Retailers Cheer Trump's Tariff Delay: 5 Solid Buys

Tirthankar Chakraborty

President Trump delayed tariffs on the remaining Chinese imports in hopes of boosting U.S. holiday sales. No doubt, retailers cheered such a move, since China tariffs could have pushed them to cut jobs and store closures. To top it, American shoppers continue to be confident about their financial well-being, something that bodes well for retailers. Thus, it’s time to invest in retailers that are likely to make the most of the bullish sentiments.

What’s Driving Retailers?

Thanks to an uptick in prices of consumer goods and a sharp drop in the stock market, the Trump administration has postponed the levying of tariffs on Chinese products on Sep 1. And let’s admit, the White House has realized that tariffs are doing no good to U.S. consumers, even if Trump claims that tariffs have affected China.

Trump’s 10% tariffs on $300 billion of Chinese imports might go into effect on Dec 15, possibly a move to buttress the holiday shopping season. Trump claimed that “we are doing this for Christmas season, just in case some of the tariffs would have an impact on U.S. customers. Just in case they might have an impact on people, what we've done is we've delayed it so that they won't be relevant to the Christmas shopping season.”

The targeted products include clothing and footwear, cell phones, laptops, video game consoles, certain toys and computer monitors, to name a few. Financial experts welcomed the news as tariffs would have affected the U.S. economy and eventually squeezed corporate profits. More importantly, retailers cheered the tariff delay. This is because more tariffs would mean more job cuts and store closures for retailers. Tariffs would dampen consumer outlays, slow down the economy and hurt retailers’ bottom line.

Lest we forget, retailers have already trimmed 43,000 jobs so far this year, showing a 40% jump from the same period last year, according to the outplacement firm Challenger Gray & Christmas. What’s more, store closures so far this year have exceeded last year’s count, per a recent report from Coresight Research.

US Consumer Confidence Near 18-Year High

Nonetheless, American consumers are still confident about their well-being, and that’s a bonanza for retailers as well. After all, more the confidence households generate the more will they spend. Notably, consumer spending accounts for roughly 70% of the U.S. economy, which isn’t a petty number.

The consumer confidence index climbed to 135.7 in July from a revised 124.3 in June, according to the Conference Board. The key economic indicator that measures attitudes on economic prospects exceeded analysts’ expectations of a 126 reading and now sits slightly below an 18-year high of 137.9, achieved last October.

And people’s confidence in present situations improved from 164.3 in June to 170.9 in July. The future expectations index for the next six months also improved. Both the indexes are currently near their highest level since the economy started to expand in mid-2009.

The Big Winners

Given the positives, retailers are set to witness a strong rally. Hence, it will be prudent to invest in five of the best retail stocks. Such stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Boot Barn Holdings, Inc. BOOT, a lifestyle retail chain, operates specialty retail stores in the United States. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 7.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 20.7%, higher than the Retail - Apparel and Shoes industry’s estimated rally of 0.6%.

Fossil Group, Inc. FOSL designs, develops, markets and distributes consumer fashion accessories. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has climbed 56.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 10.3%, compared with the Retail - Apparel and Shoes industry’s expected rise of 0.6%.

RH RH operates as a retailer in the home furnishings. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 5.4% up over the past 60 days. The company’s expected earnings growth rate for the current year is 9.5%, compared with the Retail - Home Furnishings industry’s projected rally of 0.3%.You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. BBY operates as a retailer of technology products, services, and solutions in the United States. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 0.3% north over the past 60 days. The company’s expected earnings growth rate for the current year is 8.1%, compared with the Retail - Consumer Electronics industry’s estimated rally of 3.3%.

Aaron's, Inc. AAN operates as an omnichannel provider of lease-purchase solutions to underserved and credit-challenged customers. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 2.9% over the past 60 days. The company’s expected earnings growth rate for the current year is almost 17%, compared with the Retail - Consumer Electronics industry’s estimated rally of 3.3%.

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Click to get this free report Aaron's, Inc. (AAN) : Free Stock Analysis Report Fossil Group, Inc. (FOSL) : Free Stock Analysis Report Best Buy Co., Inc. (BBY) : Free Stock Analysis Report Restoration Hardware Holdings Inc. (RH) : Free Stock Analysis Report Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report To read this article on Zacks.com click here.