3 Retail Stocks Ready to Shine in the Holiday Season

With consumer spending strong, inflation easing, and personal incomes on the rise, the U.S. retail sector is primed for a robust holiday season. With promising growth potential, investors might consider top retail stocks like Amazon.com, Inc. (AMZN), Costco Wholesale Corporation (COST), and Target Corporation (TGT) for their reliable dividends and consistent returns.

U.S. retail sales rose 0.4% in September, exceeding economists’ expectations of 0.3%, likely due to lower gasoline prices, which left consumers with more disposable income to spend at restaurants, bars, clothing stores, and online. This solid growth supports the view of a strong economic performance in the third quarter.

Besides, personal income rose by $50.5 billion (0.2%) in August, , while disposable income increased by $34.2 billion (0.2%), and personal consumption expenditures grew by $47.2 billion (0.2%), per the U.S. Bureau of Economic Analysis.

Further, the cherry on top for consumers is the easing inflation in August, with the Personal Consumption Expenditures (PCE) price index rising 2.2% year-over-year, down from 2.5% in July. This marks the lowest inflation rate since February 2021, moving closer to the Fed's 2% target.

In this favorable landscape, here are three retail stocks ready to shine this holiday season.

Amazon.com, Inc. (AMZN)

AMZN operates globally through its retail, advertising, and subscription services. It also manufactures and sells electronic devices and develops and produces media content. The segments in which the company operates are North America, International, and Amazon Web Services (AWS).

On October 24, AMZN’s AWS and Box, Inc. (BOX) expanded their partnership to enhance productivity with generative AI. Box customers can now access Amazon Bedrock’s foundation models, starting with Anthropic’s Claude and Amazon Titan, within Box AI. This integration enables companies to build secure generative AI applications using their data on Box’s platform.

Additionally, on October 16, 2024, AMZN unveiled a new lineup of Kindle devices, including the first-ever color Kindle, a revamped Kindle Scribe, the fastest Kindle Paperwhite, and a new entry-level Kindle in a fresh Matcha color.

During the financial second quarter that ended June 30, 2024, AMZN’s total net sales increased 10.1% year-over-year to $147.98 billion. Its operating income grew to 91% from the year-ago value of $14.67 billion. In addition, the company’s net income and EPS came in at $13.49 billion and $1.26, up 99.8% and 93.8% from the second quarter of 2023, respectively.

Analysts expect AMZN’s EPS and revenue for the quarter ended September 30, 2024, to increase 20.9% and 9.9% year-over-year to $01.14 and $157.27 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters, which is impressive.

Over the past year, the stock has gained 45% to close the last trading session at $186.38. It soared 22.7% year-to-date.

AMZN’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

AMZN has a B grade in Sentiment, Momentum, and Quality. It is ranked #15 out of 53 stocks in the B-rated Internet industry.

Beyond what we have stated above, we also have given AMZN grades for Growth, Value, and Stability. Get all the AMZN’s ratings here.

Costco Wholesale Corporation (COST)

COST operates membership warehouses worldwide, offering a wide range of branded and private-label products, including groceries, electronics, appliances, and more.

On October 16, COST announced a quarterly cash dividend on its common stock of $1.16 per share, payable on November 15, 2024. The stock pays an annual dividend of $4.64, yielding 0.52% at current prices. Its four-year average yield stands at 1.69%. Over the past three and five years, COST’s dividend payments have grown at a CAGR of 23% and 17.9%, respectively. COST boasts 19 years of consecutive dividend growth,

In the third quarter of 2024, which ended on May 12, COST’s total revenue increased 9.1% year-over-year to $58.52 billion, while its operating income stood at $2.20 billion, up 30.9% year-over-year. Its net income for the quarter amounted to $1.68 billion or $3.78 per share, representing an increase of 29% from the same period last year. Also, the company’s cash flow from operating activities grew 14.1% from the year-ago value to $8.38 billion.

Street expects COST’s revenue and EPS for the quarter ending November 2024 to increase 7.7% and 5.2% year-over-year to $62.25 billion and $3.77, respectively. It surpassed the consensus EPS estimates in the each of the four quarters.

The stock climbed 35.4% year-to-date and 61.9% over the past year to close the last trading session at $893.42.

COST’s POWR Ratings reflect strong prospects. It has a B for Momentum. It is ranked #32 out of 37 stocks in the Grocery/Big Box Retailers industry.

To access COST’s Growth, Value, Stability, Quality, and Sentiment ratings, click here.

Target Corporation (TGT)

TGT operates as a general merchandise retailer in the United States. The company provides a wide range of products, including apparel for all ages, jewelry, beauty, personal care items, and groceries.

On October 22, TGT announced its intention to lower regular prices on more than 2,000 items across owned and national brands this holiday season, which should boost its sales.

In addition, on September 18, the company declared a quarterly dividend of $1.12 per common share, which is payable on December 10. This will be the company's 229th consecutive dividend paid since October 1967, when the company became public. Its annual dividend of $4.48 yields 2.98% on the prevailing price level, higher than the four-year average of 2.28%.

In the second quarter of 2024, which ended August 3, TGT's total revenue increased 2.7% year-over-year to $25.45 billion. Its operating income rose 36.6% to $1.64 billion, driven by higher sales and an improved gross margin rate. The company reported an EPS of $2.57, up 42.8% from the prior year quarter.

Street expects TGT’s revenue and EPS for the quarter ending October 2024 to increase 2.2% and 9.4% year-over-year to $25.96 billion and $2.30, respectively.

The stock climbed 5.5% year-to-date and has returned 38.19% over the past year, closing the last trading session at $150.18.

TGT’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It has a B grade for Value, Momentum, and Quality. Within the Grocery/Big Box Retailers industry, it is ranked #14.

Click here to see TGT’s ratings for Growth, Value, and Stability.

What To Do Next?

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AMZN shares were trading at $189.82 per share on Friday afternoon, up $3.44 (+1.85%). Year-to-date, AMZN has gained 24.93%, versus a 23.67% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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