U.S. retail sales returned to the growth trajectory in February. On Mar 14, the Department of Commerce reported that retail sales in February grew 0.6% month over month. The metric for January was revised downward to a decline of 1.1% from a drop of 0.8% reported earlier. However, February’s data was below the consensus estimate of a rise of 1%.
Like January, retail sales data for December was also revised downward. Year over year, retail sales increased 1.5% in February. Retail sales rebounded primarily owing to a resilient labor market and a higher-than-expected rise in wage rates.
Core retail sales (excluding auto) increased 0.3% month over month in February. The metric for January was revised downward to a decline of 0.8% from a drop of 0.6% reported earlier. However, February’s data was below the consensus estimate of a rise of 0.6%. Core retail sales for December were also revised downward.
Another measure of retail sales (excluding automobiles, gasoline, building materials and food services) remained unchanged in February. This so-called core retail sales measure corresponds most closely with the consumer spending component of gross domestic product. The Zacks-defined Retail and Wholesale sector has rallied 37.6% in the past year and 9.75 year to date.
Our Top Picks
We have narrowed our search to five retailers with strong potential in for 2024. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Zacks Investment Research
Image Source: Zacks Investment Research
DICK'S Sporting Goods Inc. DKS has been gaining from a strong back-to-school season and continued market share gains. This led to a robust top-line performance in third-quarter fiscal 2023. Also, strong comparable store sales (comps) and healthy transaction growth acted as tailwinds for DKS.
For fiscal 2023, DKS expects comps growth of 0.5-2% versus our estimate of a 2% rise. In addition, DKS’ store expansion initiatives, driven by DICK'S House of Sport, Golf Galaxy Performance Center, Public Lands and Going, Going, Gone! Stores, bode well.
DICK'S Sporting Goods has an expected revenue and earnings growth rate of 0.5% and 0.2%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days.
Abercrombie & Fitch Co. ANF has benefited from continued momentum across both brands, which bolstered its holiday sales. ANF witnessed strong sales growth during the holiday season for each of its brands, particularly the Abercrombie brand.
ANF expects the Abercrombie brand’s women's business to attain the highest-ever Q4 sales, along with strong men's category growth. ANF expects the Hollister brand to deliver robust sales growth in Q4, led by the women's business. ANF raised its outlook for Q4 and fiscal 2024.
Abercrombie & Fitch has an expected revenue and earnings growth rate of 5.7% and 16.4%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 12.3% over the last 30 days.
Deckers Outdoor Corp. DECK has been benefiting from its potential for further expansion and market resilience. Key strategic initiatives, including product innovation and brand assortment expansion, coupled with a robust focus on direct-to-consumer channels, drive DECK’s growth trajectory. Successful international market penetration and a strong wholesale segment contribute to DECK’s market diversification.
Additionally, proactive consumer engagement strategies and omni-channel distribution bolster its competitive edge. DECK’s commitment to elevating renowned brands like UGG and HOKA into global lifestyle icons enhances brand equity and market reach. We expect net sales to increase by 12% and 24.6% for the UGG and HOKA brands, respectively, in fiscal 2024.
Deckers Outdoor has an expected revenue and earnings growth rate of 10.7% and 10.9%, respectively, for the current year (ending March 2025). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days.
Tapestry Inc.’s TPR emphasis on brand building, customer engagement and market expansion has been pivotal in driving sales growth. TPR’s robust international performance, particularly in Greater China, highlights its adaptability and market strength.
Tapestry's proactive approach to enhancing omni-channel experiences through retail expansion and investment in fulfillment capabilities underscores its commitment to meet evolving consumer preferences. TPR’s outlook for fiscal 2024, with an anticipated 8-9% year-over-year increase in adjusted EPS, reflects confidence in its ability to navigate dynamic market conditions.
Tapestry has an expected revenue and earnings growth rate of 1.3% and 9%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 60 days.
Builders FirstSource Inc. BLDR has benefited primarily from productivity and multi-family strength. BLDR is also gaining from digital enhancements, a strong value-added product portfolio and the positive impact of operational initiatives.
BLDR’s focus on cost synergies and strategic acquisitions are added positives. BLDR expects the housing market to stabilize in 2024 as the Fed has decided to pause interest rate hikes.
Builders FirstSource has an expected revenue and earnings growth rate of 4.2% and 11.2%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 6.1% over the last 60 days.
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