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4 Stocks to Buy on Solid Jump in October Retail Sales

U.S. retail sales for October logged an impressive jump despite rising prices that are major threats to the sector. The retail sector has put up a better show than expected amid inflationary pressures and is likely to do well in the coming months courtesy of the holiday season.

October’s jump was once again driven by a solid rise in online sales, which been playing a major role in boosting overall retail sales. Given this scenario, stocks with a strong online presence like Sportsman's Warehouse Holdings, Inc. SPWH, PC Connection, Inc. CNXN, Vivint Smart Home, Inc. VVNT and Dollar General Corporation DG are expected to benefit in the near term.

Retail Sales Grow in October

The Commerce Department said on Nov 16 that U.S. retail sales rose 1.3% in October, beating analysts’ expectations of a rise of 1%. October’s jump comes after retail sales came in flat in September. On a year-over-year basis, retail sales grew 8.3% in October.

The retail sector has been struggling amid pressures of soaring commodity prices, which has compelled people to cut down on spending. However, higher demand for goods has still kept the sector growing.

October’s jump in retail sales was driven by a number of factors. An early start to the holiday season gave a push to sales. Also, motor vehicles played a key role in driving sales. Receipts at auto dealers increased a solid 1.3% in October. Furniture sales increased 1%, while sales at bars and restaurants, the only service category in the retail sales report rose 1.6%.

Also, higher gasoline prices gave a boost to sales. Receipts at gas stations 4.1%. Online retail sales increased 1.2% for the month.

Retail Sector on Track for Growth

The October retail sale report comes just days after fresh data for October showed easing inflation. The Consumer Price Index (CPI) rose 7.7% in October year over year, after increasing 8.2% in September, showing signs of prices colling off.

Headline inflation rose just 0.4% in October, beating expectations of a rise of 0.6%. Excluding volatile food and energy costs, or core CPI, increased 0.3% in October and 6.3% from a year ago, also beating expectations.

Although higher prices have been preventing people from spending, higher demand for goods has been helping the retail sector grow.

Also, October’s data comes just ahead of the holiday season. The holiday season is an important window for retailers, as sales get a boost during this time. The National Retail Federation has projected a 6% to 8% rise in holiday retail sales on a year-over-year basis. The NRF expects holiday retail sales to grow between $942.6 billion- and $960.4 billion.

Although the projection is lower than last year it is well above the 10 year’s average of 4.9%. The NRF also expects e-commerce will significantly contribute to the increase in holiday sales. In comparison to the $238.9 billion realized in sales last year, online and other non-store sales are predicted to increase by 10-12% between $262.8 billion and $267.6 billion this time.

Shoppers tend to spend more during the holiday season on gifts and other holiday-related things, despite the fact that increased prices remain a concern this time.

Our Choices

Given this scenario, it would be wise to invest in these four stocks with a strong online presence. Each of the 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.

Sportsman's Warehouse Holdings, Inc. is an outdoor sporting goods retailer. Its stores offer camping products, fishing products, and hunting and shooting products. SPWH’s stores also provide clothing products, footwear products and optics, electronics, and accessories.

Sportsman's Warehouse’s expected earnings growth rate for next year is 25.2%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days. TA presently sports a Zacks Rank #1.

PC Connection, Inc. is a direct marketer of brand-name personal computers. CNXN also markets related peripherals, software, and networking products to business, education, government, and consumer end users located primarily in the United States.

PC Connection’s expected earnings growth rate for next year is 29.1%. The Zacks Consensus Estimate for current-year earnings has improved 4% over the past 60 days. CNXN presently carries a Zacks Rank #2.

Vivint Smart Home, Inc. is a smart home company primarily in North America. VVNT delivers an integrated smart home system with in-home consultation, professional installation and support delivered by its Smart Home Pros, as well as 24/7 customer care and monitoring.

Vivint Smart Home’s expected earnings growth rate for the current year is 70.2%. Shares of VVNT have gained 38.3% in the past 30 days. Vivint Smart Home presently has a Zacks Rank #2.

Dollar General Corporation is one of the largest discount retailers in the United States. DG trades in low-priced merchandise, typically $10 or less. Dollar General offers a wider selection of merchandise, including consumable items, seasonal items, home products and apparel.

Dollar General’s expected earnings growth rate for the current year is 13.8%. Shares of DG have gained 8.3% in the past 30 days. Dollar General Home presently has a Zacks Rank #2.


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