We are now at the tail-end of the 2019 holiday shopping season, and data from both Adobe Analytics and the National Retail Federation jointly supports the idea that this was a good one for retailers — much unlike last year, when retail sales fell flat amid concerns about a looming recession.
But, there’s also a ton of data out there that supports the idea that this rising tide did not lift all boats in the retail segment. That is, there has been a clear and widening separation between winners and losers in the retail category over the past few years. This separation became more pronounced this holiday season, meaning that blindly buying retail stocks because the holiday shopping season was a good one, is a bad investment strategy.
Instead, when picking retail stocks, investors need to be selective.
That’s why I’ve created this list of high-quality retail stocks that are having strong holiday seasons. All of these retailers are companies that have out-performed their peers for several quarters, and which appear to be in the midst of record-setting holiday seasons. They are also supported by strong stocks, which should move higher in the New Year when the retailers report impressive holiday numbers.
All in all, these are the retail stocks that I’m looking to buy this holiday season. They’re winners, and it looks like they stayed in winning mode this December.
Retail Stocks Winning Big This Holiday Season: Lululemon (LULU)
For all intents and purposes, premium athletic apparel maker Lululemon (NASDAQ:LULU) has been the hottest brand in apparel retail for the past two years, as the company has rattled off quarter after quarter of 15%-plus comparable sales growth. All signs point to the fact that Lululemon has remained the hottest brand in retail this holiday shopping season.
Lululemon reported strong third-quarter numbers in early December that sailed past expectations, and included yet another 15%-plus rise in comparable sales. More importantly, the holiday quarter guide was good, too, and management said on the call that they had a record-setting start to the holiday season.
Other data supports the idea that Lululemon has maintained strong momentum into the holidays. Both domestic and international search interest related to “Lululemon” has spiked to all-time highs this holiday season. Web traffic data remains equally favorable, with both Alexa and SimilarWeb showing site rank gains for lululemon.com over the past few weeks. Foot traffic data also remains favorable, with Placer.ai — the world’s leading foot traffic platform — showing that Lululemon’s in-store traffic has been rising at a robust rate throughout all of 2019.
Ultimately, it appears that Lululemon has been a big winner this holiday season. This big winning should lead to the company delivering a blowout holiday sales update in the new year. That update could propel LULU stock to new highs.
In early 2018, big box retailer Target (NYSE:TGT) figured out how to compete in the big retail world. They built a big e-commerce platform, developed multiple omni-channel capabilities and refreshed stores. It worked. Ever since Target did those three things, the company has rattled off a series of quarters with decade-best revenue, comparable sales and traffic growth.
It appears this red-hot momentum continued into the holiday season.
First, Target’s most recent earnings report heading into the holiday season was a great one. It comprised 4.5% comparable sales growth, on top of 5.1% comparable sales growth in the year-ago quarter. Last year, strong third-quarter momentum spilled into record-setting fourth-quarter sales. There’s very little reason to believe that the same won’t happen this year.
Second, many Wall Street firms, including Cowen, highlighted Target as a Black Friday out-performer this year. Third, holiday web traffic data for target.com from SimilarWeb and Alexa is highly favorable.
All in all, the data here supports the fact that Target has been firing on all cylinders this holiday season, led by robust e-commerce growth. This dynamic has been in play for two years. During this stretch, TGT stock has more than doubled. If this dynamic persists into the new year, history says that shares should keep pushing higher.
Another big box retailer which is having a big holiday season is the world’s largest retailer, Walmart (NYSE:WMT). Much like Target, Walmart figured out a few years ago how to compete in today’s dynamic, omni-channel retail world. Ever since they figured that out, Walmart — like Target — has been pushing out decade-best growth numbers.
Most data points indicate that this decade-best growth momentum persisted into the holiday season.
First, Walmart reported strong third-quarter numbers in November that included a 3.2% rise in U.S. comparable sales. That’s healthy momentum heading into the holiday season. It’s unlikely this momentum dried up in December.
Second, Walmart was highlighted by multiple Wall Street analysts as being a solid out-performer during the Back Friday shopping weekend. Third, SimilarWeb and Alexa both give a favorable read on walmart.com’s traffic share gains over the past few weeks. Fourth, search interest related to “Walmart” spiked to all time highs yet again this holiday season. Fifth, Placer.ai data recently shown a positive light on Walmart’s in-store traffic trends.
Overall, multiple data points corroborate the thesis that Walmart stayed red hot this holiday season. That means Walmart should deliver a strong holiday sales update in early 2020. That strong update should push WMT stock higher, because shares remain relatively discounted at just 24-times forward earnings.
Ugly is the new cool, and because of that, it looks like sandal maker Crocs (NASDAQ:CROX) is having a big holiday season.
Crocs has been on fire since early 2018, with the brand only gaining momentum into late 2019 as its signature foam clog shoes have made a huge comeback. Considering the company reported a whopping 20% rise in sales in the third quarter — for comparison purposes, Crocs hasn’t reported anything north of 10% revenue growth for a long, long time — it is very unlikely that the Crocs brand momentum dried up this holiday season.
Instead, it is far more likely that all that momentum led into a record-setting holiday season for Crocs.
Indeed, the data suggests that is exactly what is happening. Big celebrity collaborations with country singer Luke Combs and pop star Post Malone were huge hits, went viral, sold out in hours, and gave favorable exposure to the brand. It is not surprising, then, that Crocs’ search interest spiked to multi-year highs this holiday season, or that crocs.com has seen significant traffic share gains over the past few months. Nor is it surprising that Crocs is having shipping problems this holiday season, thanks to huge demand.
Big picture — the Crocs comeback didn’t stop this holiday season. Instead, it went up another notch. As such, next quarter’s numbers may be even better than last quarter’s blowout numbers. If so, CROX stock may make a push above $40 in early 2020.
TJX Companies (TJX)
Off-price has been a winning retail strategy for the past several years, and that has been a huge positive for off-price retail king TJX Companies (NYSE:TJX). It appears that this dynamic did not change this holiday season. Instead, off-price remained in-style, and as a result, TJX appears to be having a strong holiday season.
The data here supports the idea that all of TJX’s stores and websites have been very busy. Foot traffic data from Placer.ai shows that TJX’s flagship store, T.J. Maxx, experienced healthy in-store traffic growth heading into the holiday season. Placer.ai data also shows that TJX’s discount home furnishings store, HomeGoods, experienced even healthier in-store growth heading into the holiday season.
Meanwhile, web traffic data from SimilarWeb shows that both tjmaxx.com and homegoods.com have been highly visited over the past few months. Search interest data from Google Trends similarly shows that search interest related to T.J. Maxx and HomeGoods has spiked to all-time highs this holiday season.
Broadly, it looks like TJX is having a great holiday season. Strong holiday numbers should be enough to propel TJX stock meaningfully higher in early 2020, especially since shares remain relatively discounted at just 23-times forward earnings.
As of this writing, Luke Lango was long LULU and WMT.