With Christmas shopping in full swing, several retailers are poised to outperform, according to UBS. New market research shows that U.S. consumers have strong intentions to spend and their ability to do so is improving, said analyst Jay Sole. But conversations UBS has had with professional investors suggest few expect this. Nearly 25% of consumers plan to spend more this holiday season compared to last year, according to UBS data. This is the second highest figure in the last 13 years, Sole noted. Additionally, only 21% of Americans had completed their shopping by mid-November, he added. He expects clothing to be one of the most popular gifts this year. “Therefore, we expect Softlines Group to experience upward EPS revisions associated with (price-to-earnings) multiples expansion over the coming months,” Sole wrote in a note on Monday. Softline refers to retailers that sell “soft” products, such as clothing, bedding and towels. Here are some of the softline retail stocks on UBS’s buy list. The names all have a prime position in the market and the best opportunity to “go it alone,” without malls or third parties to drive consumer engagement and sales growth, Sole said. Companies can fuel growth through strong category tailwinds, and by adding new categories or entering new markets, he added. Other features include a disciplined brand management strategy, consistent full-price selling, and inventory control. “Not only are these companies expected to outperform due to their long-term growth opportunities, but also these growth stocks have the best chance of maintaining or regaining high P/Es,” Sole said.
