5 Retail Stocks To Buy On Renewed Consumer Confidence

Consumer confidence, which ebbed some time back, took an unexpected “U” turn in June, indicating that the economy remains well on track, barring a few hiccups. Though consumer confidence has largely receded from the highs it reached in March this year, analysts believe that it will improve once the policies announced by the current regime start taking shape and the picture becomes clearer.

For now, steady job additions, persistently low unemployment and gradual wage acceleration offer a perfect background to drive consumer confidence, a key determinant of the economy’s health. According to the recent Conference Board data, the Consumer Confidence Index rose to 118.9 this month from May’s reading of 117.6. We expect this positive sentiment to translate into higher consumer spending that may help revive sales.

U.S. retail sales in May recorded the steepest drop in 16 months. The Commerce Department stated that U.S. retail and food services sales in May fell 0.3% to $473.8 billion – following an unrevised reading of 0.4% growth registered in April – as people refrained from buying motor vehicles and spent less at gasoline stations, department stores and electronics shops. However, retail sales increased 3.8% from May 2016.

Nevertheless, the Retail-Wholesale sector still holds some promise, given the favorable economic indicators. We note that so far in the year, the sector has registered an increase of 14.3% compared with the S&P 500 that is up roughly 9.2%. The rebound in oil prices from all-time lows, improving labor market and a gradual improvement in the housing market signal that the economy is on a recovery mode. Thus, adding a few stocks from the space would be a prudent decision.

5 Prominent Picks

Here we have highlighted five Retail/Wholesale stocks with a favorable combination of a Zacks Rank #1 (Strong Buy) or #2 (Buy) and a VGM Score of “A” or “B”.

We suggest investing in Conn's, Inc. (CONN - Free Report) with a long-term earnings growth rate of 18.5% and a VGM Score of “A”. In the past one year, the stock has zoomed over 100% and comfortably outperformed the Zacks categorized Retail-Consumer Electronic industry, which advanced 64.9%. This specialty retailer of durable consumer goods and related services delivered an average positive earnings surprise of 80.9% over the trailing four quarters and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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