4 Retail Stocks for Holiday Shopping Season

With the holiday shopping season around the corner, retailers are preparing to go out of their way to attract customers. Several factors indicate that there will be an uptrend in holiday sales this year. According to the National Retail Federation, holiday sales excluding gasoline, restaurants and cars will increase 3.7% on a year-over-year basis.

A yearly increase of 3.7% is substantially higher than the average increase of 2.5% recorded over the last 10 years. Adding stocks of retailers to your portfolio at this time of the year would make for a smart choice.

Retailers Increase Seasonal Hiring

One indication that sales could be better this holiday season is the fact more than 50% of retailers will engage in seasonal hiring this year. This was revealed by data gathered by a CareerBuilder.com survey. Last time around, only 43% of retailers recruited seasonal workers.

Additionally, the number of full-time workers hired by U.S. retailers during the fourth quarter will be the highest in nine years. Amazon.com, Inc. (AMZN - Analyst Report) has already recruited 25,000 full time employees this year. The online retailing behemoth intends to employ 100,000 seasonal workers for the holiday shopping season.

Labor Market Improves

A significant improvement in the labor market situation and lower fuel costs have raised disposable incomes. The economy added 271,000 nonfarm payroll jobs in October, crushing the consensus estimate of 182,000. Also, the unemployment rate declined to a seven and a half year low of 5% last month from 5.1% in September.

Moreover, the report showed that average hourly earnings increased 9 cents in October to $25.20 after rising only 1 cent in the prior month. The metric also registered a 2.5% year-on-year increase, recording its biggest gain since the recession in 2008.

Fuel Costs Fall

Another major factor which will increase spending this holiday season is the continuing slump in fuel prices. Data from the Consumer Fuels Survey results conducted by the National Association of Convenience Stores (NACS) shows that 26% of consumers will increase spending in November.

This is substantially higher than the 21% recorded during the same period last year. The survey is conducted every month by the NACS to determine the effect of gasoline prices on the broader economy.

Our Choices

The increase in seasonal hiring by retailers, the slump in fuel prices and record wage growth are all trends which favor the consumer. These factors are likely to result in a strong holiday shopping season.

This is why it may be a good time to pick stocks of retailers. Our selection is also backed by a good Zacks Growth Score and Zacks Rank.

We narrowed down our choices with the help of our new style score system.

Our research shows that stocks with a Growth Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the growth investing space.

American Eagle Outfitters, Inc. (AEO - Analyst Report) is a specialty retailer of casual apparel, accessories and footwear for men and women aged15–25 years.

American Eagle Outfitters sports a Zacks Rank #1 (Strong Buy) and has a Growth Style Score of ‘A’. The company has expected earnings growth of 66.3% for the current year. The earnings estimate for the current year has increased by 2.9% over the last 30 days. 

Burlington Stores, Inc. (BURL - Snapshot Report) operates as an off-price apparel and home product retailer.

Burlington Stores also has a Zacks Rank #2 (Buy) and has a Growth Style Score of ‘A’. The company has expected earnings growth of 29.1% for the current year.

The Kroger Co. (KR - Analyst Report) is one of the nation’s largest grocery retailers. Apart from selling turkeys, Kroger will be offering seven varieties of Thanksgiving meals this year. 

Kroger has a Zacks Rank #2 (Buy) and has a Growth Style Score of ‘B.’ The company has expected earnings growth of 12.9% for the current year. The earnings estimate for the current year has increased by 0.2% over the last 30 days. 

Destination XL Group, Inc. (DXLG - Snapshot Report) is a multi-channel specialty retailer of big & tall men's apparel with operations throughout the United States, Canada and Europe.

Destination XL Group sports a Zacks Rank #2 (Buy) and has a Growth Style Score of ‘A.’ The company has expected earnings growth of 28.1% for the current year.