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The retail industry has struggled lately as customers have become more frugal with their spending due to rising prices. Sales, however, increased again in January as inflation appeared to be slowing down. Retail sales are increasing as a result of the continued high demand. Moreover, despite the rising inflationary pressure, the labor market remains robust.

People are benefiting from this since their purchasing power has continued to rise as a result of the economy's acquisition of new jobs. Thus, funds likeFidelity Select Retailing Portfolio (FSRPX - Free Report), Fidelity Advisor Consumer Staples Fund Class A (FDAGX - Free Report), and Fidelity Select Consumer Staples Portfolio (FDFAX - Free Report) are likely to benefit in the near term.

Retail Sale Rebound

The Commerce Department reported on Feb 15 that retail sales jumped 3% in January on a month-over-month basis and also surpassed forecasts of a 1.9% increase. The increase in January came after sales declined 1.1% in December. Excluding autos, retail sales rose 2.3%, exceeding estimates for a 0.9% increase.

Sales at restaurants and bars, which were up 7.2% month over month, were the primary factor behind the robust jump in January. While sales at furniture and furnishings businesses rose 4.4%, sales at motor and motor parts dealers grew 5.9%. Sales at appliance and electronics stores jumped 3.5%.

E-commerce, which has played a major role in boosting retail sales since the onset of the pandemic, drove sales once again, as online sales increased 1.3% in January. E-commerce has since emerged as the most popular mode of shopping.

Millions chose to shop from home during the epidemic due to their fears of getting the COVID-19 virus. They finally understood the benefits of shopping online as a result of this. Since then, the trend has persisted and significantly aided the retail industry.

Also, people have started spending more freely since inflation has been showing signs of easing in recent months. Although the Consumer Price Index (CPI), the preferred gauge of measuring inflation, rose 0.5% in January, inflation had moderated in prior months.

Another factor benefiting the retail sector is the strong job additions to the economy. The labor market has been resilient amid rising inflationary pressure, which is allowing people to spend freely as more jobs mean more wages.

3 Best Choices

We have selected three mutual funds with significant exposure to the retail sector that carries a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds.

Fidelity Select Retailing Portfolio fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 10.7% and nearly 9% over the past three and five-year periods, respectively.

FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.70%, which is below the category average of 0.79%.

Fidelity Advisor Consumer Staples Fund Class A aims for capital growth. FDAGX invests the majority of its assets in securities of companies that manufacture and market consumer staples products. Fidelity Advisor Consumer Staples Fund Class A primarily invests in common stocks of companies.

Fidelity Advisor Consumer Staples Fund Class A has a history of positive total returns for more than 10 years. Specifically, FDAGX has returned nearly 8.9% and 6.6% over the past three and five-year periods, respectively.

FDAGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73%, which is below the category average of 0.76%.

Fidelity Select Consumer Staples Portfolio fund aims for capital growth. FDFAX invests the majority of assets in securities of companies primarily engaged in manufacturing, marketing or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.

Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 9.2% and 6.9% over the past three and five years, respectively.

FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73% versus the category average of 0.76%.

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