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A major retail sales report just rocked Wall Street this week: People are spending money again.
Sales jumped nearly 6% in January, while experts were expecting something closer to 1% growth. Don't let the numbers fool you, a jump this size between expectations and reality shows something serious is happening.
Breaking it down even more, we saw electronics sales jumped 15%, home furnishings grew by 12%, and online spending was up 11%. These are big jumps amid a pandemic and economic slump, a sign of things to come as the economy recovers.
And one more thing. Americans are getting stimulus checks up to $1,400 as soon as next month. That's going to drive these sales even higher.
That explosion is going to be a pale imitation compared to the sales bonanza we'll see as more people are vaccinated and the pandemic heads off into the history books.
With retail sales already blowing away expectations and more catalysts coming, we're taking a deep look into the top retail stocks to help you find the best to own to profit from this breakout.
The Best Retail Stocks to Buy Now
Chico's FAS Inc. (NYSE: CHS) is a retailer of women's clothes in the United States. It has 1,341 stores in the United States and Canada as well as franchises in Mexico. Its brands include Chico's, White House/Black Market, and Soma Intimates.
Like everybody else in the retail brick and mortar business, Chico's has been hammered by the pandemic. It is really hard to sell clothes when your stores are closed. It's also hard to sell clothes when your stores are open but your customer base is afraid to go shopping.
To fix this, Chico's FAS has done an outstanding job of ramping up its online shopping game. In spite of the pandemic, Chico's is seeing strong sequential sales growth. Even though sales are still well below the levels achieved before than pandemic struck.
That is going to change quickly once its target market of 35-year-old and up females with above average incomes feels safe to head out shopping once again.
Dave and Buster's
Dave & Buster's Entertainment Inc. (NASDAQ: PLAY) is also primed to grow from the latest sales jump.
It is not just clothing stores that are starting to see a rebound. Even food and drinking places saw a 6.9% rise from December levels. When the all–clear is sounded later this year, restaurants will see an explosion as people head back out to grab a bite and relax.
Dave and Buster's will see revenue and profits explode when it can finally get all of its stores open again. Although the combination restaurant/arcade has 139 locations across the country, an average of just 74 of those were open in the last quarter. The company hopes to get that number back up to 100 or more by the end of the first quarter of 2020.
In addition to the food and games, Dave and Buster's is also a big sports bar. To increase patronage in a post–pandemic world, Dave and Buster's is looking into forming a partnership with a sports betting company to add that to its list of attractions.
That makes this an especially good opportunity to get in before these catalysts ignite growth later in the spring.
Two of the largest shareholders are Hill Path Capital, an activist fund, and KKR & Co. Inc. (NYSE: KKR), the elite private equity firm. It's a good sign when you're investing alongside firms like these, and they'll be sure to step in and push management in the right direction if needed.
Conn's Inc. (NASDAQ: CONN) could also see a turnaround in sales and profits once shoppers are back out in full force later this year. Conns sells large ticket items like appliances, furniture, and consumer electronics with locations in 14 states.
Conn's also offers financing to its customers, who are primarily sub–prime borrowers. It had tightened up its credit standards as the pandemic hit last year, and as a result, its loan portfolio is in pretty good shape.
Sales have been down thanks to the pandemic. Furniture can be ordered online, but most consumers like to take a look at what they are buying and imagine how it will look in their own home.
With all the economic uncertainty caused by the pandemic, no one has been in a hurry to replace older appliances. If it worked or could easily be repaired, people have made do over the past year. It is better to make do with what you have than to spend the cash, was the thought process of many consumers.
With the end of the pandemic in sight, that's going to change
The combination of another round of stimulus checks later this year and a continued decline in COVID-19 cases could bring the shoppers and the profits back into Conn's by the end of 2021
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