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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. The news In a note to clients this week, the retail-focused company ranked Amazon, Costco, Best Buy and TJX among the companies best positioned relative to their peers this holiday season. Telsey Advisory expects the search for value to be a key theme among buyers this year, putting companies known for good deals on solid footing. Overall, the company expects holiday retail sales to grow between 3% and 3.5% this year, compared to last year’s 4.6% growth and an increase of 5 .4% in 2022. Analysts have identified top picks by retail sector, from online clothing to specialty clothing and more. The company has an Outperform rating equivalent to Buy on all four Club stocks. Amazon is Telsey Advisory’s choice among online retailers as consumers prioritize a more convenient shopping experience through Prime membership. Overall, analysts see direct-to-consumer sales as a bright spot this holiday season, fueled by a wide selection of products competitively priced and delivered at increasingly faster speeds. “Amazon is expected to continue to lead the race,” the analysts write, noting that its October discount event for Prime members helped capture dollars for early Christmas shopping. Although Telsey Advisory’s note was released before Amazon’s earnings report Thursday evening, the company’s guidance for the quarter supported analysts’ optimism. Analysts named Costco as one of their two favorites in the discount club and warehouse club category (Walmart is the other). The company is generally bullish on warehouse clubs, forecasting holiday sales growth of 7% compared to 5.5% last year, “primarily driven by a defensive product mix of consumables and merchandise discretionary value-based products that should attract consumers in a tight income environment. environment.” Costco has had a good year so far, and that is expected to continue in the final months of 2024, Telsey Advisory argued. Best Buy will stand out in the hardline category, which covers items such as electronics, appliances and furniture, argued Telsey Advisory Analysts predict that consumer electronics sales will decline 3% year-on-year in 2024, but this is actually an improvement over. last year’s 7.9% decline, as demand hit an all-time low after sales accelerated during the Covid-19 pandemic More importantly, the company says Best Buy is on point. to gain market share in electronics retailing through offering a “full range of the latest technology products,” such as new AI-powered laptops, and its strength in e-commerce. Although Best Buy’s same-store sales are roughly flat, Telsey Advisory expects a stabilization to begin as the replacement cycle of pandemic purchases takes shape. TJX Companies is the company’s off-price retailer of choice as consumers of all incomes gravitate toward the lower-priced products the company offers. Parent company TJ Maxx’s value-focused offering for family and home away from malls helps position the company to deliver consistent profit growth, Telsey Advisory said. Overall, analysts expect off-price retail to gain share of consumer spending this holiday season. Overview Telsey Advisory selecting these four Club stocks as preferred names this holiday season reflects their competitive strengths in their respective categories. This is particularly important at a time when consumers are grappling with a number of economic challenges that impact their ability to spend. “The savings rate has fallen, consumers have moderated their spending habits and there is still some inflation,” company founder Dana Telsey said in an interview with CNBC. She added that even as wages rise, everyday spending has increased, making consumers “more thoughtful and discerning” when it comes to holiday shopping. Indeed, the National Retail Federation predicts that holiday spending growth in 2024 will be the slowest in six years. The company’s forecast holiday sales – defined as occurring in November and December – will increase between 2.5% and 3.5% year over year, similar to Telsey Advisory’s own projection . One reason for this is that there are five fewer shopping days between Thanksgiving and Christmas this year. Another issue concerns the potential impacts of Hurricanes Helene and Milton and the U.S. presidential election. As shoppers become more selective, retail investors must do the same. That’s what we’ve tried to do by owning 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 products at deep discounts should attract shoppers as their appetite for discretionary products is mitigated and the need of daily essential products remains. Granted, we sold Best Buy on Tuesday to book some profits ahead of earnings later in November, but our long-term thesis, rooted in the PC refresh cycle and falling interest rates fueling home electronics purchases , remains unchanged. such as household appliances and televisions. Meanwhile, Amazon’s quarter on Thursday demonstrated its importance in the future of the portfolio. Some questions about Costco’s valuation have emerged on Wall Street recently, but the company has many growth levers, including its international expansion and new technology initiatives. Although TJX stock has pulled back slightly in recent weeks, the reasons to own the company – particularly off-price market share gains, just as Telsey Advisory expects this holiday season – remain intact. (Jim Cramer’s charitable fund is long AMZN, COST, BBY, TJX. See here for a complete list of stocks.) 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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.
