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The retail sector is making solid efforts to bounce back from its earlier lows. Sales have increased over the past few months as price pressures eased following the Federal Reserve’s back-to-back rate cuts. Robust consumer spending is helping overall retail sales.

Also, the holiday season is approaching, and a shopping extravaganza is expected to boost overall retail sales. Given this positive outlook, investing in retail stocks would be a prudent choice.

We have selected four such stocks: Amazon.com, Inc. AMZN, Tapestry, Inc. TPR, Casey's General Stores, Inc. CASY and Abercrombie & Fitch ANF. These stocks have seen positive earnings estimate revisions in the last 60 days. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

Black Friday, Cyber Monday Sales to Hit New Highs

Retailers who look forward to the all-important holiday sales to maximize their revenues can expect a robust Black Friday to Cyber Monday. Retail sales are projected to hit $75 billion for the first time during the Black Friday to Cyber Monday shopping window, up 5% year over year and ahead of the total holiday period sales growth of 3%, according to Bain.

Of the total holiday period sales, 8% will be generated between Black Friday and Cyber Monday, the largest in the post-pandemic era.

The popularity of e-commerce has made Cyber Monday an important shopping day. Cyber Monday this year is also expected to be great, with online sales growing in October. The Commerce Department, in its sales report, said that online sales grew 0.3% last month.

Overall Retail Sales Grow

The retail sector suffered for most of 2022 and 2023 as consumers spent cautiously amid rising price pressures and higher borrowing rates. However, price pressures have eased substantially, with inflation declining sharply over the past few months.

Retail sales grew 0.4% sequentially in October, surpassing analysts’ expectations of a rise of 0.3%. The Federal Reserve has cut interest rates by 75 basis points since September after inflation declined substantially in the second and third quarters.

Lower borrowing costs have been helping consumers gain more purchasing power. Also, consumer spending has been robust. Consumer spending rose 0.5% month over month in September and 3.7% annually. A jump in retail sales and consumer spending bodes well for the sector ahead of the holiday season.

4 Retail Stocks With Upside

Amazon.com, Inc.

Amazon.com, Inc.is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. AMZN’s online retail business revolves around the Prime program well-supported by the company’s massive distribution network. Further, the Whole Foods Market acquisition helped Amazon establish a footprint in the physical grocery supermarket space. AMZN also enjoys a dominant position in the cloud-computing market, particularly in the Infrastructure as a Service space, thanks to Amazon Web Services.

Amazon.com has an expected earnings growth rate of 78.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 8.8% over the last 60 days. AMZN presently carries a Zacks Rank #2.

Tapestry, Inc.

Tapestry, Inc. is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. TPR offers lifestyle products, which include handbags, women’s and men’s accessories, footwear, jewelry, seasonal apparel collections, sunwear, travel bags, fragrance and watches.

Tapestry has an expected earnings growth rate of 6.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2% over the last 60 days. TPR presently carries a Zacks Rank #2.

Casey's General Stores

Casey's General Stores, Inc. operates convenience stores under the Casey's and Casey's General Store names in 16 states, mainly Iowa, Missouri and Illinois. CASY offers a comprehensive range of products and services to meet the needs of its customers. In addition to fuel, the stores provide a wide variety of merchandise, including groceries, prepared food, snacks, beverages, tobacco products, health and beauty aids, school supplies, housewares, pet supplies and automotive supplies.

Casey’s has an expected earnings growth rate of 6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the last 60 days. CASY currently has a Zacks Rank #2.

Abercrombie & Fitch

Abercrombie & Fitch 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 64.2%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. ANF currently sports a Zacks Rank #1.

Zacks Investment Research

Abercrombie & Fitch Co. ANF is scheduled to report third-quarter fiscal 2024 results on Nov 26, before the opening bell.

The Zacks Consensus Estimate for ANF’s fiscal third-quarter revenues is pegged at $1.2 billion, suggesting 11.8% growth from that reported in the year-ago quarter. For fiscal third-quarter earnings, the consensus mark is pegged at $2.32 per share, implying a 26.8% increase from the $1.83 reported in the year-ago quarter. The consensus estimate for earnings has moved up by a penny in the past 30 days.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

In the last reported quarter, Abercrombie's earnings beat the consensus estimate by 16.8%. Moreover, ANF has delivered an earnings surprise of 28%, on average, in the trailing four quarters.

Earnings Whispers

Our proven model conclusively predicts an earnings beat for Abercrombie this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks before they are reported with our Earnings ESP Filter.

Abercrombie currently has an Earnings ESP of +4.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Trends Leading Up to ANF’s Q3 Results

ANF has been gaining from continued momentum in the Abercrombie brand, improvement in the Hollister brand and store-optimization efforts. The company has noted that its efforts to improve the positioning of the Hollister brand have been paying off. Investments across stores, digital and technology via its Always Forward Plan bode well.

The company's third-quarter fiscal 2024 results are anticipated to reflect the strength of its brands and robust demand for products that resonate with customers. Management is focused on curating trend-right merchandise, strengthening customer relationships through marketing, advancing digital commerce and efficiently managing expenses.

On the last reported quarter’s earnings call, management expected to benefit from brand strength, driven by its focus on delivering high-quality, on-trend assortments for new and retained customers across regions and brands. It has also been focused on making investments across stores, digital and technology, which are slated to strengthen the company’s performance in the forward quarters.

Abercrombie anticipates third-quarter fiscal 2024 consolidated net sales to increase in the low-double digits from the $1.06 billion reported in the year-ago period. The operating margin is expected to be 13-14%, suggesting an increase from the operating margin of 13.1% delivered in third-quarter fiscal 2023.

Our model predicts third-quarter fiscal 2024 total revenues to increase 10.1% year over year. We expect sales for the Abercrombie brand to grow 12.4%. Sales for Hollister are expected to improve 7.7%.

Abercrombie & Fitch Company Price and EPS Surprise

Abercrombie & Fitch Company price-eps-surprise | Abercrombie & Fitch Company Quote

We note that Abercrombie has been witnessing favorable margin trends, driven by lower freight and raw material expenses, and improved average unit retail (AUR). This has been boosting the company’s gross and operating margins.

For the third quarter of fiscal 2024, ANF projected an operating margin of 13-14%, implying an increase from the operating margin of 13.1% delivered in third-quarter fiscal 2023. This growth is expected to have been backed by a higher gross margin rate on continued benefits from cotton prices, improved AUR and modest expense leverage. We expect an adjusted operating margin of 13.4% for the fiscal third quarter, suggesting a year-over-year rise of 30 bps. Our model predicts the gross margin to remain flat year over year at 64.9% in the fiscal third quarter.

However, Abercrombie has been witnessing elevated operating costs on higher technology expenses and incentive-based compensation. Additionally, inflation and increased investment for the 2025 Always Forward Plan initiatives are likely to have been concerning in the to-be-reported quarter. Our model estimates a year-over-year increase of 10.3% in adjusted operating expenses for the fiscal third quarter.

ANF’s Price Performance & Valuation

Abercrombie’s shares have exhibited an uptrend in the year-to-date period, leaving behind its industry peers and the Zacks Retail-Wholesale sector. Year to date, the New Albany, OH-based company’s shares have risen 63.6%, outperforming the industry and the sector’s growth of 5% and 23.2%, respectively. The company has also lagged the S&P 500’s rally of 24.5%.

ANF’s One-Year Price Performance

Restaurant Brands International Inc. QSR is likely to benefit from strong Tim Hortons performance, menu innovation and marketing strategies. Also, the focus on the Reclaim the Flame initiative bodes well. However, macro pressures and general softening in the consumer environment are a concern.

Factors Driving Growth of QSR Stock

Restaurant Brands continues to benefit from strong Tim Hortons performance. During the third quarter, comparable sales in the segment increased 2.7% year over year, driven by traffic growth. The brand maintained its leadership in coffee, baked goods and breakfast, bolstered by innovative promotions like a $3 hot breakfast sandwich with coffee, boosting traffic and profits.

