The holiday shopping season is upon us, and our retail stocks are well-positioned to thrive, according to Wall Street research firm Telsey Advisory Group. The news In a note to clients this week, the retail-focused firm labeled Amazon , Costco , Best Buy , and TJX Companies as among the companies best positioned versus their peers this holiday season. Telsey Advisory expects value-seeking to be a key theme among shoppers this year, which puts companies with reputations for good deals on solid ground. Overall, the firm expects holiday retail sales up between 3% to 3.5% this year, compared with 4.6% growth last year and a 5.4% increase in 2022. Analysts identified top picks by retail sector, from online to specialty apparel and so on. The firm has a buy-equivalent outperform rating on all four Club stocks. Amazon is Telsey Advisory’s pick among online retailers as consumers prioritize a more convenient shopping experience through the Prime membership. In general, analysts see direct-to-consumer sales being a bright spot this holiday season, fueled by a wide product selection that is priced competitively and delivered at increasingly quick speeds. “Amazon should continue to lead the race,” analysts wrote, noting that its October discount event for Prime members helped capture early holiday shopping dollars. Although Telsey Advisory’s note came out before Amazon’s earnings report Thursday night , the company’s guidance for the quarter backed up analysts’ optimism. Analysts tapped Costco as one of their two favorites in the discounter and warehouse clubs category ( Walmart is the other). The firm is upbeat on warehouse clubs generally, predicting holiday sales growth of 7% versus 5.5% in the year-ago period, “primarily driven by a defensive product mix of consumables and value-focused discretionary items that should attract consumers in a tight income environment.” Costco has had a good year so far, and that should continue in the final months of 2024, Telsey Advisory argued. Best Buy will stand out in the hardlines category, which covers items like electronics, appliances and furniture, Telsey Advisory argued. Analysts predict consumer electronic sales will decrease 3% year over year in 2024, but that is actually an improvement from last year’s 7.9% decline as demand bottomed after a sales acceleration during the Covid-19 pandemic. Most crucially, the firm argues Best Buy is poised to gain market share in electronics retail thanks to offering the “full range of the latest technology products,” such new AI-powered laptops, and its strength in e-commerce. Although Best Buy’s same-store sales may be about flat, Telsey Advisory expects a stabilization to begin as the replacement cycle for pandemic-era purchases takes shape. TJX Companies is the firm’s off-price retailer of choice as consumers across the income spectrum are trading down to cheaper merchandise that the company offers. The T.J. Maxx parent’s value-oriented offering for the family and its home in off-mall locations help position the company to deliver consistent earnings growth, Telsey Advisory said. Overall, analysts expect off-price retail to gain share of consumers’ spending this holiday season. Big picture Telsey Advisory selecting these four Club stocks as preferred names this holiday season reflects their competitive chops within their respective categories. That’s especially important at a time when consumers grapple with a number of economic challenges impacting their ability to spend. “Savings rate has come down, consumers have moderated their spending patterns and you still have inflation to some degree,” the firm’s founder, Dana Telsey, said in an interview with CNBC. She added that while wages are growing, daily living expenses have risen higher, making consumers “more thoughtful and discerning” around holiday purchases. Indeed, the National Retail Federation forecasted holiday spending growth in 2024 to be the slowest in six years. The firm projected holiday sales — defined as taking place in November and December — will rise between 2.5% and 3.5% year over year, which is similar to Telsey Advisory’s own projection. One reason for that is there are five fewer shopping days between Thanksgiving and Christmas this year. Another is potential impacts from Hurricanes Helene and Milton and the U.S. presidential election. Bottom line As shoppers get more selective, investors in retail need to do the same. That’s what we’ve tried to do with our ownership of Amazon, Costco, Best Buy and TJX. The value of Amazon Prime and Costco memberships, Best Buy’s differentiated product mix, and TJX’s assortment of high-quality merchandise at steep discounts should appeal to shoppers as their appetite for discretionary goods is dampened and the need for everyday essentials remains. To be sure, we did sell Best Buy on Tuesday to book some profits ahead of earnings later in November, but there’s no change to our long-term thesis, rooted in the refresh cycle for PCs and lower interest rates fueling purchases of home electronic necessities like appliances and TVs. Meanwhile, Amazon’s quarter Thursday demonstrated its importance in the portfolio going forward. Some questions about Costco’s valuation have recently emerged on Wall Street, but it has ample growth levers to pull, including international expansion and new technology initiatives . While TJX stock has pulled back a bit in recent weeks, the reasons to own the company — especially off-price market share gains, just as Telsey Advisory expects this holiday season — remain intact. (Jim Cramer’s Charitable Trust is long AMZN, COST, BBY, TJX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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The holiday shopping season is upon us, and our retail stocks are well-positioned to thrive, according to Wall Street research firm Telsey Advisory Group.
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