The Fed has aggressively increased interest rates this year to tame the multi-decade-high inflation. After six consecutive interest rate hikes, inflation seems to have started cooling off, as evidenced by October’s lower-than-expected Consumer Price Index (CPI).

Moreover, Federal Reserve Vice Chair Lael Brainard indicated that the central bank could soon slow down the pace of its interest rate increases. According to the National Retail Federation (NRF), holiday retail sales are expected to grow by 6% to 8% this year.

According to the U.S. Bureau of Economic Analysis, the personal consumption expenditure index shows an average increase of 6.2% year-over-year. NRF Chief Economist Jack Kleinhenz said, “Consumer demand really remains intact even though we are seeing rising interest rates, persistent inflation, (and) certainly political uncertainty.”

According to NRF and Prosper Insights & Analytics, holiday shoppers will spend an average of $832.84 on gifts and holiday items this year, in line with the 10-year average. Senior Director of Industry and Consumer Insights Katherine Cullen said, “Almost regardless of what’s going on in the economy, consumers want to celebrate holidays. They want to give gifts to their loved ones, and they want to make this time of year feel special.”

Several major retailers are directing the majority of their holiday hires to work on store floors this year as Americans shift from mainly shopping online to shopping in physical stores. According to the annual holiday purchase intentions survey from The NPD Group, the number of consumers planning to shop online for the holidays fell from 85% last year to 80% this year.

Amid this backdrop, investors could look to capitalize on the holiday retail sales boom by investing in the fundamentally strong retail stocks Walmart Inc. (WMT), Dollar General Corporation (DG), Dillard's, Inc. (DDS), Torrid Holdings Inc. (CURV), and J.Jill, Inc. (JILL).

Walmart Inc. (WMT)

WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S, Walmart International, and Sam's Club.

Over the last three years, WMT’s dividend payouts have grown at a 1.9% CAGR. Its four-year average dividend yield is 1.72%, and its forward annual dividend of $2.24 per share translates to a 1.49% yield. It is expected to pay a quarterly dividend of $0.56 per share on January 3, 2023.

On October 31, 2022, Popable, a pop-up shop marketplace platform, and WMT announced a strategic partnership that allows small businesses to rent retail space in WMT stores across the country for short-term leasing.

The partnership is believed to help small business owners thrive, keeping excess inventory moving and creating greater built-in foot traffic. WMT will benefit from the utilization of its store space.

For the fiscal third quarter ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion. Its adjusted operating income increased 3.9% year-over-year to $6.02 billion. In addition, its adjusted EPS came in at $1.50, representing a 3.4% increase from the year-ago quarter.

WMT’s revenue for the quarter ending January 31, 2023, is expected to increase 4.2% year-over-year to $157.91 billion. Its EPS for the quarter ending April 30, 2023, is expected to grow 10.1% year-over-year to $1.43. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 3.8% year-to-date to close the last trading session at $150.23.

WMT’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the A-rated Grocery/Big Box Retailers industry, it is ranked #12 out of 39 stocks. The company has an A grade for Sentiment and a B for Stability and Quality.

Click here to see the additional POWR Ratings of WMT for Growth, Value, and Momentum.

Dollar General Corporation (DG)

DG is a discount retailer providing various merchandise products in the southern, southwestern, Midwestern, and eastern United States. It offers consumable products, packaged food, perishables, health and beauty products, pet supplies, pet food, and tobacco products. It also provides apparel and accessories.

Over the last three years, DG’s dividend payouts have grown at an 18.3% CAGR. Its four-year average dividend yield is 0.79%, and its forward annual dividend of $2.20 per share translates to a 0.85% yield. It paid a quarterly dividend of $0.55 per share on October 18, 2022.

On August 17, 2022, DG donated an additional $1 million to Feeding America to commemorate its one-year partnership anniversary. The donation intends to support community food banks and help provide increased access to nutritious food resources through Feeding America. 

DG’s CEO, Todd Vasos, said, "We are proud to leverage our unique store footprint to help increase access to a variety of nutritious foods that help provide meals to individuals facing hunger."

For the fiscal second quarter ended July 29, 2022, DG’s net sales increased 9% year-over-year to $9.43 billion. The company’s gross profit increased 11.3% from the year-ago period to $3.04 billion. Its net income increased 6.4% year-over-year to $678.03 million. Additionally, its EPS came in at $2.98, representing a 10.8% increase from the prior-year quarter.

Analysts expect DG’s EPS and revenue for the quarter ended October 31, 2022, to increase 21.9% and 10.7% year-over-year to $2.53 and $9.43 billion, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 9.3% year-to-date to close the last trading session at $257.70.

