3 Retail Stocks to Buy as the Holiday Shopping Season Hits High Gear

The word for the 2024 holiday spending season is, well, “normal”

Some things have changed. Retailers have aggressively courted holiday shoppers with ad campaigns and “Black Friday” deals that started well before Halloween. Additionally, consumers are in moderate spending mode in a retail climate where prices continue to be higher than people like. 

Yet spend they will.

According to Visa Business and Economic Insights, holiday spending will rise by 3.9% for the 2024 shopping season, which is right in line with 2023, when spending rose by 3.8%. On average, shoppers will spend $638 during the holiday season, up slightly from $635.

The question is whether that will be enough ammunition to attract investors to retail stocks leading into 2025.

Here are three factors changing the retail landscape – and three retail stocks to buy before the New Year. 

Three Big Factors

Time will tell, and any outcome should be driven by these three key retail industry factors.

A positive outlook – in general. There are myriad moving parts to the retail sector right now, with some being more equal than others.

"With the stock market near all-time highs, low unemployment, and disinflation, many consumers are feeling good and ready to spend," says Justin Sacks, vice president of strategy at Moomoo Technologies, an online stock trading platform. "That could mean a profitable quarter for many retailers, but they may not all benefit equally."

There are some headwinds, however. "Low-end consumers have spent much of their pandemic savings and are still playing catch up on the significant price increases over the past few years," Zacks says. "The trend towards online shopping and away from in-person shopping will likely continue and could separate the winners from the losers among retail stocks."

Trump and tariffs. President-elect Donald Trump's plan to enact tariffs should be a big disruptor for the retail sector.

"Any products imported from other countries could be subject to tariffs, leading to higher prices, which retailers would most likely pass on to consumers," says Stephen Callahan, trading behavior analyst at Firstrade, a fintech online brokerage firm. "All physical goods, such as autos, apparel, toys, furniture, footwear, tools, and household appliances are at risk from tariffs. Analysts are predicting double-digit increases in prices."

That's not good news for retailers, especially the big boys on the block.

"Companies like Walmart, Lowe's, and Home Depot get a large part of their inventory from China and other low-cost manufacturers, and manufacturers who import materials for their products will see their costs rise," Callahan says. "Those costs will be passed along to retailers selling the final products."

The National Retail Federation says the tariffs will reduce consumer spending power by $46 billion. "This would have a big effect on a wide range of consumer products and could impact retail companies' earnings," Callahan adds.

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Cautious consumers.

Caution will be the watchword for The first months of 2025.

"During that time,  consumers will likely be holding back on disposable income as they assess the impact of the new administration’s policies," says Derrick Fung, CEO at JoinSignals, an investment data intelligence company.  "Companies that cater to homeowners and stock market participants, such as Uber, Instacart, and Williams-Sonoma, are likely to see sustained consumer spending."

Fung expects the stock market response to be varied, with certain sectors likely outperforming others. "Economic uncertainties may still pose a risk of a slowdown, potentially benefiting specific major retailers as spending continues to surge in online retail, such as Amazon, hypermarkets like Walmart, and discount/bulk stores such as Costco," he says.

Three Retail Stocks For Your Christmas Stocking

With the retail sector mounting a modest comeback in 2024 but with some vexing issues in play, market mavens favor these industry stocks heading into the new year.

Walmart (WMT). This retail giant seems poised to pop in 2025.

"Walmart is firing on all cylinders right now," says Michael Zakkour, founder and chief strategist at 5 New Digital, a retail consultancy company.  "What separates Walmart from all other retailers is not just their size but the commitment they have made over the last six-to-seven years to building a modern integrated commercial ecosystem."

Walmart has perfected the “New Retail” model by seamlessly integrating online, offline, technology, supply chain, and media, Zakkour says. "Target was ahead of Walmart in this regard several years ago but is paying the consequences of not going all in on the NRM."

Discount retailers. Zakkour also believes also believes 2025 will be an excellent year for off-price retailers. "TJX, Ross, Burlington, and other key players in the space had strong 2024 sales, and I expect that to continue well into the new year."

Those same companies could "benefit from changes in overall retail inventory levels due to changes in tariffs," Sacks adds.

Holiday head starts. Amazon (AMZN) and Costco (COST) are good stocks to consider if you're looking to get a head start on 2025.

"Amazon is a standout," says Clay Cary, savings expert at Coupon Follow. "Their early Black Friday sales have been strong, and their fulfillment network gives them a big edge during the holidays.

Costco is another winner, Cary says. "Their membership model and focus on value resonate with consumers trying to stretch their budgets," he notes.

Shopify (SHOP). Lower interest rates will help small and medium-sized businesses, and Shopify should benefit. "Their Shop App is a way for them to build defensibility around their business to diversify away from B2B and start building a more direct relationship with consumers," Fung says.

Williams-Sonoma WSM). This home products retailer's stock continues to outperform, up 70% year-to-date.

"They're staying competitive with a consistent pricing strategy, Fung notes. "WSM rarely offers discounts to maintain a high-end brand perception.

The retailer has also optimized the supply chain (WSM relies on in-house design and is vertically integrated). "They employ an effective omnichannel retail strategy and experience, and are focusing on sustainability and social responsibility to appeal to environmentally conscious customers," Fung adds.

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