Are Retail Stocks Good Buys This Holiday Season? Experts Explain

fizkes / Getty Images/iStockphoto

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

The consumer is the engine of the United States economy, representing more than two-thirds of the country’s entire GDP. By definition, retail stocks are one of the most direct beneficiaries of higher consumer spending. Thus, when consumer confidence numbers are up, it can often be an interesting time to look at investing in retail stocks.

So how are consumer confidence numbers doing, and what do experts think about retail stocks as we head into the 2024 holiday season? Read on to learn more.

Latest Consumer Confidence Numbers

In October 2024, The Conference Board’s Consumer Confidence Index jumped sharply, to 108.7 from 99.2 in September. Readings above 100 indicate that consumers are more likely to spend instead of saving. The jump to 108.7 marked the strongest monthly gain since March 2021, with all five components of the index improving.

The Consumer Confidence Index is a leading indicator, meaning it’s a predictive measurement. Rather than measuring what consumers have already done in the past, it instead forecasts upcoming behavior. In other words, if the CCI is moving upwards, it likely means that consumers are going to increase their spending going forward.

Experts’ Take on the Outlook for Retails Stocks During the Holidays

In addition to consumer confidence numbers, experts also watch actual retail sales figures to determine if trends are right for specific stocks and/or the industry at large. In September 2024, retail sales figures also picked up, rising 0.4%. This is another indication to experts that retail stocks might benefit in the coming months.

According to the National Retail Federation, retail sales are expected to grow by 2.5% to 3.5% during November and December, with consumers spending at least $25 billion more than they did in 2023. That would push holiday spending to record levels and bode well for retail stocks.

Specific Retail Stocks To Keep an Eye On

Some of the specific retail stocks that various experts recommend include the following.

Target (TGT)

According to Zacks Research, which rates the company a strong buy, Target has improved its operational efficiency and online footprint to the point that consumers can conveniently buy both discretionary and essential items. Its loyalty program and investment in AI are also paying off, as the company has posted an average earnings surprise of 20.3% over the past four quarters.

Costco (COST)

Costco has something of a different niche than the traditional retailers on this list. As a membership store, Costco actually receives the bulk of its income from annual fees rather than profits on its merchandise, which it intentionally prices at low levels. The resulting rabid following for the company continues to propel its stock to new highs. With consumers in the mood to spend and membership fees recently being raised, Costco is poised to continue growing its revenue and earnings.

Walmart (WMT)

Walmart is the largest retailer in the world, one that has built its reputation on always having low prices. In an environment in which many Americans are hurting from significant jumps in prices over the past few years, Walmart is well-positioned to gain from the losses of other retailers. The company has also updated its pricing, its look and its products ahead of this year’s holiday season.

Home Depot (HD)

Home Depot is the world’s largest home improvement retailer, and its history of earnings success is nothing short of impressive. The company has topped expectations for the past 19 quarters in a row. The Leading Indicator of Remodeling Activity, published by Harvard University, is expected to return to growth in the second half of 2025, likely driving sales at Home Depot. When coupled with the overall fundamentals for retail stocks in general, Home Depot could be worth a look, according to analysts.

Caveats To Consider

On the one hand, the environment seems ripe for investing in retail stocks. With both consumer confidence and actual retail sales rising, retail stocks do appear to have a tailwind. However, there are numerous other factors that could make investing in retail stocks anything but a slam dunk. Here are just some of the headwinds that retail stocks could face:

• The markets are at an all-time high, having raced higher immediately after the 2024 presidential election.
• There hasn’t been a market correction since late 2023.
• The Fed may keep interest rates higher for longer, as the economy continues to show signs of strength.
• Trump tariffs may increase wholesale prices for retailers.

In other words, while industry-specific fundamentals appear strong for retail stocks, the macroeconomic environment and other outside forces may stand in their way.

Share This Article: