This morning, watch for retail stocks to follow through from Thursday’s rally. Buyers snapped up Walmart (WMT) and Costco (COST) stock after the Commerce Department posted strong consumer spending levels.
In July, advanced retail sales increased by 1% on the month. This is up from a 0.2% decline in June and well above the 0.3% expected rate. When the data excludes auto-related items, sales grew by 0.4%. Expect consumers to continue to shun automotive products. Dealerships at Ford (F) and Stellantis (STLA) are trying to sell high-end vehicles. Yet consumers do not have the money to buy them.
Motor vehicle and parts dealer sales grew by 3.6%. Customers are likely buying them to prolong the life of their current vehicle. Sales in electronics and appliance stores increased by 1.6%.
Investors may speculate on firms like Whirlpool (WHR), Tempur Sealy (TPX), or SharkNinja (SN).
Walmart is the biggest winner. The company expressed bullish sentiment in its Q2 earnings update. CFO John Rainey said that the firm does not project a recession. Furthermore, sales in the back-to-school season have strong initial momentum.
Other related retail stocks to consider include Nordstrom (JWN), Target (TGT), Dollar General (DG), and Amazon (AMZN).
Investors should avoid higher-end retailers and luxury brands. Consumers are price-sensitive and will likely spend less on expensive items if they can avoid it.