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Growing consumer confidence coupled with higher spending has been helping the retail industry get back on its feet since the beginning of the year. An increasing number of Americans are feeling more confident about spending as they are getting vaccinated and the economy is reopening.

Also, the new round of stimulus has given them more spending power, which has given the retail sector hopes of a faster recovery. Taking into account this favorable consumer environment, the National Retail Federation (NRF) has raised its 2021 forecast for retail sales growth.

Retail Sales Forecast Revised Upward

The NRF, on Jun 10, revised its annual retail sales growth forecast between 10.5% and 13.5% for 2021 to another $4.4 trillion to $4.56 trillion as the economy gathers pace toward its recovery. The revised forecast surpasses the NRF’s earlier projection of 6.5% to 8.2% growth for 2021 made in February.

However, things have changed a lot over the past four months, with more people getting vaccinated. E-commerce, which has been driving much of the retail sales since the COVID-19 outbreak, will continue to play a dominant role throughout the year. Non-store and online sales are now projected to grow between 18% and 23% or between $1.09 trillion and $1.13 trillion.

The revised projections are also a lot higher than $4.02 trillion retail sales recorded in 2020. Of the total sales, $902 billion had accounted for online and non-store sales. Notably, the NRF expects retail sales to return to pre-pandemic levels in the ongoing quarter. The NRF has also raised its 2021 GDP growth forecast to 7% from its earlier expectation of 4.4% to 5%.

Retail Sector Getting Back on Its Feet

A combination of factors such as a faster vaccination rate, fiscal stimulus, and private-sector ingenuity have been playing key roles in raising hopes among millions of Americans about the national economy’s faster recovery.

Also, the Centers for Disease Control and Prevention (CDC) has been relaxing restrictions, giving people the much-required confidence to visit physical stores, hotels, and restaurants. A report from the New York Federal Reserve shows that people are more cautious about spending this time around after receiving the stimulus checks. Last time, the checks got exhausted in the fourth quarter and saw retail sales taking a hit.

Our Choices

Given the upbeat sentiment and considering the favorable consumer environment, this would be the right opportunity to invest in retail stocks. Each of our picks sports a Zacks Rank #1 (Strong Buy). 

Buckle, Inc. The (BKE Quick Quote BKE - Free Report) is a leading retailer of medium to better-priced casual apparel, footwear, and accessories for fashion-conscious young men and women. 

The company’s expected earnings growth rate for next year is 41%. The Zacks Consensus Estimate for current-year earnings has improved 36.4% over the past 60 days. 

Target Corporation (TGT Quick Quote TGT - Free Report) has evolved from just being a pure brick & mortar retailer to an omni-channel entity. The company has been investing in technologies, improving websites and mobile apps, and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.

The company’s expected earnings growth rate for the current year is 25.6%. The Zacks Consensus Estimate for current-year earnings has improved 37.4% over the past 60 days.

Urban Outfitters, Inc. (URBN Quick Quote URBN - Free Report) is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor, and gift products. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 31.8% over the past 60 days.

Conns, Inc. (CONN Quick Quote CONN - Free Report) sells major home appliances, including refrigerators, freezers, washers, dryers, and ranges, and a variety of consumer electronics, including projection, plasma, and LCD televisions, camcorders, VCRs, DVD players, and home theater products. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 23.9% over the past 60 days.

DICKS Sporting Goods, Inc. (DKS Quick Quote DKS - Free Report) operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories, and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf and water sports.

The company’s expected earnings growth rate for the current year is 34.8%. The Zacks Consensus Estimate for current-year earnings has improved 71.5% over the past 60 days.

Ulta Beauty Inc. (ULTA Quick Quote ULTA - Free Report) offers a wide range of products, including cosmetics, fragrance, skincare, haircare, bath and body products, and salon styling tools in stores.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 25.2% over the past 60 days.