Retail sales grew in July driven by robust consumer spending, the Commerce Department said on Aug 15. The Federal Reserve’s interest rate hike campaign is finally bearing fruit as inflation has sharply declined over the past year. The impact is showing in the steady growth in retail sales over the past few months.
Given this situation, investing in stocks like The Gap, Inc. GPS, The TJX Companies, Inc. TJX, Ross Stores, Inc. ROST, Urban Outfitters, Inc. URBN and Ollie’s Bargain Outlet Holdings, Inc. OLLI will be a wise option.
Retail Sales Jump
Retail sales jumped a solid 0.7% to $696.4 billion in July, beating analysts’ expectations of a rise of 0.4%, the Commerce Department reported. Excluding autos, retail sales rose a solid 1% in July, surpassing expectations of a 0.4% rise. This follows a 0.2% rise in June.
This has so far been the best reading since January 2023. Also, e-commerce sales increased a robust 1.9%, while sales at restaurants and bars rose 1.4%. Sales at sporting goods stores climbed 1.5%.
The report indicates that the U.S. economy is still going strong and might avoid slipping into a recession. The jump in retail sales comes as inflation continues to steadily decline from its peak of 9.1% in June 2022.
The consumer price index (CPI) rose 0.2% in July for the first time in more than 12 months. The modest rise in July indicates that there is still solid demand for goods, which is driving sales.
On a year-over-year basis, retail sales rose 3.2% in July, in line with the annual CPI increase.
The Fed has raised interest rates by 525 basis points since March 2022, with June being the only exception. This has taken the benchmark borrowing rate to the range of 5.25-5.5%.
However, a steady decline in inflation has raised hopes that the Fed might soon end its current interest rate hike campaign. This bodes well for the retail sector as lower interest rates will give more purchasing power to consumers.
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’sexpected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the past 60 days. GPS currently sports a Zacks Rank #1 (Strong Buy).
The TJX Companies, Inc. is a leading off-price retailer of apparel and home fashions in the United States and worldwide. TJX’s broad range of assortments at varying prices helps it to reach out to a broad range of consumers. In addition, The TJX Companies tries to attract consumers through a rapid turn of inventories.
The TJX Companies’ expected earnings growth rate for the current year is 14.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. TJX presently has a Zacks Rank #2 (Buy).
Ross Stores, Inc. operates as an off-price retailer of apparel and home accessories, primarily in the United States. ROST operates its stores under the Ross Dress for Less (Ross) and dd’s DISCOUNTS names. Ross Stores primarily offers in-season, branded and designer apparel, footwear, accessories and other home-related merchandise for everyone in the family.
Ross Stores’ expected earnings growth rate for next year is 13%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. ROST presently carries a Zacks Rank #2.
Urban Outfitters, Inc. is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gift products. URBN merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms. Urban Outfitters has operations in the United States, Canada and Europe.
Urban Outfitters’ expected earnings growth rate for the current year is 60.6%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. URBN currently carries a Zacks Rank #2.
Ollie’s Bargain Outlet Holdings, Inc. is a value retailer of brand-name merchandise at drastically reduced prices. OLLI offers products principally under Ollie’s, Ollie’s Bargain Outlet, Good Stuff Cheap, Ollie’s Army, Real Brands Real Cheap!, Real Brands! Real Bargains!, Sarasota Breeze, Steelton Tools, American Way and Middleton Home.
Ollie’s Bargain Outlet’s expected earnings growth rate for the current year is 61.7%. The Zacks Consensus Estimate for its current-year earnings has improved 0.8% over the past 60 days. OLLI has a Zacks Rank #2.
The TJX Companies, Inc. (TJX): Free Stock Analysis Report
The Gap, Inc. (GPS): Free Stock Analysis Report
Ross Stores, Inc. (ROST): Free Stock Analysis Report
Urban Outfitters, Inc. (URBN): Free Stock Analysis Report
Ollie’s Bargain Outlet Holdings, Inc. (OLLI): Free Stock Analysis Report
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