4 Stocks to Gain From as Retail Sales Make Solid Rebound

U.S. retail sales made a solid rebound in July, following a decline in June and after struggling for most of the year. Although price pressures continue, it has decreased substantially over the past few months, which allowed consumers to spend freely last month.

Retail Sales Soar Past Expectations

The Commerce Department said on Aug 15 that retail sales grew a solid 1% in July, following a 0.2% decline in June and ahead of the consensus estimate of a rise of 0.3%.

Retail sales, excluding gasoline, food, building materials and automobiles rose 0.3% in July after increasing 0.9% in June. Year over year, retail sales jumped 2.7% in the previous month, while total sales from May through July advanced 2.4% from the year-ago levels.

July's jump was driven by a solid 3.6% jump in sales at motor vehicles and auto parts dealers. Sales at electronics and appliance stores rose 1.6% in July. Sales at food and beverage outlets rose 0.9%.

Online sales increased 0.2% in July after increasing 2.2% in June. Amazon.com, Inc's Prime Day was largely responsible for the jump in online sales. Also, back-to-school shopping gave a boost to overall retail sales.

Resilient consumer spending saw retail sales grow in July, which could alleviate fears of a recession that were triggered earlier this month following a disappointing jobs report and a spike in the unemployment rate.

Inflation has been declining over the past quarter, with the consumer price index reading increasing marginally in July.

Year over year, CPI increased 2.9% in July, lower than June's jump of 3%. This was also the lowest pace of increase since March 2021.

A solid retail sales report coupled with softer inflation data has raised hopes that the Federal Reserve will finally start rate cuts in September. Lower interest rates bode well for the retail sector and the broader economy as it will give consumers more purchasing power.

Our Choices

Given this scenario, we have narrowed our search to four retail stocks such as Boot Barn Holdings, Inc. BOOT, American Eagle Outfitters, Inc. AEO, eBay Inc. EBAY and The Gap, Inc. GPS, with strong potential for 2024.

These stocks have seen positive earnings estimate revisions in the last 60 days. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Boot Barn Holdings, Inc. operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. BOOT's products include boots, denim, western shirts, cowboy hats, belts and belt buckles, and western-style jewelry and accessories; and rugged footwear, outerwear, overalls, denims, and shirts, as well as safety-toe boots, and flame-resistant and high-visibility clothing.

Boot Barn Holdings' expected earnings growth rate for the current year is 8.9%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. BOOT presently sports a Zacks Rank #1.

American Eagle Outfitters, Inc. is a specialty retailer of casual apparel, accessories and footwear for men and women aged 15-25 years. AEO, along with its subsidiaries, engages in the designing and marketing of casual clothing.

American Eagle Outfitters' expected earnings growth rate for the current year is 17.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the past 60 days. AEO presently carries a Zacks Rank #2.

eBay Inc. operates an online shopping platform, which provides sellers the tools to build online store formats, making it easier for customers to browse by brands. Over the years, EBAY has evolved from a relatively small community user-based auction site to a worldwide commercial behemoth store. eBayis well-positioned in the online marketplace space.

eBay's expected earnings growth rate for the current year is 13.2%. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the past 60 days. EBAY currently carries a Zacks Rank #2.

The Gap, Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products. GPS offers products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix, and Hill City brands.

The Gap's expected earnings growth rate for the current year is 24.5%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past 60 days. GPS currently has a Zacks Rank #2.

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