4 Stocks to Boost Your Portfolio on Solid Jump in Retail Sales

The retail sector has shown immense resilience amid rising prices and inflationary pressures. The sector continued to grow in July, boosting the morale of investors. The impressive jump in July retail sales has eased concerns that economic activity started slowing after three months of sluggish job growth.

Given this situation, it would be ideal to invest in retail stocks. We have selected four stocks, namely, Levi Strauss & Co. LEVI, Walmart, Inc. WMT, Dutch Bros Inc. BROS and Wayfair Inc. W for investors.

These stocks have seen positive earnings estimate revisions in the past 60 days, carry a Zacks Rank #1 (Strong Buy) or 2 (Buy), and are set for solid returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

Retail Sales Jump in July

Retail sales jumped 0.5% in July, after an upwardly revised 0.9% rise in June, the Commerce Department reported on Friday. Year over year, retail sales increased 3.9%. The July numbers were driven by a solid jump in motor vehicle sales, with receipts at auto dealerships increasing 1.6%, after climbing 1.4% in the prior month.

Online sales rose 0.8% in July after increasing 0.9% in June. Sales at clothing stores and furniture outlets increased 0.7% and 1.4%, respectively. Households have been spending less and saving more over concerns that a weak labor market is an indication of a softening economy and President Donald Trump’s tariffs would escalate inflation.

Trump’s tariffs are already making an impact, with prices of goods rising in June and July. The tariff-related price hikes have lately contributed to the increase in retail sales, and this surge is likely to give the Federal Reserve justification to keep interest rates steady at 4.25-4.5% for a longer time.

However, investors remain optimistic that the impact of tariffs will not be that severe after the White House reached trade deals with several trading partners. Moreover, despite maintaining a hawkish stance, several Federal Reserve officials have indicated that the central bank still plans to implement two 25-basis-point rate cuts before the year-end. Markets are pricing in an 83.1% chance of a 25-basis-point rate cut in September. Lower borrowing costs would be beneficial for both the retail industry and the overall economy.

4 Retail Stocks With Upside

Levi Strauss & Co.

Levi Strauss & Co. designs and markets jeans, casual wear and related accessories for men, women and children under the Levi's, Dockers, Signature by Levi Strauss & Co. and Denizen brands. LEVI’s products are sold through chain retailers, department stores, online sites and brand-dedicated retail stores, and shop-in-shops. Levi Strauss & Co. is based in San Francisco.

Levi Strauss & Co.’s expected earnings growth rate for the current year is 4%. The Zacks Consensus Estimate for current-year earnings has improved 5.7% over the past 60 days. LEVI carries a Zacks Rank #1.

Walmart

Walmart has evolved from just being a traditional brick-and-mortar retailer to an omnichannel player. WMT’s product offerings include almost everything from grocery to cosmetics, electronics to stationery, home furnishings to health and wellness products, and apparel to entertainment products, to name a few.

Walmart’s expected earnings growth rate for the current year is 4%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. WMT presently has a Zacks Rank #2.

Dutch Bros Inc.

Dutch Bros Inc. is an operator and franchisor of drive-thru shops that focus on serving high-quality, hand-crafted beverages with unparalleled speed and superior service. 

Dutch Bros’ expected earnings growth rate for next year is 34.7%. The Zacks Consensus Estimate for current-year earnings has improved 8.2% over the past 60 days. BROS presently carries a Zacks Rank #2.

Wayfair Inc.

Wayfair Inc. is one of the world's leading online sellers of home goods products, consisting of furniture and home decor. W operates worldwide through Wayfair.com and four other branded websites, namely, Joss & Main, AllModern, Birch Lane and Perigold. The company currently offers more than 40 million products from more than 20,000 suppliers.

Wayfair’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. W presently has a Zacks Rank #2.

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This article originally published on Zacks Investment Research (zacks.com).

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