New PM menu offerings, including loaded Anytime Snackers and flatbread pizzas, drove a 5.2% increase in PM food sales year over year. Also, operational enhancements, including improved drive-through speeds and effective marketing campaigns, supported traffic growth and market outperformance.

Strong International segment performance bodes well for the company. During the third quarter, the International segment posted solid results, with a 1.8% increase in comparable sales and 8.0% growth in system-wide sales. The upside was backed by strong Burger King’s performance, achieving growth in markets such as Australia, Spain, Korea, the U.K. and Japan.

During the quarter, Popeyes reported solid performance, particularly in the U.K., where the brand has grown to over 55 locations (in three years) and generating $130 million in system-wide sales. Expansion opportunities remain significant in both Burger King and Popeyes markets globally.

QSR focuses on strategic investments to drive growth. During the third quarter of 2024, QSR maintained momentum on key strategic programs, particularly the "Reclaim the Flame" plan at Burger King U.S., aimed at revitalizing the brand. Investments in marketing and restaurant modernization are delivering progress, with franchisees set to increase their ad fund contributions from 4% to 4.5% beginning in 2025. This shift will likely provide a tailwind for QSR’s AOI and adjusted earnings per share (EPS) growth.

Concerns for QSR Stock

For Immediate Release

Chicago, IL – November 22, 2024 – Zacks.com announces the list of Stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Abercrombie & Fitch Co. ANF, Urban Outfitters, Inc. URBN, Casey's General Stores, Inc. CASY and Dollar Tree, Inc. DLTR.

Here are highlights from Thursday’s Analyst Blog:

4 Retail Stocks Primed to Beast Earnings Estimates This Season

As investors await upcoming earnings reports, the performance of key players within the Retail-Wholesale sector could impact market sentiment in the coming weeks. This reporting cycle provides valuable insight into sector performance, with expectations for a potential uptick in both sales and earnings. These results are likely to be influenced by prevailing consumer sentiment, spending trends and the ongoing challenge of managing operational costs.

Per the latest Zacks Earnings Outlook, the sector is anticipated to witness top-line growth of 5.3% year over year in the third quarter of 2024. This follows a 4.4% increase in the preceding season. Meanwhile, the bottom line is expected to increase 12% this earnings season. The sector registered earnings growth of 16.1% in the previous reporting cycle.

With earnings season on its last leg, it is worth investing in companies with earnings beat potential. We have identified four stocks — Abercrombie & Fitch Co., Urban Outfitters, Inc., Casey's General Stores, Inc. and Dollar Tree, Inc. — that are poised to trump earnings estimates this season.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Key Factors Likely to Influence Retail Earnings

Retail earnings this season are poised to reflect evolving consumer preferences, which have increasingly shifted toward essentials and value-based products amid underlying inflationary pressures. Retailers focusing on competitive pricing and product diversification, particularly in areas like groceries and home essentials, may have experienced higher foot traffic and better conversion rates. However, discretionary categories such as apparel and electronics could have faced headwinds as consumers prioritize necessities.

Persistent inflation, while moderating, continues to weigh on consumer budgets and retailers’ cost structures. Retailers implementing strategic pricing, including promotions and private label expansions, are better positioned to maintain their market share without significantly eroding margins. Those with robust supply-chain management and the ability to pass on incremental costs to consumers are likely to see resilient earnings.

The sustained growth of e-commerce and the integration of omnichannel capabilities remain pivotal for retail success. Companies investing in seamless online shopping experiences, coupled with efficient last-mile delivery, are attracting a broader customer base. The fusion of physical and digital channels — such as click-and-collect options and curbside pickups —offers a competitive edge, particularly as consumers seek convenience and flexibility.

Efficient inventory management will be a critical determinant of retail profitability this earnings season. Retailers grappling with excess inventory from prior seasons may face margin pressures due to markdowns. Conversely, those leveraging advanced analytics and demand forecasting to optimize stock levels are better equipped to meet consumer demand while safeguarding profit margins.

