Halloween may not even be here yet, but many shoppers are already gearing up for the holiday season. That means headlines are already swirling about when retailers will open their doors for Black Friday and with predictions for how consumer spending will shake out during the winter months.
It also means the annual ritual of investors hunting down retail stocks to buy as the sector gears up for the most important quarter of the year.
Forecasts for now are for slightly slower spending compared to the year-ago period, but there’s a good bit of nuance and speculation in such predictions. Besides, it’s pretty safe to say that a handful of retailers with rise to the top and post impressive results even if spending is slightly slower on average.
Here are seven retail stocks to buy if you’re looking for the sure-fire leaders of the 2015 holiday shopping season.
Retail Stocks to Buy: Express Inc (EXPR)
Looking for an in-style retailer with strong fundamentals and plenty of momentum? Express (EXPR) is tailored for you. Express is a hot brand — call me a biased Warriors fan, but recently added spokesperson Stephen Curry serves as plenty of proof.
That trendiness translates to results. Express posted an earnings beat during last year’s holiday quarter and is slated to top those results by roughly 25% for the quarter ending January 2016.
Earnings estimates for that quarter (Q4) and the current quarter — Q3 results are due to be reported in early December — have both been marching steadily higher in recent months, too.
And despite the fact that Express stock has soared 35% over the past 12 months — around five times the gains of the broader market — shares are still relatively reasonably priced. EXPR stock goes for less than 14 times earnings while the S&P 500 trades for a multiple of 16 and the broader industry trades for roughly 18.
Retail Stocks to Buy: Ross Stores (ROST)
Ross Stores (ROST) and TJX Companies (TJX) are two of the biggest names in bargain hunting, and while both picks have been up and down so far this year, any spending slowdown likely will benefit the discount sector.
Heading into this holiday season, ROST stock looks like the better bet.
Ross Stores sports a lower multiple, higher consensus earnings growth for the holiday quarter and estimated full-year earnings growth that’s more than double its rival’s. Oh, and ROST beat expectations in each of the last four quarters — including the period covering last year’s holiday season.
While ROST shares recently triggered a death cross (where its 50-day moving average fell below its longer-term 200-day MA), shares have climbed above both averages — a positive technical trigger that could lead to continued gains.
Retail Stocks to Buy: Costco (COST)
Costco (COST) is a great holiday pick for one simple reason: It has everything.
Cheap stocking stuffers? Check. Stuffing ingredients to feed a Christmas dinner of 20? Check. Market momentum heading into the holiday shopping season? Check.
On a more tangible level, bargain hunters are expected to be out in full force this year. As CNBC recently reported: “67 percent of shoppers with an annual income of less than $50,000 indicated that they plan to spend the same or less than they did in 2014 — compared to 64 percent of those making $50,000 or more.”
Considering Costco provides some of the best savings thanks to its buy-in-bulk warehousing strategy, expect COST to be one of the biggest beneficiaries of the sales-minded horde.
Retail Stocks to Buy: Dick’s Sporting Goods (DKS)
It doesn’t take more than a walk down the street to see how chic athletic apparel has become — or perhaps a glimpse at the stock chart of a popular brand like Under Armour (UA).
But investors can get exposure to Under Armour products — as well as countless other brands — without having to deal with an absurd multiple by investing in big-box retailer Dick’s Sporting Goods (DKS). DKS stock is reasonably priced after taking a recent beating, trading for a forward P/E of 13 that’s right on pace with its estimated long-term growth, as well as 80% of book.
Holiday season earnings estimates are marching higher, too, and $123 million in cash easily outstrips a paltry $6.2 million in debt.
DKS stock is a solid long-term buy — and the rapidly approaching holiday season could be the catalyst for the beginning of a run.
Retail Stocks to Buy: Amazon (AMZN)
You can’t talk about holiday shopping without talking about online shopping … and you can’t talk about online shopping with talking about Amazon (AMZN). Last year, holiday web sales grew around 14%, and many expect that level of growth to continue.
Amazon stock has been on fire this year and is, of course, an investment in far more than just e-books these days — it’s media and the cloud, among other things — but the bottom line is that AMZN remains a market leader in terms of the e-commerce mega-trend.
Plus, Amazon is actually registering positive earnings a bit more regularly, while sales of 20% are on tap for the foreseeable future.
Put another way: AMZN is definitely worth adding to your cart.
Retail Stocks to Buy: L Brands (LB)
L Brands (LB) — the name behind the popular Victoria’s Secret Brand on top of Bath & Body Works — has impressive momentum heading into the holiday season. The stock is sitting near an all-time high after suffering a slow-and-steady decline from early April to late August.
Since then, LB stock exploded — displaying relative strength against the market, breaking through its moving averages and through overhead resistance.
While that explosion could mean higher expectations for the holiday season — and leaves L Brands with further to fall — the company has a solid string of earnings meets and beats in the books, including results that were 5% better than expected last year.
Plus, LB stock comes with a sweet little stocking stuffer: a dividend yielding north of 2% — not too shabby for the growth and stock gains coming out of this pick, and not too shabby considering a continued low-rate environment past Christmas is sounding increasingly likely.
Retail Stocks to Buy: VF Corp (VFC)
VF Corp (VFC) has moved mostly sideways so far this year, but simply zooming out on the stock chart shows a very different stock story. VFC stock’s upward momentum has been generally unbroken since 2008 — good reason to think that movement could continue with a nice little holiday boost.
VFC Corp has plenty of impressive brands in its arsenal to get shoppers excited, with Vans, Timberland and North Face as three of the most well-known.
The consensus price target for VFC stock is 14% above current levels, while management raised its full-year guidance during the most recent earnings release — both good signs for VFC in coming months.
Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Forbes, Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she did not hold a position in any of the aforementioned securities.
