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Consumer spending activity, which is one of the pivotal factors driving the economy, has somewhat slowed down. March retail sales data marked the second straight month of decline in spending. The Commerce Department stated that U.S. retail and food services sales in March declined 1% sequentially to $691.7 billion, following an upwardly revised reading of a 0.2% decline in February.

U.S. retail sales fell as inflation and recession-wary shoppers curtailed their spending. The decline was steeper than expected, with spending on categories such as automobiles, home furnishing, electronic stores, and building supplies taking a hit. Underlying price pressure, a slowing labor market, and a higher interest rate environment cooled demand. Softness in consumer spending activity indicates that the economy is losing momentum.

Category-Wise Sales

The Commerce Department’s report suggests that sales at motor vehicle & parts dealers and furniture & home furnishings stores decreased 1.6% and 1.2%, respectively, on a sequential basis. Sales at both building material & supplies dealers and electronics & appliance stores fell 2.1%.

Sales at food & beverage stores dropped 0.1%, while the same at clothing & clothing accessories outlets fell 1.7%. The metric declined 3% at general merchandise stores. Meanwhile, receipts at gasoline stations were down 5.5%.

Sales at health & personal care stores rose 0.3%, while the same at miscellaneous store retailers grew 0.2%. Again, sales at non-store retailers were up 1.9%, while at food services & drinking places it rose 0.1%. At sporting goods, hobby, musical instrument, & book stores, sales advanced 0.2%.

Past Year Price Performance

Image Source: Zacks Investment Research

4 Prominent Picks

You may want to invest in The Kroger Co. (KR - Free Report), which operates in the thin-margin grocery industry. The company has been making significant investments to enhance product freshness and quality and expand digital capabilities. It has been introducing new items under its “Our Brands” portfolio.

This Zacks Rank #1 (Strong Buy) company has an estimated long-term earnings growth rate of 6%. The Zacks Consensus Estimate for Kroger’s current financial year sales and EPS suggests growth of 2.5% and 6.6%, respectively, from the year-ago period. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another stock worth considering is Urban Outfitters, Inc. (URBN - Free Report). This leading lifestyle products and services company seems to be a promising bet due to its solid business strategies and sound fundamentals.

Management has been strengthening its direct-to-consumer business, enhancing productivity across the existing channels, and optimizing inventory levels. URBN’s strategic growth initiative, FP Movement, and store-growth endeavors are also impressive.

The Zacks Consensus Estimate for Urban Outfitters’ current-fiscal sales and EPS suggests growth of 4.3% and 41.7%, respectively, from the year-ago reported figure. It has an estimated long-term earnings growth rate of 18%. The stock also sports a Zacks Rank #1.

Investors can also count on Ulta Beauty, Inc. (ULTA - Free Report). The company has been strengthening its omni-channel business and exploring the potential of both physical and digital facets.

It has been implementing various tools to enhance guests' experience, like offering a virtual try-on tool and in-store education, and re-imagining fixtures, among others. Ulta Beauty focuses on offering customers a curated and exclusive range of beauty products through innovation.

Impressively, this beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products, and salon services has a trailing four-quarter earnings surprise of 26.2%, on average.

We note that this Zacks Rank #2 (Buy) company has an estimated long-term earnings growth rate of 12.3%. The Zacks Consensus Estimate for Ulta Beauty’s current-fiscal sales and EPS suggests growth of 8.5% and 5.1%, respectively, from the year-ago reported figure.

Sprouts Farmers Market, Inc. (SFM - Free Report) is another potential pick. To expand its customer base, Sprouts Farmers has been taking several initiatives focused on product innovation, customer experience, and targeted marketing with great pricing and technology.

It is steadily expanding its presence in the natural organic space, given the huge demand in the segment. It has been reducing operational complexity, optimizing production, improving the in-stock position, and updating to smaller-format stores.

Sprouts Farmers has a trailing four-quarter earnings surprise of 12.5%, on average. The company has an estimated long-term earnings growth rate of 9.5%. The Zacks Consensus Estimate for Sprouts Farmers’ current financial year sales and EPS suggests growth of 5.2% and 5.4%, respectively, from the year-ago period. The stock also carries a Zacks Rank #2.

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