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Which Three Retail Stocks Are Positioned for Big Gains?


Consumer austerity isn't hitting all retailers equally. Amazon, eBay, and Home Depot are poised to benefit as Americans open their wallets.

In addition, PayPal allows users to set up an account to pay merchants providing only their e-mail address and a password rather than typing in their credit card details online.

Favoring online sales is the accelerating move towards a cashless society-consumers are increasingly paying for goods with credit and debit cards rather than with cash and checks. PayPal is a major beneficiary of this revolution in retailing. Meanwhile, operating income from eBay's payments segment is up more than 60% year-over-year.

eBay has partnered with Discover Financial Services (NYSE:DFS) on a deal to facilitate offline transactions. Once the partnership is completed, PayPal users will be able to use their account at any merchant that accepts the Discover card.

Payments can be made either using a traditional plastic PayPal issued card or via a PIN-based mobile transaction on a smartphone linked to their account. The service is scheduled to start with 1,500 large merchants in the second quarter of 2013 and will be rolled out across the Discover network.

While the rise of online retailers has hit profitability for some types of brick-and-mortar retailers, there's still plenty of value in the offline world. One example is Home Depot (NYSE:HD), the world's largest home improvement retailer.

Spending on new home sales has been weak over the past three years, but consumers have continued to spend on remodeling their existing properties, pushing up demand for the kitchen equipment, paint, flooring, and hardware that are the core of Home Depot's business mix. With home sales and prices finally showing modest signs of firming up this year, Home Depot should benefit.

Home Depot's second-quarter 2012 results beat consensus expectations. The company reported $1.01 in earnings per share ("EPS"), compared to the estimate of $0.98 in EPS, and revenue of $20.57 billion, compared to the estimate of $17.81 billion. EPS rose 17.4%, while revenue climbed 1.7%, compared to the same year-ago period.

This article was written by Elliott Gue of Investing Daily.

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