The numbers are in, and Americans had another banner shopping season. According to the U.S. Census Bureau, retail sales for December clocked in at a whopping $529.6 billion. That’s nearly a 6% increase over last year’s numbers, and represents a great catalyst for retail stocks.
Even better, it doesn’t take into effect the booming numbers realized in November, and during the Black Friday and Cyber Monday shopping periods. Collectively, it means consumers are alive and well.
However, the effect of rising spending hasn’t been felt across retail stocks evenly. In fact, many continue to miss on the new omnichannel, buy-online-pickup-in-store (BOPIS) shopping environment.
From Kohl’s (NYSE:KSS) poor overall sales numbers to Macy’s (NYSE:M) missed execution in online sales, many retail stocks suffered this holiday season — and they’ll keep suffering as the year goes on. However, for those retail stocks that get it and made some serious bank over the holiday shopping frenzy, they have the real potential to keep it going in the new year. That’s because they understand what consumers want, and how and when they want it.
For investors, this holiday season only underscored the growing division among retailers. And in that, placing your bets on who’s getting it right is the only decision to make.
That said, here are three retail stocks that killed this holiday season — and have the potential to keep that momentum going.
Retail Stocks to Buy for 2020: Walmart (WMT)
I’ll admit it, while I love Amazon (NASDAQ:AMZN) and have totally bought into their system, these days, it seems that my family is doing a fair bit of shopping at rival Walmart (NYSE:WMT). And it turns out, I’m not alone.
According to a CNBC report, frequency of people buying items on Amazon has gone down. Those heavy users who purchase goods on Amazon six times or more per month has dropped to 40%. That’s down from 80% recorded in 2017, showing that the winner of shoppers has been Walmart.
Thanks to its efforts across its e-commerce platform, WMT is starting to seriously turn the tide in the world of retail. And, thanks to its already in place vast distribution network, grocery pick-up operations, BOPIS and quick shipping options, Walmart has become a tour de force in the new age of retail. In fact, during its last reported quarter, online sales jumped by 41%. As Walmart gets ready to post its sales and earnings from the holiday season, expectations are already running high that the company will continue a torrid pace of growth. And there’s every reason to expect that will happen.
The company continues to try new things with e-commerce, and has been boosting its online grocery operations. This includes improving its produce selection and considering building so-called “dark stores” that are strictly used for online ordering and pick-up in order to reduce congestion at some its more popular store locations. Meanwhile, WMT is willing to buy out successful online retailers to boost sales and gain some valuable tech.
All in all, WMT has the cash to really compete in the world of online and in-store shopping. And that makes it a prime retail stock to own in 2020.
When your main shoppers are fanatics, it’s pretty easy to win over the holiday season and beyond. That sums up the case for warehouse club Costco (NASDAQ:COST). Shopping at Costco remains quite the event — with plenty of one-time or limited deals, specialty products, its signature Kirkland brand and we can’t forget those rotisserie chickens.
Because of this, the company continues to execute retail the right way,and that showed up in its latest holiday numbers. For the five weeks ending Jan. 5, Costco managed to report an 10.5% increase in net sales. While new international stores did help on that front, the real driver was e-commerce sales. It turns out, making the pivot towards omnichannel retail is pretty simple when your operation is already based on warehouses. E-commerce growth at the chain grew by 20 percentage points over the holiday period.
The beauty is that Costco continues to rack up members for warehouse clubs. As of the first quarter of this year, the club featured nearly 100 million members worldwide. Furthermore, their current membership renewal rate is about 91% in the U.S. and Canada, and those members send about $3.5 billion in cash into Costco’s fees ever year.
The end result is a strong, cult-like retailer that is successfully navigating the new omnichannel environment. And because of that, Costco will continue to be one of the top retail stocks for portfolios in 2020, as it is just hitting all the right switches for further growth.
The TJX Companies (TJX)
Walmart is known for its low prices, and Costco is know for its fanatical customers. However, there is a way to get both with one retail stock — and that’s TJX Companies (NYSE:TJX). For TJX, the combination is creating an amazing retailer that, despite not really having an online presence, is just killing it with shoppers.
Operating TJ Maxx, Marshall’s, Home Goods and other store brands, TJX is a buyer of closet apparel and home furnishings. When Macy’s can’t unload full-price shirts, TJX buys them for dirt cheap. The secret is that the stores mix of goods constantly change.
Because of this, it creates a sort of treasure hunt for the so-called “Maxxinistas.” They are the ones who keep coming back to the store to find high-quality merchandise at cheap prices. The strategy has worked for a long time, but is increasingly working now as consumers have become more price sensitive.
In the third quarter, TJX Companies’ reported revenue increased by 6% year-over-year to more than $10.5 billion. Even better, foot traffic has been great, as comparative store sales grew by 4% for the quarter. This still impressive considering last year at this time, TJX saw a big 7% jump in the same metric.
Already, TJX has mentioned strong preliminary results for the holiday season. The truth is that Americans want good merchandise at deep discounts, and they are willing to go to physical retail locations to get just that.
With continued sales growth, strong cash flows and a growing dividend, TJX stock has the goods to keep rewarding shareholders throughout the future.
At the time of writing, Aaron Levitt was long AMZN stock.