Record Retail Sales Lead Post-Lockdown Recovery: 5 Winners

U.S. retail sales bounced back in May in their biggest month-on-month jump ever on record, as coronavirus-related restrictions eased, and businesses and stores started reopening. The jump was already expected and once again proves that the economy is recovering.

Total retail sales were once again driven by e-commerce, which has seen a substantial uptick in the past couple of months as more people shopped online due to stay-at-home orders due to the COVID-19 outbreak. Moreover, grocers posted a more than 14% year-over-over increase in sales as fewer people went out to eat at restaurants due to the pandemic.

Retail Sales Surge

U.S. retail sales jumped by a record 17.7% from April to May, easily topping the record 6.7% witnessed in October 2001, a month after the 9/11 terrorist attacks. Retail sales alone soared 16.8% from April, more than double the estimate of 8%. Clothing and accessories stores reported the biggest percentage gain at 188% while sporting goods, hobby, musical instruments and book stores saw an 88.2% rise.

Motor vehicle sales jumped 44.1%, while building materials were up 10.9%. One of the biggest jumps was witnessed in food sales. Food services and drinking places saw a 29.1% rebound in May after being under lockdown for almost two months.

Sales fell 8.3% in March and a further 14.7% in April after the coronavirus outbreak led the states to shut down stores and businesses.

E-commerce Drives Retail Sales

Although retail sales have taken a beating following the pandemic, e-commerce had been trying to salvage the situation. The month of May too was no different, with sales at non-store retailers, which include Internet companies like Amazon.com, Inc. (AMZN) and eBay, Inc. (EBAY), surging 9% in May after posting growth of 9.5% in April. Online sales are up a sizable 30.8% from a year ago.

Ever since the virus outbreak, online orders and delivery services have gained traction. U.S. online grocery sales grew 22% in 2019 and, propelled by high demand from the nationwide COVID-19 lockdowns, stand to surge about 40% this year, according to the Coresight Research U.S. Online Grocery Survey 2020. E-commerce accounted for roughly 2.6% of U.S. food and beverage retail sales in 2019, but the projected growth in online grocery activity would raise that to 3.5% or nearly $38 billion in 2020.

Our Choices

The jump in retail sales in May once again signals at a steady recovery. With more stores likely to open in the coming weeks, it is expected that people will once again go shopping. However, e-commerce will continue to dominate given that things like social distancing and remote working and learning culture will become the new normal now. Given this situation it might be prudent to invest in retail stocks that also have a strong online presence.

Big Lots, Inc. BIG offers products under various merchandising categories, which include food, consumables, furniture, seasonal, soft home, hard home, electronics and toys and accessories.

The company’s expected earnings growth rate for the current year is 21%. The Zacks Consensus Estimate for current-year earnings has improved 54.7% over the past 30 days. Big Lots sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG is one of the largest discount retailers in the United States.  It offers a wider selection of merchandise, including consumable items, seasonal items, home products and apparel.

The company’s expected earnings growth rate for the current year is 21.4%. The Zacks Consensus Estimate for current-year earnings has improved 9.1% over the past 60 days. Dollar Generalhas a Zacks Rank #2 (Buy).

Campbell Soup Company CPB together with its subsidiaries, is a worldwide manufacturer and marketer of high-quality, branded convenience food products.

The company’s expected earnings growth rate for the current year is 25.7%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 60 days. Campbell Soupcarries a Zacks Rank #2.

The Kroger Co. KR operates supermarkets, multi-department stores, marketplace stores and price impact warehouse stores. Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.

The company’s expected earnings growth rate for the current year is 13.6%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. Kroger has a Zacks Rank #2.

B&G Foods, Inc. BGS along with its subsidiaries manufactures, sells and distributes high quality, shelf stable, frozen food and household products across the United States, Canada and Puerto Rico.

The company’s expected earnings growth rate for the current year is 21.3%. The Zacks Consensus Estimate for current-year earnings has improved 19.2% over the past 60 days. B&G Foods sports a Zacks Rank #1.

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Big Lots, Inc. (BIG) : Free Stock Analysis Report
 
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