5 Best Retail Stocks To Buy For 2nd Half Of 2019

Wall Street is having its best year so far since 1997. However, the same cannot be said about retailers. While the broader S&P 500 has gained a staggering 18% on a year-to-date basis, the SPDR S&P Retail (NYSE:XRT) ETF increased a meager 3%. After all, trade related issues between the United States and China took a toll on retail stocks.

But, now the trade war between two of the world’s most powerful economies have been put on hold and a deal seems imminent. This development should reinvigorate U.S. consumers, which in turn should bode well for retailers during the second half of this year.

Talking about U.S. consumers, things are certainly looking up for them for the rest of this year. And why not? Jobs are being added at a steady clip, unemployment rate is at record low levels, wages are ticking up, which is making consumers feel more confident about their well-being.

The United States added a promising 224,000 jobs last month, way higher than analysts’ expectations of 170,000 jobs, per the Labor Department. Unemployment rate, by the way, edged up to 3.7% from 3.6% but is near a 50-year low. The U-6 rate ticked up to 7.2%. However, the rate of underemployment rate is below where it was a few years back. What’s more, the phenomenal jobs report shows that hourly pay has gone up by 6 cents to $27.90 an hour. In the last 12 months, wage gains held steady at 3.1%.

Back-to-school shopping season is also just around the corner. And this time around shoppers are expected to spend more on retail outlets compared with last year. In fact, Amazon (NASDAQ:AMZN) Prime Day is expected to kick off the back-to-school shopping season. Further, more than 80% of retailers consider the Amazon Prime Day period to be the most important time of the back-to-school season, per data from RetailMeNot.

It is likely that more than two-thirds of shoppers during Amazon Prime Day period will also head to other retailers. On average, shoppers are expected to visit at least 11 retailers throughout the Prime Day period. Data from marketing intelligence company MiQ showed that shoppers will visit stores on average 16 times to buy back-to-school items between July and September.

Notably, shoppers are expected to spend an average $507 for the entire back-to-school summer period, more than $465 last year. Retail behemoths Target and Walmart are already offering deals and additional discounts to attract customers.

Thus, it will be prudent to invest in retail stocks that can make the most of the big upside potential over the upcoming several months. Let’s have a look at them –

Dollar General

Dollar General Corporation (NYSE:DG) is a discount retailer that provides various merchandise products in the southern, southwestern, Midwestern, and eastern United States. The company’s focus on low prices for consumer staples products helped drive strong sales and profit growth over the past several years.

The company, currently, carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings increased 0.6% over the past 60 days. The stocks expected earnings growth rate for the current-year is 8.2%, higher than the Zacks Investment Research

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Written By: Zacks Investment Research