Three Retail Stocks to Buy Now with "Sizzling" Sales in 2013

If you're currently looking for stocks to buy, now's a great time to take a close look at retailers.

You see, a combination of factors - an improving job market, steaming summer temperatures and lower prices - have helped retailers post sizeable sales gains recently.

And that has given their stocks a significant boost.

The Spider S&P Retail ETF (NYSEArca: XRT) proves that American shoppers have bounced back from the economic malaise. They're opening up their wallets for new clothes, movies and electronics at XRT components like Macys Inc. (NYSE: M) Netflix Inc. (Nasdaq: NFLX) and Best Buy Co. Inc. (NYSE: BBY).

Just last week, XRT jumped to a new multiyear high. Shares are now trading around $80, a gain of 30.7% year to date (YTD).

But those gains are on the low end.

Shares of several hot retailers are doing even better than that.

San Francisco-based Bebe Stores, Inc.'s (Nasdaq: BEBE) stock has ratcheted up by 39.8% YTD, fashionista favorite Express Inc. (NYSE: EXPR) has gained 48.3% and discounter Stein Mart Inc. (Nasdaq: SMRT) has climbed a whopping 93.3%.

And there's more good news to come...

U.S. Retail Sales Humming

With a rising stock market and home values increasing, consumers are feeling better in 2013 than they have felt in years.

Same-store sales at shops open at least a year - which smoothes out the volatility of openings and closings - rose 4.1% in June from the same period a year earlier, according to Retail Metrics Inc.

June's results beat analysts' forecasts of 3.7% and were the largest since sales swelled 5.1% in January.

Retailers had struggled through the spring as they dealt with chilly temperatures and "an economic soft patch," said the group's president, Ken Perkins.

Analysts at Jeffries Group LLC (NYSE: JEF), the world's largest independent investment bank, are positive on retailers as a whole and believe they have still have plenty of room to run from here.

They say retailers are on an upwards trajectory for the next several years, driven by three leading indicators -- lean inventories, cheaper raw materials, improved consumer sentiment - which are accelerating free cash flows

The Best Retail Stocks to Buy Now

But identifying which stocks to buy in the crowded retail landscape can be tricky. Fickle buyers can turn today's hottest trends into yesterday's news in no time.

"When it comes to shopping, sizzle sells. And retailers know it," according to Motif Investing, which follows a portfolio of leading retailers. "Successful retailers can get us to open our wallets with a new look or a reinvigorated experience."

The key benchmarks for determining the fate of retailers are growth of same store sales and store expansions.

Successful retailers show their glitter by growing sales even in economic downturns and they continue to open new stores to meet demand. According to Thomson Reuters, 3% same store sales growth indicates a retailer is on the upswing.

Here are three retail stocks to buy now that have shown they know how to tap into America's shopping habits:

The Gap Inc. (NYSE: GPS): With a $20 billion+ market cap, GPS has shown remarkable resiliency through thick and thin. The apparel maker has superior brand recognition by itself, but also has Old Navy and Banana Republic in its stable. Same store sales jumped 7% over 2012 in June and earnings were up a whopping 43%. The company has approximately 3,100 company-owned stores, 300 franchise stores and e-commerce sites in 90 countries worldwide. In February, Gap upped its dividend by 20% to a quarterly rate of 15 cents a share for a yield of about 1.3%. The stock is up 35% YTD.

Lithia Motors Inc. (NYSE: LAD): Auto sales generate about one-fifth of all retail spending. Car sales bottomed in 2009 at 10.4 million but have been steadily rising ever since and are expected to hit 15.1 million in 2013. LAD is the 9th largest auto retailer in the U.S. with 91 stores in 11 states. The company also arranges financing, warranties and provides vehicle parts and repair services. Same store sales growth in the first quarter grew by a phenomenal 18.8%. The company has steadily increased the number of stores by acquiring new stores and dealers. The stock is up 54.9% YTD and currently yields 0.9%.

Michael Kors Holdings Ltd. (NYSE: KORS): KORS went public in December of 2011 and hasn't skipped a beat since. KORS is a rapidly growing global luxury lifestyle brand that engages in the design, marketing, distribution and retail of women's and men's apparel and accessories. It currently has 273 company-owned stores and is on track to open an additional 150 stores in Europe and Asia. It also markets to department stores and specialty shops in North America and Europe. Same store sales rocketed up by 37% while revenues jumped by 57% in the latest quarter. The company opened 67 new stores in the past year. The stock is up 25.3% YTD but pays no dividend.

For more retail stocks to buy now, that will soar as prime takeover targets, check out this list.

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