4 Retail Stocks Poised for Earnings Surprises

Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Abercrombie & Fitch: Zacks Rank #2 & Earnings ESP of +4.59%

Abercrombie & Fitch stands out as a strong investment choice. The company excels in integrating digital and physical retail channels, offering a seamless shopping experience and driving higher customer satisfaction and loyalty. Strategic marketing initiatives, particularly targeted campaigns in key markets, have been effective in boosting brand visibility and customer acquisition.

The introduction of innovative product lines meets specific customer needs and broadens the brand's appeal. Abercrombie & Fitch’s regional operating model, with a focus on the Americas, the EMEA (Europe, the Middle East and Africa) and the APAC (Asia-Pacific), provides a solid foundation for global expansion.

Investors can count on Abercrombie & Fitch with a Zacks Rank #2 and an Earnings ESP of +4.59%. The Zacks Consensus Estimate for third-quarter fiscal 2024 earnings per share has risen by a penny to $2.32 in the past 30 days. The consensus estimate suggests an increase of 26.8% from the year-ago period. ANF has a trailing four-quarter earnings surprise of 28%, on average. The company will report numbers on Nov. 26 before the opening bell. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Company price-consensus-eps-surprise-chart | Abercrombie & Fitch Company Quote

Urban Outfitters: Zacks Rank #2 & Earnings ESP of +8.17%

You may consider Urban Outfitters. The company's growth is fueled by its multi-brand approach featuring Anthropologie and Free People, allowing it to navigate a challenging retail landscape. Its success in the expansion of the Nuuly subscription rental service reflects its ability to adapt to evolving consumer demands, particularly for sustainable fashion solutions. Urban Outfitters’ focus on omnichannel integration enhances customer engagement and spending.

Urban Outfitters has a Zacks Rank #2 and an Earnings ESP of +8.17%. The Zacks Consensus Estimate for third-quarter fiscal 2025 earnings per share has risen by a penny to 84 cents in the past seven days but still implies a decline of 4.6% from the year-ago period. URBN has a trailing four-quarter earnings surprise of 17.6%, on average. The company is slated to report financial numbers on Nov. 26 after the closing bell.

Urban Outfitters, Inc. price-consensus-eps-surprise-chart | Urban Outfitters, Inc. Quote

Casey's General Stores: Zacks Rank #2 & Earnings ESP of +5.22%

Casey's also deserves a mention. The company continues to distinguish itself in the convenience store sector through robust operational strategies that bolster its market position and financial performance. A resilient business operating model, stellar omnichannel capabilities, expanded customer outreach and exclusive private-label offerings strengthen Casey's competitive position. Through a strategic blend of organic growth and targeted acquisitions, Casey's is aggressively expanding its footprint.

CASY has a Zacks Rank #2 and an Earnings ESP of +5.22%. The Zacks Consensus Estimate for second-quarter fiscal 2025 earnings per share has risen by 1.2% to $4.28 in the past 30 days. The consensus estimate implies an increase of 0.9% from the year-ago period. Casey's has a trailing four-quarter earnings surprise of 15.8%, on average. The company is scheduled to report financial numbers on Dec. 9 after the market closes.

Casey's General Stores, Inc. price-consensus-eps-surprise-chart | Casey's General Stores, Inc. Quote

Dollar Tree: Zacks Rank #3 & Earnings ESP of +2.80%

Dollar Tree is worth betting on. The company’s strategic initiatives, including its multi-price expansion, footprint growth, private brand development and supply-chain modernization, position the company for success. DLTR remains confident in its ability to deliver value to customers and drive market share growth. With a strong financial foundation, an expanding customer base and a differentiated business model, Dollar Tree is well-positioned to navigate the evolving retail landscape and continue to generate value for investors.

Dollar Tree has a Zacks Rank #3 and an Earnings ESP of +2.80%. The Zacks Consensus Estimate for third-quarter fiscal 2024 earnings per share has risen by a penny to $1.07 in the past 30 days. The consensus estimate suggests an increase of 10.3% from the year-ago period. The company is scheduled to report quarterly numbers on Dec. 4 before the stock market opens.

Dollar Tree, Inc. price-consensus-eps-surprise-chart | Dollar Tree, Inc. Quote

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