DG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. In addition, it has a B grade for Stability. It is ranked #26 in the same industry.

We have also given DG grades for Growth, Value, Momentum, Sentiment, and Quality. Get all DG ratings here.

Dillard's, Inc. (DDS)

DDS operates retail department stores in the southeastern, southwestern, and midwestern areas of the United States. Its stores offer merchandise, fashion apparel, accessories, cosmetics, home furnishings, and other consumer goods.

Over the last three years, DDS’ dividend payouts have grown at a 21.1% CAGR. Its four-year average dividend yield is 2.14%, and its forward annual dividend of $0.80 per share translates to a 0.22% yield. It is expected to pay a quarterly dividend of $0.20 per share on January 30, 2023.

For the fiscal third quarter ended October 29, 2022, DDS’ net sales increased 4% year-over-year to $1.57 billion. The company’s total assets increased 1.4% year-over-year to $3.79 billion. Its EPS came in at $10.96, representing an 11.7% increase from the prior-year period.

DDS’ EPS and revenue for fiscal 2023 are expected to increase 6.5% and 5% year-over-year to $42.64 and $6.96 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 46.6% year-to-date to close the last trading session at $359.20.

DDS’ POWR Ratings reflect solid prospects. The company has an overall rating of B, which equates to a Buy. It is ranked #9 out of 66 stocks in the Fashion & Luxury industry. In addition, it has an A grade for Quality and a B for Value.

Click here to see the other ratings of DDS for Growth, Momentum, Stability, and Sentiment.

Torrid Holdings Inc. (CURV)

CURV is a company providing women's plus-size apparel and intimates. The company designs, develops, and merchandises its products under the Torrid and Torrid Curve brand names. It is involved in selling apparel products, including tops, bottoms, dresses, sleepwear, swimwear, and non-apparel products comprising accessories, footwear, and beauty products.

CURV’s net sales for the second quarter ended July 30, 2022, increased 2.4% year-over-year to $340.87 million. The company’s income from operations increased 198.4% year-over-year to $39.42 million. Moreover, its total liabilities declined 5% to $795.21 million compared to $836.82 million for the fiscal year ended January 29, 2022.

Analysts expect CURV’s EPS for the quarter ending April 30, 2023, to increase 7.8% year-over-year to $0.25. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past month, the stock has fallen 12.6% to close the last trading session at $4.16.

CURV’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. It is ranked #4 out of 46 stocks in the Specialty Retailers industry. It has an A grade for Growth and a B for Quality.

In total, we rate CURV on eight different levels. Beyond what we stated above, we have also given CURV grades for Value, Momentum, Stability, and Sentiment. Get all CURV ratings here.

J.Jill, Inc. (JILL)

JILL operates as an omnichannel retailer of women's apparel under the J.Jill brand. The company offers knit and woven tops, bottoms, dresses, sweaters, outerwear, footwear, and accessories, including scarves, jewelry, and hosiery.

On August 4, 2022, JILL launched Welcome Everybody, a new online shopping experience in stores celebrating all women’s totality and marking a transformative moment in the brand’s evolution. 

Claire Spofford, CEO and President of JILL, believes that this venture could modernize the company’s value proposition, introduce new customers to relevant and compelling products, and clearly communicate what it offers.

JILL’s net sales for the second quarter ended July 30, 2022, increased marginally from the year-ago period to $160.34 million. The company’s gross profit rose 2.8% year-over-year to $112.47 million. Also, its adjusted EBITDA gained 8.8% year-over-year to $35.57 million.

Its adjusted net income increased 34.6% year-over-year to $17.69 million. Its adjusted EPS came in at $1.24, representing a 33.3% increase from the prior-year quarter. In addition, its adjusted income from operations increased 16.8% year-over-year to $28.19 million.

Analysts expect JILL’s EPS and revenue for fiscal 2023 to increase 26.8% and 4% year-over-year to $2.70 and $608.80 million, respectively. JILL has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 31.5% year-to-date to close the last trading session at $25.23.

It is no surprise that JILL has an overall rating of A, which equates to a Strong Buy. It is ranked first in the Fashion & Luxury industry. In addition, it has an A grade for Sentiment and Quality and a B for Value.

To see the other ratings of JILL for Growth, Momentum, and Stability, click here.

WMT shares were trading at $152.06 per share on Monday afternoon, up $1.83 (+1.22%). Year-to-date, WMT has gained 6.34%, versus a -15.93% rise in the benchmark S&P 500 index during the same period.

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.

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