High consumer prices had initially made retailers skeptical about this year’s back-to-school sales. However, with inflation easing, the retail sector is now a lot more confident about a solid back-to-school shopping season.
The back-to-school sales are projected to grow year over year in 2023, which is definitely good news for the struggling retail sector. Although higher prices are going to play a part in elevating overall sales, demand too is high, which bodes well for retailers.
Back-to-School Sales to Jump
According to a survey by the National Retail Federation (NRF), 2023 will be the most expensive back-to-school shopping season. Overall sales are projected to surpass $135 billion, $24 billion more than in 2022.
NRF projects that families with children in elementary through high school are likely to spend an average of $890.07, which is around $25 higher than the previous year and would set a new record.
Similarly, families with college students are projected to shell out in record numbers, with the NRF estimating an average of $1,366.95 per person. This amount is more than $167 higher than the spending seen last year.
The demand for electronics, particularly laptops and tablets, is expected to reach a record high, resulting in increased consumer spending in this category.
The retail sector has been suffering over the past year. The Fed resumed its aggressive interest rate hike in July after pausing briefly in June. The central bank has increased interest rates by 525 points since March 2022, taking the federal funds rate to the range of 5.25-5.5%.
However, inflation at the same time has been steadily declining over the past year after peaking at a 40-year-high of 9.1% in June 2022. Although inflation declined to 4.1% in June, which is a lot higher than the Fed’s 2% target, market participants are optimistic that the central bank might soon end its current monetary tightening policy.
Lower interest rates will thus help the retail sector, as this will give consumers more purchasing power.
Stocks to Buy
Given this situation, it would be ideal to watch out for these four stocks.
Crocs, Inc. CROX is one of the leading footwear brands with a focus on comfort and style. CROX offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages.
Crocs’ expected earnings growth rate for next year is 10.3%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the past 60 days. CROX presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Urban Outfitters, Inc. URBN is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. URBN merchandises are generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms. Urban Outfitters has operations in the United States, Canada and Europe.
Urban Outfitters’ expected earnings growth rate for the current year is 60%. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the past 60 days. URBN currently carries a Zacks Rank #2.
The Gap, Inc. GPS is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. GPS offers products for men, women and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix and Hill City brands.
The Gap’sexpected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. GPS currently sports a Zacks Rank #1.
Abercrombie & Fitch Co. ANF operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids through a network of approximately 850 stores across North America, Europe, Asia and the Middle East. ANF’s product portfolio includes knit and woven shirts, graphic T-shirts, fleece, jeans and woven pants, shorts, sweaters, outerwear, personal care products and accessories for men, women and kids, under the Abercrombie & Fitch, abercrombie kids and Hollister brands.
Abercrombie & Fitch’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. ANF currently sports a Zacks Rank #1.
Abercrombie & Fitch Company (ANF): Free Stock Analysis Report
The Gap, Inc. (GPS): Free Stock Analysis Report
Urban Outfitters, Inc. (URBN): Free Stock Analysis Report
Crocs, Inc. (CROX): Free Stock Analysis Report
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