5 Stocks to Cash in on the Record Retail Sales Surge in May

Emilee Geist

Retail sales in the United States rose 17.7% in May from April reading, thus marking the all-time monthly jump. This uptrend is aided by the relaxation of coronavirus-induced lockdowns and the gradual reopening of the economy. While the figure reflects a recovery from a record decline of 14.7% in April […]

Retail sales in the United States rose 17.7% in May from April reading, thus marking the all-time monthly jump. This uptrend is aided by the relaxation of coronavirus-induced lockdowns and the gradual reopening of the economy. While the figure reflects a recovery from a record decline of 14.7% in April and 8.2% in March, it still falls 6.1% below the year-ago level, highlighting the damage caused by the coronavirus pandemic.

Per a Marketwatch poll, this favorable data also surpassed analysts’ expectations, showing their anticipation of an 8.5% climb in retail sales for May, while economists at Dow Jones expected an increase of 8.8%.   

Sales Across the Board

Excluding sales at auto dealers, which popped up 44% and usually generates roughly one-fifth of total retail spending, May’s sales ascended 12.4%, setting a record. Sales at clothing and accessories stores posted the biggest leap with a skyrocketing gain of 188% while home-furnishing stores soared 90% and stores that sell books, music, sporting goods and other hobby items, witnessed a surge of 88%.

Gas stations reported a near 13% improvement, signalling that consumers are again hitting the road. Sales at bars and restaurants saw a 29% rebound in May after bearing the brunt of a continual shutdown in April and March. However, the figure is still 40% lower than the year-ago level, reflecting the struggles of numerous establishments to survive this unprecedented crisis.

Internet retailers are thankfully among a handful few industries to fare well amid the pandemic chaos, having recorded a 9% spike in May. Grocery sales registered a marginal gain of 1.3%, lagging the 14.4% rise in the prior month. The only sector to post a relatively dismal performance was health and personal care with a slight increase of 0.4%.

Best Buys

The outbreak of coronavirus created a huge lacuna globally. How much of the revival in May retail sales was derived from pent-up demand and how much of it was drawn from the government’s new stimulus measures in response to the rampant COVID-19 outbreak are a few lurking questions.

It is difficult to turn the economy around anytime soon, more so, in the absence of a vaccine against the deadly virus. Moreover, the way forward is unlikely to be rapid as the possibility of a second wave of COVID-19 outbreak still looms on. More employment opportunities and government aid will be required to carry on with the positive retail spending trend.

Against this backdrop, keeping all the upsides in mind, we narrowed down our search to five stocks for a winning investment portfolio, carefully hand-picked from furniture, restaurants, apparel and shoes and e-commerce industries. Each stock has a Zacks Rank #1 (Strong Buy) or 2 (Buy). 

You can see the complete list of today’s Zacks #1 Rank stocks here.

Lowes Companies, Inc. LOW is one of the world’s leading home improvement retailer, offering services to homeowners, renters and commercial business customers. The company offers diverse products and services for home decoration, maintenance, repair, re-modeling and property maintenance. It has a trailing four-quarter positive earnings surprise of 13.11%, on average. The company is presently a Zacks #1 Ranked player. 

Wingstop Inc.WING, headquartered in Dallas, TX, is a chain of restaurants that specializes in chicken wings. The company’s operating segment consists of franchise and company segments. The Zacks Consensus Estimate for current-year earnings has witnessed 10 upward revisions in the past 60 days. The company currently sports a Zacks Rank of 1. 

LaZBoy Incorporated LZB is one of the world’s leading residential furniture producers. Domiciled in Monroe, MI, this American entity manufactures residential furniture, ranging from upholstered recliners to sofas, stationary chairs, lift chairs and sleeper sofas. The company has a trailing four-quarter positive earnings surprise of 8.64%, on average, and currently has a Zacks Rank of 2. 

Xcel Brands, Inc.XELB is a leading retailer of medium to better-priced casual apparel, footwear and accessories for fashion-conscious young men and women. This Zacks Rank #2 companymarkets a wide selection of brand names and private label casual apparel including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The company has a trailing four-quarter positive surprise of 11.11%, on average.

Etsy, Inc.ETSY offers e-commerce services and provides online and offline marketplaces to buy and sell goods. The company’s product line comprises art, home and living, mobile accessories, jewellery, wedding merchandise, and others. The Zacks Consensus Estimate for current-year earnings has witnessed nine northbound revisions in the past 60 days. The company holds a Zacks Rank of 2 at present. 

 

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Lowes Companies, Inc. (LOW) : Free Stock Analysis Report
 
LaZBoy Incorporated (LZB) : Free Stock Analysis Report
 
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