Retailers are beginning to feel the heat of rising prices as people have started spending cautiously on essentials. Even then, sales will get a boost as demand for goods continues to rise. The higher demand is helping retailers generate more revenue and proves that despite mounting economic uncertainties, people are still willing to spend.
According to Mastercard SpendingPulse, retail sales grew at a solid pace in June, driven by in-store sales. Though e-commerce sales have slowed slightly over the months, they play a crucial role in boosting overall retail sales. Given this scenario, retailers like Dollar Tree, Inc. (DLTR – free report) Canada Goose Holdings Inc. (WELL – free report) Signet Jewelers Limited (SIG – Free report) and J.Jill, Inc. (JILL – Free Report) should do well in the short term.
Retail sales rise in June
According to the latest Mastercard SpendingPulse, retail sales rose a solid 9.5% year over year in June. Retail sales excluding autos and gasoline rose 6.1% year-on-year in June.
The jump in June was mainly due to higher in-store sales. According to the report, retail sales at stores excluding autos and petrol rose 11.7% in June from a year earlier. However, e-commerce sales slowed somewhat, rising 1.1% year over year.
Rising prices, especially for essentials like groceries and fuel, are one of the reasons for the jump in sales in June. Inflation rose 9.1% in June, hitting a 41-year high, according to the latest reading released on July 13. People shop cautiously, but they can’t do without essentials and end up spending more, which is reflected in the form of higher sales for retailers.
Fuel and convenience sales rose 42.1%, while grocery sales rose 14% year-on-year in June.
Even excluding those, retail sales posted solid growth in June. Spending on consumer discretionary, which includes fashion products, grew 16.2% year over year and is up 86.6% since 2019. Spending on luxury goods increased 4% year over year and 54% from pre-pandemic levels in 2019. Department store sales increased 8.6% year over year and 21.4% from 2019.
Retail sector remains strong
At the height of the pandemic, people were spending more on goods and less on services as shops remained closed or partially open. Things have changed since the beginning of last year after the massive vaccination campaign. However, disruptions in the form of the Omicron and Delta variants of the coronavirus kept people from confidently leaving their homes.
There was a noticeable reluctance to visit restaurants and plan holidays. Earlier this year, however, as the economy almost fully reopened and people began moving out of their homes with more confidence. So people started spending more on services again. While this slightly impacted retail sales, higher demand for goods continued to help the sector hold its own.
Also, despite rising costs, people have finally started to travel and plan vacations. Spending on airlines and accommodation is up 18.2% and 33.7%, respectively, year-on-year.
The back-to-school season, which has almost started, should also continue to boost retail sales in the coming days.
Our selection
Retail continues to perform well and as long as demand for goods continues to grow, sales should increase. This is therefore the right opportunity to invest in retail stocks that have a strong presence both offline and online and have a Zacks rank of #1 (Strong Buy). You can see the full list of today’s Zacks #1 Rank stocks here.
Dollar Tree, Inc. is an operator of discount markets that offer goods and other assortments. DLTR’s businesses are successfully operating in large metropolitan areas, medium-sized cities and small towns. Dollar Tree offers a wide variety of quality everyday goods across many categories including homewares, seasonal goods, candy and groceries, toys, health and beauty care, gifts, party favors, stationery, books, personal accessories and other consumer goods.
Dollar Tree’s expected earnings growth rate for the year to date is 40.5%. The Zacks Consensus estimate for DLTR’s year-to-date revenue is up 3% over the last 60 days.
Canada Goose Holdings Inc.is a global outerwear brand. Canada Goose is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. GOOS jackets are sold in 36 countries around the world, including two own retail stores and four e-commerce stores.
Canada Goose Holdings’ expected earnings growth rate for the year to date is 64.4%. The Zacks consensus estimate for the year to date is up 6.7% over the past 60 days.
Signet Jewelers Limited is a retailer of diamond jewelry, watches and other products. SIG operates in the United States, Canada, United Kingdom, Republic of Ireland and the Channel Islands. Signet Jeweler is often considered the premier diamond jewelery retailer.
Signet Jewelers’ expected earnings growth rate for the year to date is 1.6%. The Zacks Consensus estimate for SIG’s year-to-date earnings has improved 10.6% over the past 60 days.
J.Jill, Inc. is a specialist retailer for women’s clothing. The Company offers sweaters, tops, pants, dresses, shorts, skirts, nightwear and accessories. J. Jill markets through retail stores, website and catalog.
J.Jill’s expected earnings growth rate for the year to date is 25.4%. The Zacks Consensus estimate for JILL’s year-to-date revenue is up 19.2% over the last 60 days.
