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Consumer Confidence Gets a Boost: 4 Retail Stocks in Focus

U.S. consumer confidence — a key determinant of the economy’s health — surprisingly increased in May, after being shattered by the coronavirus-inflicted crisis. The news of gradual reopening of the economy in a phased manner provided a confidence boost to Americans, who have been strictly adhering to social distancing measures and lockdown restrictions for a while now. Per Conference Board data, the Consumer Confidence Index rose to 86.6 in May from a revised reading of 85.7 in April.

According to media reports, all 50 states have initiated the process of resuming operations, including non-essential businesses, to some extent. This is a great relief as life limps back to normalcy. Definitely, both business owners and consumers need to follow some protocols and guidelines.

"Following two months of rapid decline, the free-fall in Confidence stopped in May," said Lynn Franco, senior director of economic indicators at The Conference Board. "Short-term expectations moderately increased as the gradual re-opening of the economy helped improve consumers' spirits. However, consumers remain concerned about their financial prospects."

It comes as no surprise that the deadly virus has already taken a toll on employment and household income. Policy makers are walking the tight rope and undertaking every measure to support households, firms and financial markets. The Fed announced a massive quantitative easing program and slashed the benchmark interest rate to near zero. President Trump signed stimulus package aimed at helping workers, small industries and distressed companies.

Quite apparent, the Retail-Wholesale sector has been hit hard by the coronavirus-induced stay-at-home orders, social distancing and some mandatory store closures. As a result, U.S. retail sales witnessed a record decline for the second consecutive month in April. Per the Commerce Department retail sales in April fell 16.4%, following a decline of 8.3% in March. However, as lockdown is slowly lifted and stores begin to open, sales will pick up but will take time to reach the pre-COVID stage.

For now optimism over reopening of the economy and hopes of a potential COVID-19 vaccine rejuvenated the Wall Street on May 26.

4 Prominent Picks

We have shortlisted four Retail-Wholesale stocks on the basis of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B. Notably, the sector has rallied 11.4% compared with the S&P 500 Index’s rise of 1.3% in the past three months.

Investors can count on Sprouts Farmers Market SFM, which provides fresh, natural, and organic food products. This Zacks Rank #1 company has a long-term earnings growth rate of 4.4% and a VGM Score of A. It has a trailing four-quarter positive earnings surprise of 37.2%, on average. Moreover, the Zacks Consensus Estimate for its current financial year earnings has moved up 18.2% in the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

You may also consider The Kroger Co. KR, operator of supermarkets and multi-department stores. The stock carries a Zacks Rank #2 and a VGM Score of A. It has a trailing four-quarter positive earnings surprise of 2.1%, on average. Moreover, the Zacks Consensus Estimate for its current financial year earnings has moved up 3.8% in the past 60 days. The company has a long-term earnings growth rate of 4.9%.

eBay Inc. EBAY, which operates the marketplace and classifieds platforms that connect buyers and sellers globally, is a solid bet with a Zacks Rank #2 and a VGM Score of A. The company has a trailing four-quarter positive earnings surprise of 6.2%, on average. It has a long-term earnings growth rate of 12.4%. The Zacks Consensus Estimate for its current financial year earnings has improved 2.3% in the past 30 days.

We also suggest investing in Office Depot, Inc. ODP with a long-term earnings growth rate of 6.8%. This provider of business services and supplies, products, and technology solutions has a trailing four-quarter positive earnings surprise of 32.6%, on average. The stock has a Zacks Rank #2 and a VGM Score of A. Moreover, the Zacks Consensus Estimate for its current financial year earnings has moved up 9.8% in the past 30 days.

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eBay Inc. (EBAY) : Free Stock Analysis Report
 
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The Kroger Co. (KR) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
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