These retail names are on our Best Stocks list as the holiday season begins

Top Retail Stocks to Watch This Holiday Season for Potential Investor Gains

Think of the U.S. consumer like a crowd at a baseball game—everyone’s watching the same action, but each person has a different seat, snack budget, and reason for being there. This matters for investors because “the consumer” isn’t just one group, and understanding these differences can help you spot better opportunities in the stock market.

Why Investors Should Care

Stocks in the consumer and retail sector can make up a big piece of your portfolio. But headlines about “the consumer” being strong or weak can be misleading. People in different jobs, cities, and income brackets spend their money in very different ways.

For example, when interest rates go up, wealthy households might earn more from savings, while people with credit card debt feel squeezed. Investors need to look past the headlines and see which companies are really connecting with shoppers.

Bulls: The Bright Spots in Retail

  • TJX Companies (TJX) runs over 5,000 stores and keeps beating expectations—even when other retailers struggle. Their secret? Letting local managers set prices and staying focused on value for shoppers. In fiscal 2023, TJX’s earnings grew 10%. That jumped to nearly 30% in 2024, and they’re guiding for another 9% growth this year.
  • Ulta Beauty (ULTA) is another winner, with a loyalty program that hit a record 45.8 million members recently. Loyalty members drive about 95% of sales. Ulta’s creative marketing—like teaming up with Beyoncé’s tour—keeps customers coming back. Last quarter, Ulta’s sales in stores open at least a year grew 6.7%.
  • According to National Retail Federation data, U.S. retail sales rose 3.6% during the 2023 holiday season, showing shoppers are still spending, especially when they see value.

Bears: The Challenges Facing Retail

  • Not all consumers are feeling confident. The bottom 80% of households are more likely to struggle with rising prices and borrowing costs. That means some retailers, especially those selling more expensive or non-essential items, can see slower sales.
  • Consumer discretionary stocks—companies that sell things we want but don’t need—are up just 3.7% this year, far below the S&P 500’s gain. Even the U.S. bond market did better, up 7% year to date.
  • Regional differences matter. For example, falling natural gas prices may hurt jobs in Texas and Oklahoma but help people in colder cities save on heating. This makes it tricky to judge the “health” of the consumer with just one number.
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Spotlight: TJX and Ulta’s Winning Formulas

TJX stands out because it adapts prices to what shoppers want in each area, rather than setting one-size-fits-all rules. They check sales data every week and adjust quickly, which helps them keep winning even when the economy is uncertain.

Ulta Beauty is all about building a loyal fan base. Their rewards program is massive, and their brand partnerships—like with major music festivals—help them stay in the spotlight. This approach is paying off, with Ulta gaining more market share even as some shoppers cut back.

Risks and How to Manage Them

  • TJX: If you’re trading, consider using $140 as a stop-loss. For longer-term investors, $134 is a key level to watch. If the stock falls below that, it could mean a longer period of weaker performance.
  • Ulta: The $570 price level is important. If the stock breaks above that, it could keep climbing. Support has held around $500, so that’s a spot to set your risk level if you’re buying in.

Investor Takeaway

  • Don’t treat “the consumer” as one group—look at how different companies reach different shoppers in creative ways.
  • TJX and Ulta are showing strong results by focusing on value and loyalty, making them worth a closer look.
  • Watch key price levels for risk management: $140 and $134 for TJX, $570 and $500 for Ulta.
  • Remember, retail stocks can swing with changing shopper moods, so keep your portfolio balanced and stay alert for shifts in spending trends.
  • Check out trustworthy sources like the National Retail Federation for up-to-date data on consumer trends.

For the full original report, see CNBC

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