High levels of consumer confidence and rising consumer spending, driven by 4% U.S. GDP growth and low unemployment, have led analysts at KeyBanc Capital Markets to predict "continued broad strength across most retail categories," per a report quoted by Barron's.  KeyBanc has named 10 consumer stock picks for the second half of 2018, including: Brunswick Corp. (BC), Callaway Golf Co. (ELY), Lowe’s Companies Inc. (LOW), Patrick Industries Inc. (PATK), RH (RH), Shopify Inc. (SHOP), Stitch Fix Inc. (SFIX), Tempur Sealy International Inc. (TPX), Tiffany & Co. (TIF) and Walmart Inc. (WMT).

10 Consumer Stocks to Watch

Stock Forward P/E Ratio
Brunswick 13.1
Callaway 22.0
Lowe's 19.0
Patrick 12.0
RH  17.3
Shopify 263.3
Stitch Fix 255.8
Tempur Sealy 14.0
Tiffany 23.5
Walmart 19.6

Source: Yahoo Finance

Stitch Fix, Callaway and Lowe's offer illustrative stories.

Stitch Fix

The company is an online personal shopping service. After filling out a personal style profile, customers receive selections of clothing, shoes and accessories on a periodic basis, chosen by a personal stylist. Shipping, returns and exchanges are free. Shipments come only when the customer requests them and have a $20 styling fee, which is applied against the cost of any merchandise that the customer decides to keep. From its IPO price of $15 per share in Nov. 2017, the stock has gained 230% through the open on Sept. 17.

"We are increasingly confident in management's ability to grow market share at a healthy margin, especially among its newer categories," as Edward Yruma, Keybanc's senior ecommerce, specialty retail, apparel and footwear equity analyst, wrote last week, per Barron's. Yruna also praised the company's use of data, noted that its new kids' business is "off to a solid start," and forecasted EBITDA to reach $95 million in 2020. The current market capitalization of Stitch Fix is $4.8 billion.

Callaway

The maker of golf equipment and apparel is trading near 52-week highs, despite continued pessimism about the future of golf, which has seen a 7% decline in the number of courses, per data from The National Golf Foundation cited by Seeking Alpha. A positive for Callaway is that the decline of golf has spurred some big competitors, notably Nike Inc. (NKE), to exit the market. This bodes well should the golf market stabilize or even stage a rebound. Callaway also is being proactive, through its investment in Topgolf, a variation on the traditional golf driving range in which players can compete on the basis of the accuracy of their shots, and which also offers bar, dining and party facilities.

Lowe's

The hardware, plumbing, lumber, gardening and general home improvement superstore chain also been trading near 52-week highs recently, and new management has been making significant progress in closing the gap with longtime category leader The Home Depot Inc. (HD), per another Seeking Alpha report. New CEO Marvin Ellison, whose career includes a 12-year stint as a Home Depot executive, is focusing on increasing the efficiency of the supply chain and removing under-performing products from the shelves. The stock yields 1.7%, and Seeking Alpha sees potential for both dividend growth and capital appreciation.

Core Retail Sales Slow Down

Consumer spending has been growing at a solid 0.4% monthly rate recently, per CNBC. However, a cause for concern is the fact that retail sales increased by only 0.1% in August, after removing purchases of automobiles, gasoline, building materials and food services, according to Reuters. This adjusted spending figure, calling core retail sales, had been expected to grow by 0.4% in August, according to economists polled by Reuters, which speculates that the culprit may be rising gasoline prices, which are eating into consumers' budgets.