Retail sales rebounded in February after an unexpected decline in January, following a solid holiday season. The Commerce Department said on Mar 14 that retail sales increased 0.6% in February on a month-over-month basis.

February's rise came after a 1.1% decline in January. Although retail sales fell short of the consensus estimate of an increase of 0.8%, last month's rebound once again proves that consumers are spending lavishly.

Year over year, retail sales grew 1.5% in February as inflation has declined substantially over the past year.

Retail sales increased across a large number of segments in February. Sales at garden equipment and building material stores increased 2.2%. Receipts at motor vehicles and parts dealers rose 1.6%, while sales at gasoline stations climbed 0.6%. Sales at electronics and appliances outlets grew 1.5%.

Core retail sales, which excludes automobiles, gasoline, building materials and food services costs, remained unchanged month over month in February. Core retail sales for January were revised down to 0.3% from 0.4%.

Inflation is still higher than the Federal Reserve’s 2% target. The consumer price index rose 3.2% year over year in February. However, consumer spending, which has been driving the retail sector, remains rock solid. The U.S. economy grew 2.5% in the fourth quarter of 2023. Also, the Atlanta Fed has projected 2.5% annualized GDP growth for the first quarter.

Our Picks

Given the encouraging economic environment and increase in retail sales, it would be prudent for savvy investors to consider betting on retail stocks like Amazon.com, Inc. AMZN, Casey's General Stores, Inc. CASY, American Eagle Outfitters, Inc. AEO, eBay Inc. EBAY and Tapestry, Inc. TPR. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Amazon.com, Inc. is one of the largest e-commerce providers, with sprawling operations in North America and across the globe. AMZN’s online retail business revolves around the Prime program and is well supported by its massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish its footprint in the physical grocery supermarket space.

Amazon.com’sexpected earnings growth rate for the current year is 40.7%. The Zacks Consensus Estimate for current-year earnings has improved 12.1% over the past 60 days. AMZN presently carries a Zacks Rank #2.

Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 Midwestern states, mainly Iowa, Missouri and Illinois. CASY also operates two stores under the name "Tobacco City," selling primarily tobacco and nicotine products, one liquor store and one grocery store.