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The bankruptcy of Sears Holding Corp would have corresponded to the global scenario of the US retail sector a year ago, but not now. Unlike Sears, retailers are optimistic because US consumers are now the most confident since 2000. During the holiday season, retailers are actually about to see their sales increase.
Sears failure will not affect retail
Sears, which was once a dominant force in retail in the United States, filed for bankruptcy last week. A series of store closings and purchases failed to turn the situation around for the retailer, who had $ 6.9 billion in assets and $ 11.3 billion in liabilities. Sears also announced the closure of 142 unprofitable stores by the end of the year. Sears and its Kmart stores now have 894 stores in the United States, up from 3,500 when they merged in 2005.
The company had announced the resignation of its managing director, Edward Lampert, after the company's failure to pay off its $ 134 million debt. Like Toys "R" Us, Sears had been faced with cash flow problems due to interest payments and additional pressure related to pension commitments.
Sears' attempt to restructure its debt and sell more assets did not work at a time when retailers like Walmart Inc. (WMT – Free Report) and Target Corporation (TGT – Free Report) survive by investing heavily in e-commerce and experimenting with new brands and ideas.
In fact, buyers feel more confident about spending, which is reflected in the proliferation of shopping centers. Needless to say, retailers are gearing up for the end of the year with rising sales. It can be concluded that the Sears bankruptcy is an isolated case and not an industry trend.
Things to come for retailers
According to the Conference Board, an enterprise research organization, the level of American consumer confidence has reached its highest level in 18 years in September. The consumer confidence index climbed to 138.4 last month from 134.7 revised upward in August.
Consumer optimism was largely driven by the strength of the labor market. Nevertheless, such a record level of consumer confidence is a significant reading, as it has always been good at predicting consumer spending in the next three to six months. These figures influence the production schedule of companies. In fact, retailers are mostly affected because spending plays a major role in determining revenue. Lynn Franco, director of economic indicators at the Conference Board, added that "these historically high levels of confidence should continue to support healthy consumer spending and should be good news for retailers as they begin to prepare for the holiday season ".
The National Retail Federation added that retail sales in November and December, with the exception of automobiles, gasoline and restaurants, are expected to increase 4.3% to 4.8% over the same period last year to reach a total of $ 717.45 billion to $ 720.89 billion. This is much more than an average annual increase of 3.9% for the last five years.
5 solid choices
Given that retailers are well positioned to take advantage of this stellar reading of the confidence level and a slight rise in holiday sales, choosing shares in the space will be a wise decision. We therefore selected five solid retail values with Zacks ranking # 1 (strong purchase) or # 2 (purchase).
Burlington Stores, Inc. (BURL – Free Report) – Zacks' second largest company – operates as a branded clothing retailer in the United States. Zacks' consensus estimate of current year results has increased 3.7% over the past 60 days. The expected growth rate of the company's profits for the current quarter and year is 50% and 42.3%, respectively.
Target – a Zacks Rank # 2 company – operates as a general merchandise retailer in the United States. The consensus estimate of Zacks for current year profits has increased 0.2% over the past 60 days. The Company's expected growth rate for the current quarter and year is 20.9% and 14.2%, respectively.
Dollar General Corporation (DG – Free Report) – Zacks Group 2 Company – Provides various products in the South, Southwest, Central and Western United States. Zacks' consensus estimate of current year results has increased 0.7% over the past 60 days. The Company's expected growth rate for the current quarter and year is 28.6% and 35.9%, respectively. You can see the complete list of the current ranks of Zacks n ° 1.
Tilly & # 39; s, Inc. (TLYS – Free Report) – a top Zack company – sells casual clothes, shoes and accessories. The Zacks consensus estimate for its current year profits has increased 11.1% over the past 60 days. The expected growth rate of the company's profits for the next quarter and the current year is respectively 41.7% and 38.5%.
Urban Outfitters, Inc. (URBN – Free Report) is a lifestyle products and services company. The company has a ranking of No. 1 Zacks. The Zacks consensus estimate for its current year profits has increased 0.4% over the past 60 days. The company's expected growth rate for the current quarter and year is 53.7% and 59.3%, respectively.
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