The retail sector has been putting up an impressive show this year. Sales skyrocketed during the holiday season, and after a solid January, February once again turned out to be a good month for retailers. E-commerce, which has been playing a key role in helping the retail sector, emerged as a winner in February.

Additionally, the job market is relatively robust despite rising price pressures. This is helping people since their purchasing power has continued to rise as a result of new job additions to the economy. Given this situation, stocks like Urban Outfitters, Inc. (URBN), Tapestry, Inc. (TPR), Casey’s General Stores, Inc. (CASY) and DICK’S Sporting Goods, Inc. (DKS) are likely to benefit from a surge in retail sales.

Retail Sales Soar
According to the latest Mastercard SpendingPulse, retail sales in the United States jumped a solid 6.9% year over year in February. This comes after the Commerce Department announced that retail sales in January rose 3%, beating analysts’ expectations of a jump of 1.9%.

The retail sector made a great start to this year following a dynamic holiday season to round off an impressive 2022 despite mounting commodity prices and inflationary pressures. The robust February sales were primarily driven by spending at restaurants and bars, which rose 14.2% year over year.

Sales at apparel stores increased 3.9% year over year, while departmental stores recorded a jump of 5.6% in sales

Also, spending on air tickets and lodging jumped 15.6% and 42.7%, respectively. The categories prove that consumers are aggressively spending on discretionary items despite surging inflationary pressures.

Another reason behind the jump in airline ticket sales and lodging was the growing demand for travel experiences ahead of the spring break.

E-commerce, which has been a major factor in boosting retail sales since the pandemic struck, provided support to the industry once more as online sales increased 13.2% year over year in February. E-commerce has emerged as the most preferred mode of shopping.

Another factor that has been playing a major role in aiding the retail sector is strong job additions to the economy. Inflationary pressures have made people cautious with their spending but a resilient labor market has been helping sales.

In 2022, the labor market continued to be strong, and this year has also started out well.

The Labor Department announced that a solid 311,000 jobs were added to the economy in February, exceeding economists’ expectations of a jump of 205,000. This follows a 517,000 jump in nonfarm payrolls in January.

Our Choices
This is, thus, the right opportunity to invest in retail stocks that have both a strong offline and online presence.

Urban Outfitters, Inc. is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts’ products. URBN’s merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms. The company has operations in the United States, Canada and Europe.

Urban Outfitters’ expected earnings growth rate for the current year is 41.7%. The Zacks Consensus Estimate for current-year earnings has improved 11.2% over the past 60 days. URBN presently sports a Zacks Rank #1.

Tapestry, Inc. is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. TPR offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches.

Tapestry’sexpected earnings growth rate for the current year is 7.2%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. TPR presently carries a Zacks Rank #2 (Buy).

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.

Casey’s General Stores’ expected earnings growth rate for the current year is 27.5%. The Zacks Consensus Estimate for current-year earnings has improved 7.7% over the past 60 days. CASY currently carries a Zacks Rank #2.

DICK’S Sporting Goods, Inc. operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc. DKS offers these items through a blend of associates, in-store services and unique specialty shop-in-shops.

DICK’S Sporting Goods’ expected earnings growth rate for the current year is 7.2%. The Zacks Consensus Estimate for current-year earnings has improved 7.4% over the past 60 days. DKS currently carries a Zacks Rank #2.

— Ritujay Ghosh

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Source: Zacks