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5 Retail Stocks to Take Center Stage as Sales Pop Up Again

U.S. retail sales rose again in the month of June, marking the fifth straight month of gains with May's reading revising upward.

Well you simply can’t ignore the fact that concerns related to trade war have to an extent subdued business environment and impacted consumer confidence. Nevertheless, this did not deter people from buying motor vehicles or splurging in restaurants or purchasing a range of other goods. Americans continued their shopping spree supported by strengthening labor market, lower taxes and modest improvement in income.

U.S. retail sales rose again in the month of June, marking the fifth straight month of gains with May’s reading revising upward. Certainly, consumer spending — one of the pivotal factors driving the economy — is likely to remain strong in the months ahead. This is evident from the drop in the number of Americans claiming unemployment benefits that fell to a two-month low last week with jobless rate hovering near its 18-year low and the economy adding 213,000 jobs last month.

Its quite apparent, the economy remains well on track after a muted start to the year. These factors along with firming inflation allowed the Federal Reserve to raise the benchmark interest rate for the second time this year. The Fed has signaled a two more hikes before the end of this year. Evidently, the economic activity continues to gain pace with second-quarter GDP rate likely to come ahead of 4%, per industry experts.

Retail Sales Rise Again

The Commerce Department stated that U.S. retail and food services sales in June advanced 0.5% to $506.8 billion, following an upwardly revised reading of 1.3% gain in May. Notably, retail sales improved 6.6% from June 2017.

The report suggests that sales at motor vehicles and parts dealers rose 0.9%, while at food services & drinking places the metric increased 1.5%. Meanwhile, receipts at gasoline stations rose 1%, while at furniture & home furnishing stores sales improved 0.6%.

Sales at building material dealers and health & personal care stores grew 0.8% and 2.2%, respectively. Sales at non-store retailers jumped 1.3% but surged 10.2% from the prior-year period.

However, sales at sporting goods, hobby, book & music stores dipped 3.2%, while at clothing & clothing accessories stores the same fell 2.5%. Sales at general merchandise stores declined 0.8%, while at electronics & appliance stores the metric slid 0.4%.

Retail Stocks to Sustain Momentum

Pick up in retail sales is welcome news for retailers, whose fortunes depend upon consumers’ willingness to spend. A robust job market with unemployment rate at 4%, massive tax cuts and sound economic fundamentals are likely to boost consumer confidence. We expect this positive sentiment to translate into higher consumer spending.

For obvious reasons, retailers are the end gainers. With digital transformation in shopping, retailers are fast adopting the omni-channel mantra to provide a seamless shopping experience, whether online or in-stores. Moreover, National Retail Federation’s projection of an uptick in U.S. retail sales of 3.8-4.4% this year raises optimism. Additionally, the recent cut in corporate tax rate will allow retailers to channelize the surplus money toward best possible alternatives.

Notably, the Retail-Wholesale sector has advanced roughly 8% in the past three months and has comfortably outperformed the S&P 500’s growth of approximately 4%.

Retail Stocks to Steal the Show

With U.S. retail sales ticking up, the sector is likely to remain in the limelight. Consequently, picking up stocks from the space will be a lucrative move. Here are five stocks you can count upon.

Shoe Carnival, Inc. SCVL, which operates as a family footwear retailer, has a VGM Score of B and an expected EPS growth rate of 12% for 3-5 years. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sonic Automotive, Inc. SAH, an automotive retailer, carries a Zacks Rank #2 (Buy). The stock has a VGM Score of A and an expected EPS growth rate of 5.5% for 3-5 years.

The Home Depot, Inc. HD, which operates as a home improvement retailer, has a VGM Score of B and an expected EPS growth rate of 14.1% for 3-5 years. The stock currently carries a Zacks Rank #2.

Ulta Beauty Inc. ULTA which operates as a beauty retailer, has a VGM Score of B. This Zacks Rank #2 stock has an expected EPS growth rate of 18.6% for 3-5 years.

Darden Restaurants, Inc. DRI, which owns and operates full-service restaurants, has a VGM Score of A and an expected EPS growth rate of 9.3% for 3-5 years. The stock currently carries a Zacks Rank #2.

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Sonic Automotive, Inc. (SAH) : Free Stock Analysis Report
 
The Home Depot, Inc. (HD) : Free Stock Analysis Report
 
Shoe Carnival, Inc. (SCVL) : Free Stock Analysis Report
 
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
 
Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
 
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