5 Retailers Likely To Emerge Winners This Earnings Season

The recent volatility in the Wall Street rattled even the most ardent of investors, who started taking stock of their portfolio, overlooking the impressive earnings display by corporates for a while. Nevertheless, market for now seems to have somewhat settled trying to accommodate rising bond yields and a possible uptick in inflation with the backdrop dominated by the latest tax reform and healthy economic growth.

Well, after the action-packed phase, the focus is back on the reporting cycle. The earnings season is in full swing, with results from more than 340 S&P 500 members out by now. But the main highlight of the show is yet to come for the Retail-Wholesale sector.

How Is the Sector Faring?

The Retail-Wholesale sector, which currently occupies the top 6% (1 out of 16) position in the list of 16 Zacks sectors, has advanced approximately 27% in a year and comfortably outperformed the S&P 500’s growth of roughly 14%. Moreover, according to the latest Earnings Trends, the sector is expected to record top and bottom-line growth of 8.9% and 7.2%, respectively, this earnings season.

Favorable economic indicators along with friendlier fiscal and regulatory policies from the current regime bode well for the sector. Industry experts are of the opinion that gradual wage acceleration, a 17-year low unemployment rate and rising consumer confidence are enough to trigger consumer spending, which accounts for more than two-thirds of U.S. economic activity.

For obvious reasons, retailers are the end gainers. Moreover, National Retail Federation’s recent projection of an uptick in U.S. retail sales of 3.8-4.4% this year raises optimism. In addition, the recent cut in corporate tax rate will allow retailers to channelize the surplus money toward best possible alternatives. They may opt for a dividend hike or reduce debt load, or even create a corpus to fund acquisitions, otherwise invest in omni-channel capabilities, product launches and other innovations.