Retailers, led by Walmart Inc. (WMTFree Report) , have reported strong sales in Q2. This reflects an encouraging economic scenario which is allowing Americans to splurge and that some have found ways to compete in an ever growing e-commerce world.

Americans are pretty confident about their personal income and employment, while Republican tax cuts are adding to their incomes. Such aspects not only drove sales last month but also compelled retailers to raise their expectations for the year. Given the positives, investing in sound retail stocks seems prudent.

Walmart Posts Best Sales in a Decade, Adopts to Change

Everyone for quite some time has been talking about a retail apocalypse. Walmart, once the undisputed king of American consumerism, took a back seat to Amazon.com, Inc.’s (AMZNFree Report) online business that completely changed the retail scenario in the last decade. This, in turn, compelled brick-and-mortar stores to either adapt to the change or perish.

Walmart’s recent stellar quarterly earnings, however, restored faith in brick-and-mortars. The retailer’s fiscal second-quarter earnings and sales beat expectations and notched the best comparable sales growth in the last 10 years. Sales were robust, particularly, in grocery, apparel, and seasonal merchandise departments, while its e-commerce sales ticked higher. The predominantly brick-and-mortar giant has also ventured into the digital space and its new strategy to redesign website and expand online groceries are paying off well.

Not just Walmart, Nordstrom, Inc. (JWNFree Report) , The Home Depot, Inc. (HDFree Report) and coach owner Tapestry, Inc. (TPRFree Report) have also benefitted as shoppers showed more confidence translating to rising sales.

Consumer Spending Lifts Retailers

Walmart Chief Executive Doug McMillon said that “customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances.” Thus, buoyed by an uptick in income and employment as well as recent tax cuts, Americans have started to splurge more on retail products, including jeans, handbags and wall paint.

July retail sales, in fact, were fairly robust. Sales at U.S. retailers rose 0.5% last month, while it increased 6.4% over the past 12 months and was close to the long-run average since 1980. By the way, the National Retail Federation (NRF) said that it expects retail sales to climb higher than what had been earlier projected. Spending at retailers for this year — excluding automobiles, gasoline stations and restaurants — is predicted to grow 4.5% year over year. The trade organization had projected a modest growth range of 3.8% to 4.4% in February.

NRF asserted that for the first half of this year, retail sales improved 4.8% over the same period last year in spite of a poor show in January. In the most recent three-month moving average, retail sales ticked up 4.4% year over year (read…