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3 Best Retail Stocks You'll Regret Not Buying in 2023

Tirthankar Chakraborty
·4 min read

Decade-high inflation, increase in interest rates, and concerns about a looming recession, no doubt, have made consumers cautious this year. Consequently, sales at U.S. retailers dropped considerably last month, thanks to a broader pullback in consumer outlays.

However, retail sales did bounce back during the holiday shopping season as consumers accommodated rising prices and latched onto steep discounts. The period from Nov 1 to Dec 24, which predominantly encompasses the holiday shopping season, saw retail sales climb 7.6% year over year, more than an expected 7.1% growth, per a Mastercard report.

Some of the retail bigwigs like Amazon.com, Inc. AMZN and Walmart Inc. WMT were able to lure consumers by offering substantial discounts to do away with excess inventory. Such large discounts, undoubtedly, led to strong demand for all types of retail items, particularly during the five-day holiday period between Thanksgiving and Cyber Monday.

Notably, sales in the apparel and restaurant categories have jumped 4.4% and 15.1%, respectively, this holiday season, while online sales are up 10.6% compared to year-ago levels, added the Mastercard report. Moreover, retail sales during the cyber week soared nearly 11%, added a separate Mastercard SpendingPulse report, citing a businesstoday article.

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Meanwhile, consumer confidence has lately improved noticeably and that may certainly boost spending heading into the new year. And with households expected to continue spending, both in-store and online retailers are poised to benefit.

The consumer confidence index climbed to 108.3 in December, up from November’s 101.4, and the highest reading since April, per the Conference Board. Lest we forget, the University of Michigan’s consumer sentiment index too jumped to a preliminary reading of 59.1 in December from 56.8 in November.

To top it, a resilient labor market and solid wage growth would certainly fuel spending, which is unquestionably a boon for retailers. Consumer spending, by the way, which accounts for the bulk of US economic activity, edged up in October.

Thus, it would be judicious to invest in retailers like Chico's FAS CHS, Shoe Carnival SCVL and Texas Roadhouse TXRH that not only have made the most of the holiday shopping season but also are positioned to gain next year, banking on encouraging spending trends.

These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chico's FAS is a cultivator of brands serving the lifestyle needs of fashion-savvy women 30 years and older.

CHS currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its next-year earnings has moved up 5.3% over the past 60 days. CHS’s expected earnings growth rate for next year is 9.9%.

Shoe Carnival is one of the nation's largest family footwear retailers, offering a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with emphasis on national and regional name brands.

SCVL currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its next-year earnings has moved up 2.6% over the past 60 days. SCVL’s expected earnings growth rate for next year is 11.4%.

Texas Roadhouse is a full-service, casual dining restaurant chain, which offers assorted seasoned and aged steaks hand-cut daily on the premises and cooked to order over open gas-fired grills.

TXRH currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its next-year earnings has moved up 0.4% over the past 60 days. TXRH’s expected earnings growth rate for next year is almost 15%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

Texas Roadhouse, Inc. (TXRH) : Free Stock Analysis Report

Chico's FAS, Inc. (CHS) : Free Stock Analysis Report

Shoe Carnival, Inc. (SCVL) : Free Stock Analysis Report

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Zacks Investment Research