3 stocks set to benefit from record Valentine's Day spending

Key Points

• Wall Street predicts a 15% year-over-year jump in fiscal Q1 EPS for Signet Jewelers, the world's largest diamond jewelry retailer.
• FLWS reported flat YOY fiscal 2024 Q2 EPS when the forecast was a 5% decline, a beat driven by lower freight, labor and commodity costs as well as inventory optimization efforts.
• Tootsie Roll stock has been in a downtrend over the past 12 months in conjunction with a broader pullback in the consumer staples sector, but stronger holiday sales could energize the defensive mid-cap.

Love is in the air and dollar bills are flying everywhere. And that's not just the latest catchy country song lyric.

Americans will spend a record $14.2 billion on Valentine's Day cards and gifts this year. That's according to a recent survey conducted by the National Retail Federation (NRF) and Prosper Insights & Analytics. In the coming days, brick-and-mortar retailers will adorn their stores with decorations and deals intended to win over last-minute shoppers' hearts. Online storefronts are expected to get plenty of love too, with e-commerce forecast to account for 40% of all Valentine's spending (compared to 35% a year ago).

According to the study, the average consumer will dish out $185.81, with 25 to 34-year-olds planning to celebrate the most of any age group. Combined with money spent on romantic dinners and other activities, this year's U.S. Valentine's Day tab could top $25 billion. It's a sign of lasting demand for experiences and resilient consumer spending in the face of inflation and elevated credit card rates. It's holiday commercialization at its best.  

This year's heartfelt shopping spree is likely to make winners out of a wide range of publicly traded companies. Keeping with tradition, candy and greeting cards are expected to be the most popular gift choices. But some of the biggest spending is slated to go to other categories. Jewelry, flowers, clothing and an evening out are all expected to smash Valentine's Day records.

Uber Technologies Inc. NYSE: UBERand higher-end restaurant chains aside, the evening out theme is a tough one to play from an investment standpoint. But while consumers have plenty of choices when it comes to physical gifts, some clear-cut leaders could dominate their respective markets. This leads us to a jewelry shop, a flower shop and a candy shop —  all of which could record red-hot February financial results.

What is a good jewelry stock to invest in? 

As the world's largest diamond jewelry retailer, Signet Jewelers Limited NYSE: SIG should get a significant chunk of the estimated $6.4 billion spent on earrings, necklaces, bracelets and watches. Jewelry is expected to account for nearly half of all Valentine's gift outlays. Chances are many shoppers will go to one of Signet's 2,800 retail locations under various brands such as Kay Jewelers, Zales and Jared.

Since the retailer's fiscal 2024 fourth quarter ended in late January 2024, however, much of its Valentine's revenue won't hit the books until the April-end period. The company has historically reported its fiscal first quarter results in early June. Given the holiday timing and recent cost-cutting initiatives, Wall Street predicts a 15% year-over-year jump in fiscal Q1 earnings per share (EPS). It would mark Signet's best bottom line growth in two years. Any weakness in the stock leading up to this report could be a sparkling trade opportunity.

Will the FLWS earnings beat streak continue?

1-800-FLOWERS.COM, Inc. NASDAQ: FLWS is one of the nation's top e-commerce destinations for flowers and gourmet food baskets. Aside from its namesake flowers website, the company owns Harry & David, Shari's Berries, The Popcorn Factory and keepsakes retailer Things Remembered.

Earlier this month, FLWS reported flat year-over-year fiscal 2024 Q2 EPS when the Street was forecasting a 5% decline. The beat was driven by lower freight, labor and commodity costs, as well as inventory optimization efforts. 

This set the stage for what's expected to be a stronger fiscal Q3 performance that captures the key Valentine's Day stretch. Analysts are projecting 11% profit growth. The small-cap company will bring a six-quarter EPS beat streak into the report, a streak that has helped its stock recover 55% from its September 2023 low.

Are there any publicly traded confectioners?

From its classic Tootsie Roll Pops to Cherry Lover's Dots to Cella's chocolate covered cherries, Tootsie Roll Industries, Inc. NYSE: TR has lots of sugary treats out this Valentine's season. Whether or not this translates to sweet financials for the candy maker remains to be seen. Investors will have to wait until the company reports the 2024 first quarter results in April or May 2024. 

Its 2023 Q1 results showed 15% year-over-year revenue growth but modest earnings growth amid commodity inflation. In addition to indications of Valentine's Day success, the 2024 Q1 financials will likely offer clues about input cost disinflation and the potential for stronger profits this year.

In the meantime, Tootsie Roll is scheduled to announce 2023 Q4 results after the close on February 20. Its stock has been in a downtrend over the past 12 months in conjunction with a broader pullback in the consumer staples sector. However, strong Christmas and Valentine's Day sales could energize the defensive mid-cap.