Americans are gearing up for the upcoming holiday season, with sales projected to soar. Higher personal income is fueling consumer spending. In fact, holiday shopping appears to have already started, with retail sales on the rise.
This is also boosting the nation’s economic growth, which is evident from the solid jump in the third-quarter GDP. Given this scenario, investing in consumer discretionary stocks like Comcast Corporation (CMCSA – Free Report) , GIII Apparel Group (GIII – Free Report) , Hilton Worldwide Holdings Inc. (HLT – Free Report) ,Lululemon Athletica Inc. (LULU – Free Report) and Royal Caribbean Cruises Ltd. (RCL – Free Report) ahead of the holiday season would be a prudent choice.
Holiday Season to Boost Sales
The retail sector has been making a steady rebound and the holiday season is expected to boost sales further. According to the National Retail Federation, holiday sales, including e-commerce, are projected to jump 3-4% to $957.3-$966.6 billion this year.
The NRF projects that sales from online and other non-store channels will rise by 7% to 9%, totaling $273.7 billion to $278.8 billion.
Inflation has declined sharply over the past year, thanks to the Fed’s monetary tightening policy that saw interest rates being hiked by 525 basis points. This has seen price prices ease substantially, allowing people to spend more freely.
The Fed said last month that it is open to another 25-basis point rate hike as inflation is still way above its 2% target. However, that hasn’t stopped consumers from spending.
Higher personal income is helping people spend more. Personal income rose 0.3% or $77.8 billion in September after climbing 0.4% in the previous month. Disposable personal income, which is calculated after paying current personal taxes, jumped $56.1 billion or 0.3% in September on a month-over-month basis.
Personal spending rose a solid $138.7 billion or 0.7% month over month, which gives a clear picture of consumers willing to spend more despite inflationary pressures.
Broader Economic Growth
Higher spending is boosting the nation’s overall economy. The U.S. economy grew at an annualized pace of 4.9% in the third quarter, surpassing the consensus estimate of growth of 4.7%, the Commerce Department reported. Moreover, the third-quarter growth was more than double the growth in the second quarter, when GDP grew 2.1%.
Needless to say, higher consumer spending played a major role in driving the third-quarter economic growth. For the quarter, consumer spending increased a solid 4% after rising a meager 0.8% in the second quarter. Consumer spending contributed 2.7% of the overall GDP growth in the third quarter.
Given the surge in household spending, consumer discretionary stocks are expected to benefit as consumer outlays significantly impact their revenues. We’ve identified five consumer discretionary stocks that exhibit a Zacks Rank of #1 (Strong Buy) or 2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Comcast Corporation is a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. Beginning first-quarter 2023, CMCSA changed its presentation of segment operating results around its two primary businesses, Connectivity & Platforms, and Content & Experiences.
Comcast Corporation’s expected earnings growth rate for the current year is 7.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the past 60 days. CMCSA presently carries a Zacks Rank #2.
GIII Apparel Group is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. GIII’s portfolio includes outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage. G-III has a portfolio of more than 30 licensed and proprietary brands, including five global major brands — DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld.
GIII Apparel’s expected earnings growth rate for the current year is 14.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. GIII presently sports a Zacks Rank #1.
Hilton Worldwide Holdings Inc. is a hospitality company that owns, leases, manages, develops, and franchises hotels and resorts. As of Dec 31, 2022, HLT’s development pipeline comprised nearly 2,820 hotels, with nearly 416,400 rooms across 118 countries and territories — including 30 countries and territories where it currently has no running hotels.
Hilton Worldwide’s expected earnings growth rate for the current year is 24.1%. The Zacks Consensus Estimate for the current-year earnings has improved 0.7% over the past 60 days. HLT currently carries a Zacks Rank #2.
Lululemon Athletica Inc. designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. LULU offers a line of apparel assortment, including fitness pants, shorts, tops and jackets designed for healthy lifestyle and athletic pursuits, such as yoga, training, and running as well as other sweaty and general fitness under the lululemon athletica brand name.
Lululemon Athletica’s expected earnings growth rate for the current year is 20.5%. The Zacks Consensus Estimate for the current-year earnings has improved 0.2% over the past 60 days. LULU presently carries a Zacks Rank #2.
Royal Caribbean Cruises Ltd. owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, RCL has a 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises. Royal Caribbean Cruises’ cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which includes the budget and luxury segments.
Royal Caribbean Cruises’ expected earnings growth rate for the current year is 182.1%. The Zacks Consensus Estimate for current-year earnings has improved 7.3% over the past 60 days. RCL currently has a Zacks Rank #2.
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