4 Solid Retail Stocks To Buy Amid Growing Challenges

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Higher demand for consumer goods has been driving retail sales although skyrocketing prices have been a cause of concern. People have been cut down on expenses over the past several months but the retail sector hasn’t been affected much, which is a good sign given that several other sectors have started showing signs of slowing growth.

According to the latest Mastercard SpendingPulse, both online and in-store retail sales grew in August. Moreover, predictions are that retail sales are projected to grow at a faster pace during the holiday season despite several challenges. Given this situation, retailers like The Buckle, Inc. (BKE - Free Report), Designer Brands Inc. (DBI - Free Report), Movado Group, Inc. (MOV - Free Report) and PC Connection, Inc. (CNXN - Free Report) are likely to do well in the near term.

Retail Sales Grow

The retail sector has been putting up a great fight amid ongoing challenges like rising prices and the supply-chain crisis. According to the latest Mastercard SpendingPulse, retail sales jumped 11.7% in August on a year-over-year basis. Moreover, sales grew 20.4% from August 2019.

Rising energy costs and food prices have been behind the recent uptick in sales but prices have also been cooling over the past month. This indicates that people are still spending a lot on other goods that are driving sales.

Back-to-school shopping also played a key role in helping boost retail sales last month.

Consumers have been negotiating their purchases amid growing prices. However, higher demand for consumer goods has been helping the retail sector flourish. Also, online sales, which had slowed down lately as traffic increased at physical stores, grew 8.9% in August. More interestingly, online retail sales increased a whopping 100.2% from August 2019.

Understandably, the pandemic changed the way people shopped traditionally. Although e-commerce has been growing steadily over the past few years, the pandemic saw an increasing number of people shopping online as stores remained closed and people preferred maintaining social distancing.

This saw e-commerce overtaking in-store shopping and the trend has continued since.

Holiday Season to Help Retailers

The holiday season is approaching and is expected to help retailers once again. According to the Mastercard SpendingPulse report, holiday retail sales, excluding automotive, are projected to grow 7.1% year over year. According to analysts, many retailers are planning to start the holiday season in October to boost sales.

The 2021 holiday season was disappointing for the first time, as total revenues did not match the expectations of retailers. However, this year, key shopping days like Black Friday weekend, are expected to make a strong return. Besides, Christmas Eve is on Saturday, which is expected to be one of the busiest shopping days this time round.

In-store retail sales are expected to grow 7.1% year over year. Although e-commerce has been playing a dominant role in driving sales over the years, this year, in-store sales made up 80% of the total retail sales from January through August.

Among the top-selling categories will be apparel and luxury goods. Apparel sales are expected to grow 4.6% year over year, while luxury goods are projected to jump 4.4%.


Our Choices

Although retailers are struggling as higher costs have made consumers spend cautiously, the retail sector has so far put up an impressive show. This is thus the right opportunity to invest in retail stocks that have both a strong offline and online presence and boast a Zacks Rank #1 (Strong Buy) or 2 (Buy).

The Buckle, Inc. (BKE)

The Buckle, Inc. is a leading retailer of medium to better-priced casual apparel, footwear, and accessories for fashion-conscious young men and women. BKE markets a wide selection of brand names and private-label casual apparel, including denim, other casual bottoms, tops, sportswear, outerwear, accessories, and footwear.

The Buckle’sexpected earnings growth rate for the current year is 4.5%. The Zacks Consensus Estimate for current-year earnings has improved by 2.3% over the past 90 days. BKE has a Zacks Rank #2.

Designer Brands (DBI)

Designer Brands Inc. designs produce and retail footwear and accessories. DBI offers shoes, boots, sandals, sneakers, socks, handbags, and accessories. Designer Brands’operating segment consists of the DSW segment, which includes DSW stores and dsw.com, and the Affiliated Business Group segment.

Designer Brands’ expected earnings growth rate for the current year is 23.5%. The Zacks Consensus Estimate for current-year earnings has improved by 6.1% over the past 90 days. DBI has a Zacks Rank #2.

Movado Group (MOV)

Movado Group, Inc. is one of the world's premier watchmakers. MOV designs, manufactures, and distributes watches from 10 of the most recognized and respected names in time: Movado, Concord, EBEL, and ESQ Movado along with their Coach, HUGO BOSS, Juicy Couture, Lacoste, Tommy Hilfiger, and Scuderia Ferrari licensed watch brands.

Movado Group’s expected earnings growth rate for the current year is 7.4%. The Zacks Consensus Estimate for current-year earnings has improved by 3.7% over the past 90 days. MOV has a Zacks Rank #2.

PC Connection (CNXN)

PC Connection, Inc. is a direct marketer of brand-name personal computers and related peripherals, software, and networking products to business, education, government, and consumer end users located primarily in the United States.

PC Connection’sexpected earnings growth rate for the current year is 24.2%. The Zacks Consensus Estimate for current-year earnings has improved by 2.8% over the past 90 days. CNXN has a Zacks Rank #2.

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