Top Stocks to Watch After May's Optimistic CPI Data

Optimistically, May’s much-anticipated inflation data came in better than expected amid ongoing concerns that President Trump’s tariffs could cause a cost surge.

That said, the Consumer Price Index (CPI) increased 0.1% from the prior month, below economists’ estimates of 0.2% and beneath April’s 0.2% monthly uptick as well. Year over Year, CPI rose 2.4% in May compared to expectations of 2.5%, although this was up from 2.3% in April, but April’s data marked the lowest yearly increase since February of 2021.

Excluding volatile food and energy costs, “Core” CPI rose 0.1% MoM, nicely beneath expectations of 0.3% and April’s 0.2% gain. On an annual basis, Core CPI rose 2.8%, matching April’s ascent but less than forecast of 2.9%.   

Keeping May’s optimistic CPI data in mind, here are three retail stocks to watch that currently hold spots on the Zacks Rank #1 (Strong Buy) list.

Carvana – CVNA

Carvana’s CVNA e-commerce platform for used cars has embodied consumer optimism, with its stock soaring nearly +3,000% since going public in 2017. These astronomical gains are hard to come by, but what is most appealing is that Carvana is starting to make good on its lofty growth projections thanks to its cost-cutting initiatives.

CVNA is only 9% from its all-time high of $370 a share, and EPS estimates have soared over the last 60 days for fiscal 2025 and FY26, justifying more upside.

Sprouts Farmers Market – SFM

One company that has been able to capitalize on a more health-conscious consumer while Beyond Meat BYND and others have faltered is Sprouts Farmers Market SFM. In the same time frame since Carvana went public, SFM shares are up over +600% to produce market-leading gains of its own. Notably, Sprouts launched its IPO over a decade ago but has gained notoriety in recent years as a provider of grass-fed, gluten-free, and keto-friendly food products.

Earning SFM a spot on the Zacks Rank #1 (Strong Buy) list and glamorizing the company’s appealing EPS growth is that FY25 and FY26 EPS estimates are now up 9% and 7% in the last 60 days, respectively.

Urban Outfitters – URBN

Among fashion apparel retailers, Urban Outfitters URBN stock stands out and has caught the attention of institutional investors. Institutional ownership of URBN shares is now over 70%, which should limit the volatility in Urban Outfitters' stock.

This comes as the fashion apparel retailer achieved record quarterly sales of $1.3 billion during Q1, seeing strong brand performance, highlighted by Nuuly, its clothing and resale business that grew 60% and added 110,000 subscribers. On track for another peak in terms of annual sales (projections of $6 billion), Urban Outfitters' operational efficiency sets the company apart from many of its peers, optimizing inventory and enhancing its digital outreach. Like Carvana and Sprouts Farmers Market, Urban Outfitters has seen a very positive trend of earnings estimate revisions in the last two months.

Other Stocks to Watch

Following Wednesday’s favorable CPI report, consumer lending stocks are seeing a nice bounce, with LendingTree TREE and OneMain Holdings OMF standing out in particular and up over +2% in today's trading session. Both land a Zacks Rank #3 (Hold) at the moment and have appealing growth trajectories, with OneMain having an annual dividend yield of over 7% that certainly appeals to income investors.

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

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