In June, U.S. retail sales showed remarkable resilience, holding steady at $704.3 billion, according to the latest report from the U.S. Census Bureau, defying expectations of a 0.3% decline. This stable performance follows a revised 0.3% increase in May. Amid economic uncertainties, consumer spending remains a cornerstone of the U.S. economy, driving two-thirds of its activity. Retail sales grew 2.3% year over year last month.
Despite persistent challenges such as elevated inflation and sustained high interest rates, Americans have shown cautious yet resilient spending habits. Savings accumulated during the pandemic have largely been depleted, prompting a shift toward essential purchases over discretionary spending. This strategic approach reflects consumers’ efforts to navigate a volatile economic landscape.
The Federal Reserve is closely monitoring these developments, particularly as unemployment edges up and consumer caution grows apparent. The latest inflation data and signs of economic slowdown reinforce expectations that the Federal Reserve may soon lower interest rates. Market expectations are leaning toward a potential rate cut during the Sep 17-18 Federal Reserve meeting.
Breaking Down the Sales Number
Furniture and home furnishing stores led with a 0.6% increase in sales, while electronics and appliance stores experienced a modest 0.4% rise. Building material and supplies dealers saw a significant 1.4% jump, while food and beverage stores saw a slight 0.1% increase. Health and personal care stores reported a 0.9% rise, and non-store retailers, predominantly online, showed a robust 1.9% increase.
Clothing and accessories stores also saw positive momentum with a 0.6% increase, alongside miscellaneous stores at 0.3% and general merchandise stores at 0.4%. Food services and drinking places saw a modest 0.3% uptick in sales.
Conversely, motor vehicle and parts dealers experienced a notable 2% decline in sales, while gasoline stations faced a more pronounced drop of 3%. Sales at sporting goods, hobbies, musical instruments and bookstores also decreased slightly by 0.1%.
Past-Year Price Performance
Image Source: Zacks Investment Research
4 Prominent Picks
Amazon.com, Inc. AMZN is a potential pick. The company’s robust e-commerce platform, renowned for its vast product selection and efficient delivery services, continues to be a primary driver of revenue growth. Prime membership, a cornerstone of Amazon’s success, not only fosters customer loyalty but also drives recurring revenues through subscription fees, offering members exclusive access to a myriad of services, such as expedited shipping.
The Zacks Consensus Estimate for Amazon’s current financial-year sales and EPS suggests growth of 11% and 57.9%, respectively, from the year-ago reported figure. AMZN, which sports a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 48.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Burlington Stores, Inc. BURL is worth considering. The company has adeptly responded to the challenges in the retail landscape by strategically emphasizing recognizable brands, implementing the best pricing strategy and targeting trade-down shoppers. The implementation of strategic initiatives aimed at enhancing merchandising capabilities, operational efficiency and store optimization is likely to support revenue growth. By focusing on initiatives such as store relocations and downsizing, Burlington Stores aims to improve store productivity. The ability to quickly respond to evolving market dynamics and adjust inventory levels based on real-time data insights has enabled the company to seize opportunities.
The Zacks Consensus Estimate for Burlington Stores’ current fiscal sales and EPS suggests growth of 9.5% and 25.4%, respectively, from the year-ago reported figure. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 21.7%, on average.
Investors can count on Walmart Inc. WMT. This omnichannel retail giant has been diligently working to strengthen its already formidable presence in the market. The company has embarked on a series of strategic e-commerce initiatives, encompassing acquisitions, partnerships and significant improvements in its delivery and payment systems. Simultaneously, Walmart is committed to elevating its merchandise offerings, ensuring a diverse and appealing product assortment. Innovation extends to its supply chain, wherein the company is enhancing capacity and introducing cutting-edge solutions.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings suggests growth of 4.3% and 9.5%, respectively, from the year-ago reported numbers. This Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 8.3%, on average.
Costco Wholesale Corporation COST is worth betting on. The discount retailer’s growth strategies, better price management and decent membership trends have been contributing to its performance. Cumulatively, these factors have been aiding this Issaquah, WA-based company in registering decent sales numbers. The company’s distinctive membership business model and pricing power set it apart from traditional players. We believe a favorable product mix, steady store traffic, pricing strength and strong liquidity should benefit Costco.
This Zacks Rank #2 company has a trailing four-quarter earnings surprise of 2.3%, on average. The Zacks Consensus Estimate for current financial-year revenues and EPS suggests growth of 5.2% and 10.3%, respectively, from the year-ago reported figures.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
