Retailers Pin Hopes on Upbeat Consumer Confidence: 5 Picks

U.S. consumer confidence — a key determinant of the economy’s health — grew more than anticipated in June and reached a three-month high. The gradual reopening of the economy in a phased manner and stimulus measures undertaken by the government provided a confidence boost to Americans, who have been strictly adhering to social distancing measures and lockdown restrictions for a while now. Clearly, hopes of an economic revival has lifted the mood.

Per Conference Board data, the Consumer Confidence Index rose to 98.1 in June from a revised reading of 85.9 in May. However, the index still remains below the pre-pandemic levels and analysts fear that the euphoria may not last long enough given the recent spike in coronavirus cases following the easing of stay-at-home and quarantine restriction. It goes without saying that the government’s timely interventions to shore up the economy and the discovery of COVID-19 vaccine are paramount to keeping this optimism going.

Lynn Franco, senior director of economic indicators at The Conference Board said, "The re-opening of the economy and relative improvement in unemployment claims helped improve consumers' assessment of current conditions.” Franco further added “Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it's too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels."

Without doubt, this biological catastrophe has severely impacted industries across the board, taking a toll on employment and household income. Nonetheless, measures undertaken to support households, firms and financial market coupled with the resumption of commercial and industrial activities post the coronavirus lockdown have provided much needed impetus to the market. With the gradual reopening of the economy and people back on streets, consumer spending activity — one of the pivotal factors of the economy — is likely to regain momentum.

Quite apparent, the Retail – Wholesale sector is likely to witness a sharp rebound. Retailers are leaving no stone unturned to improve top-line performance and expand customer base.

The industry players remain committed to address the challenges related to the pandemic and position themselves for future success. In this respect, companies are directing resources toward digital platforms in order to better engage with customers, accelerating fleet optimization initiative, augmenting supply chain, and concentrating on improving financial flexibility. They are also focusing on product strategy to resonate well with customers and advancing omni-channel capabilities.

Here we have shortlisted five Retail-Wholesale stocks on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. These stocks not only boast sound fundamentals but have also outperformed the sector as well as the S&P 500 index on a year-to-date basis. Notably, the sector has risen 11.7%, while the index has declined 5.2% so far this year.

5 Prominent Picks

We also suggest investing in SpartanNash Company SPTN, which distributes and retails grocery products. The company has a trailing four-quarter positive earnings surprise of 17.1%, on average. The stock has a Zacks Rank #1 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year earnings indicates growth of 82.7% from the year-ago period. We note that the stock has surged 49.2% so far in the year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Big Lots, Inc. BIG, a discount retailer, is a solid bet with a Zacks Rank #1 and a VGM Score of A. The company has a trailing four-quarter positive earnings surprise of 62.2%, on average. It has a long-term earnings growth rate of 7.1%. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 37.3% from the year-ago period. Notably, the stock has rallied 46.2% so far in the year.

Dollar General Corporation DG, a discount retailer, is also worth betting with a Zacks Rank #1 and a VGM Score of A. The company has a trailing four-quarter positive earnings surprise of 16.9%, on average. It has a long-term earnings growth rate of 12.4%. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 31.4% from the year-ago period. The stock has rallied 22.1% year to date.

You may invest in Sportsman's Warehouse Holdings, Inc. SPWH, which has a Zacks Rank #2 and a VGM Score of A. This outdoor sporting goods retailer has a trailing four-quarter positive earnings surprise of 32.5%, on average. Moreover, the Zacks Consensus Estimate for its current financial year earnings suggests an improvement of 68.1% from the year-ago period. The stock has displayed a bullish run on the bourses gaining 77.4% year to date.

Investors can count on Domino's Pizza, Inc. DPZ, with a long-term earnings growth rate of 12.8%. This pizza company has a trailing four-quarter positive earnings surprise of 12.7%, on average. The stock has a Zacks Rank #2 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year earnings indicates growth of 18.3% from the year-ago period. Notably, the stock has appreciated 25.7% year to date.

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Dominos Pizza Inc (DPZ) : Free Stock Analysis Report
 
Big Lots, Inc. (BIG) : Free Stock Analysis Report
 
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Sportsmans Warehouse Holdings, Inc. (SPWH) : Free Stock Analysis Report
 
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