U.S. retail sales jumped for the third straight month in April, proving that the sector is still holding its ground. Although inflation played a key role in pushing sales in April, the retail sector has shown immense resilience amid inflationary pressures and the ongoing geopolitical tensions.
However, consumers are still spending aggressively, which has been driving overall retail sales. Given this situation, it would be ideal to invest in retail stocks with a strong online presence. We have selected five stocks, namely, Casey's General Stores, Inc. CASY, Starbucks Corporation SBUX, Tapestry TPR, Five Below, Inc. FIVE andLevi Strauss & Co. LEVI.
These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #1 (Strong Buy) or 2 (Buy), and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Retail Sales Jump
The Commerce Department reported last week that retail sales rose 0.5% in April, after a downwardly revised 1.6% rise in March. Year over year, retail sales jumped 4.9% in April. Although higher energy costs owing to the ongoing Iran war saw receipts at gas stations increase substantially, retail sales jumped across all categories.
Receipts at gasoline stations advanced 2.8% after jumping 13.7% in March. Sales at electronics and appliance stores climbed 1.4%. Sales at nonstore retailers, including online retailers, gained 1.1%.
Gasoline prices have increased substantially since the beginning of the Iran war. Gasoline prices jumped 12.3% in April after rising nearly 40% in March. However, consumers continued to spend aggressively on discretionary goods.
Sales at sporting goods, hobby, musical instrument and book stores jumped a solid 1.4%, while receipts at restaurants grew 0.6%. Economists consider restaurant spending an important indicator of consumers’ financial health.
The Federal Reserve has not lowered interest rates this year and inflation has jumped substantially over the past two months. However, investors remain confident that the central bank will restart cutting rates in the second half of the year, which bodes well for the retail sector.
5 Retail Stocks With Upside
Casey's General Stores
Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 states, mainly Iowa, Missouri and Illinois. CASY offers a comprehensive range of products and services to meet the needs of its customers. In addition to fuel, the stores provide a wide variety of merchandise, including groceries, prepared food, snacks, beverages, tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive supplies.
Casey’s has an expected earnings growth rate of 24.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2% over the last 60 days. CASY currently has a Zacks Rank #2.
Starbucks Corporation
Starbucks Corporation is the leading roaster and retailer of specialty coffee globally. In addition to fresh, rich-brewed coffees, SBUX’s offerings include many complimentary food items and a selection of premium teas and other beverages, sold mainly through the company’s retail stores. Starbucks’popular brands include Starbucks coffee, Teavana tea, Seattle's Best Coffee, La Boulange bakery products and Evolution Fresh juices.
Starbucks’ expected earnings growth rate for next year is 12.7%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 60 days. SBUX currently has a Zacks Rank #1.
Tapestry
Tapestry is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. TPR offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrances and watches.
Tapestry’s expected earnings growth rate for the current year is 36.3%. The Zacks Consensus Estimate for current-year earnings has improved 7.5% over the past 60 days. TPR presently sports a Zacks Rank #1.
Five Below, Inc
Five Below, Inc. is a specialty value chain retailer that provides a wide range of premium quality and trendy merchandise for $5 or below. FIVE mainly targets teenagers or pre-teen shoppers for its products, which include certain brands and licensed merchandise. Notably, these products belong to categories such as Style, Room, Sports, Tech, Create, Party, Candy and Now.
Five Below’s expected earnings growth rate for the current year is 19.2%. The Zacks Consensus Estimate for current-year earnings has improved 13.6% over the past 60 days. FIVE presently carries a Zacks Rank #1.
Levi Strauss & Co.
Levi Strauss & Co. designs and markets jeans, casual wear and related accessories for men, women and children under the Levi's, Dockers, Signature by Levi Strauss & Co. and Denizen brands. LEVI’s products are sold through chain retailers, department stores, online sites and brand-dedicated retail stores, and shop-in-shops. Levi Strauss & Co. is based in San Francisco.
Levi Strauss & Co.’s expected earnings growth rate for the current year is 11.9%. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. LEVI carries a Zacks Rank #2.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Starbucks Corporation (SBUX): Free Stock Analysis Report
Casey's General Stores, Inc. (CASY): Free Stock Analysis Report
Five Below, Inc. (FIVE): Free Stock Analysis Report
Tapestry, Inc. (TPR): Free Stock Analysis Report
Levi Strauss & Co. (LEVI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).