five stocks, namely Five Below, Inc. FIVE, Amazon.com, Inc. AMZN, Deckers Outdoor Corporation DECK, The Gap, Inc. GAP and Dutch Bros Inc. BROS 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 .
The Commerce Department reported last week that U.S. consumer spending jumped in November amid robust demand for a wide range of goods, reflecting the underlying strength in the economy. Consumer spending, which accounts for more than two-thirds of the nation’s economic activity, rose a solid 0.4% in November after increasing 0.3% a month earlier.
Consumers spent across a variety of goods and services, including motor vehicles, recreational goods, healthcare, clothing and footwear, furniture, and restaurant services. Consumer spending rose 3.7% in the third quarter, the fastest pace in 18 months.
The jump in consumer spending came as data showed a steady rise in personal income and wages. Personal income rose 0.3% sequentially in November, while wages jumped 0.6%. Also, the personal savings rate dropped to 4.4% in November from 4.5% in the month earlier as people spent freely during the holiday season.
Fresh data showed that in November, housing inflation grew at its slowest rate since April 2021, indicating a slowdown in rent increases. Meanwhile, the cost of food and accommodation services rose the most in 10 months. The personal consumption expenditure (PCE) index increased just 0.1% in November after climbing 0.2% in October.
Year over year, the PCE index advanced 2.4% after increasing 2.3% in October. Core PCE, which excludes the volatile food and energy costs, also rose 0.1% sequentially in November after increasing 0.3% in the prior month and 2.8% from the year-ago levels.
The Federal Reserve cut interest rates by 25 basis points in December, its third rate cut this year. However, it also hinted at slowing its pace of rate cuts in 2025, with just two interest rate cuts now expected. However, slowing inflation has raised hopes that the Federal Reserve could change its stance in the near term.
Also, higher consumer spending is boosting the retail sector, with the holiday season making an impressive start. Retail sales grew a solid 0.7%, totaling $724.6 billion month over month in November, after increasing 0.5% in October. U.S. retail sales grew 3.4% on Black Friday, with a 14.6% jump in online sales. Black Friday online sales totaled $10.8 billion. Consumers spent $13.3 billion online alone on Cyber Monday this year.
Given the positive sentiment, it would be ideal to invest in retail stocks.
Five Below, Inc. is a specialty value chain retailer that provides a wide range of premium quality and trendy merchandise for $5 or below. FIVE mainly targets teenagers or pre-teen shoppers for its products, which include certain brands and licensed merchandise. Notably, these products belong to categories such as Style, Room, Sports, Tech, Create, Party, Candy and Now.
Five Below’s expected earnings growth rate for next year is 2.7%. The Zacks Consensus Estimate for current-year earnings has improved 6.6% over the past 60 days. FIVE presently carries a Zacks Rank #2.
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.
Amazon.com has an expected earnings growth rate of 20% for next year. The Zacks Consensus Estimate for current-year earnings has improved 9.3% over the last 60 days. AMZN presently carries a Zacks Rank #2.
Deckers Outdoor Corporation is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. DECK sells products primarily under five proprietary brands — UGG, HOKA, Teva, Sanuk and Other brands (mainly comprising Koolaburra).
Deckers Outdoor’sexpected earnings growth rate for next year is 13.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the past 60 days. DECK currently has a Zacks Rank #2.
The Gap, Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products. GPS offers products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix and Hill City brands.
The Gap’s expected earnings growth rate for next year is 6.9%. The Zacks Consensus Estimate for current-year earnings has improved 7.4% over the past 60 days. GPS currently has a Zacks Rank #2.
Dutch Bros Inc. is an operator and franchisor of drive-thru shops that focus on serving high-quality, hand-crafted beverages with unparalleled speed and superior service.
Dutch Bros’ expected earnings growth rate for next year is 28.9%. The Zacks Consensus Estimate for current-year earnings has improved 15.4% over the past 60 days. BROS presently carries a Zacks Rank #2.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
The Gap, Inc. (GAP) : Free Stock Analysis Report
Five Below, Inc. (FIVE) : Free Stock Analysis Report
Dutch Bros Inc. (BROS) : Free Stock Analysis Report
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