Holiday Cheer And Return: 3 Retail Stocks To Watch Ahead Of The Festive Season

The U.S. consumer continues to show resilience in the face of changing economic conditions, prompting experts to forecast that the upcoming holiday season will see a steady improvement in retail sales, with big-box stores and household retail brands placing an important emphasis on discounts to retain customer support. 

As inflation begins to near the Federal Reserve’s 2% target rate, experts believe that consumers will return in full force this holiday season, despite many feeling stretched compared to last year. Forecasts by Mastercard (MA) estimate that retail sales are expected to rise 3.2% during the holiday period, which runs from Nov. 1 to Dec.31. 

This year, consumers will be bargain hunting, with Mastercard expecting more shoppers to look for discount deals online instead of in-store. Online sales are expected to jump 7.1% over the shorter-than-usual holiday period compared to last year, according to the Mastercard report. 

Insights by Adobe (ADBE) suggest a similar trend for the upcoming festive period. A recent online shopping forecast for the upcoming holiday period estimates that online spending, through mobile devices, will reach a record $128.1 billion, representing a 53.2% share of the record-hitting $240.8 billion consumers are expected to be spending during the 60-day holiday window. 

A strong demand for discounts as high as 30% off listed prices will help drive shoppers back, and in turn deliver an additional $2 billion in incremental spending for retailers. This year, everything from electronics, sporting goods home appliances, and clothing will see increased demand as inflationary pressures begin to wane, and prices continue to stabilize. 

In the coming weeks, investors will begin taking stock and rebalancing their portfolios ahead of the festive season. However, market conditions continue to produce high levels of volatility in light of the ongoing geopolitical conflict in the Middle East, and with the U.S. Presidential Election falling right in the middle of the upcoming holiday period. 

Looking ahead, there are plenty of moving parts that investors will need to take into account, more so compared to last year. Though there has been an indication that the U.S. economy has managed to skirt a recession, with a soft landing now imminent, perhaps the retail sector can provide investors with some cushioning as they enter the last stretch of the year. 

Amazon 

Amazon (AMZN) is likely to present droves of online deals for cash-strapped consumers this holiday season. More than this, Prime Members are likely to benefit from additional discounts including faster and more affordable delivery options. 

Last year, the company reported a record-breaking 1 billion items purchased on Amazon with both Black Monday and Cyber Monday seeing a surge in activity. In total, shoppers saved over 70% compared to the same period in 2022. On top of this, Amazon reported that the 2023 holiday season was among the busiest, with more customers than ever shopping on Amazon than during any other holiday season. 

This year might bring the same type of holiday cheer for the company as they are set to roll out a new line of PR strategies that will bring in more shoppers, and provide them with even bigger and more robust discount offerings. 

In the second quarter, Amazon delivered strong net sales gains, although stock performance was largely muted as investors dumped tech stocks in the wake of wider economic uncertainty. 

Nonetheless, the company reported strong earnings, with $148.0 billion in Q2 net sales, an improvement of 10% compared to Q2 2023. In total, North American sales increased 9% year-over-year to $90.0 billion, despite consumers pulling back spending as inflation remained high during the beginning of Spring. 

Abroad, net sales on Amazon rose 7% year-over-year to $31.7 billion, while the company reported net income of $13.5 billion or $1.26 per diluted share, compared to $6.7 billion or $0.65 per diluted share in Q2 2023. 

Stock gains remain modest, with AMZN up 23.48% year to date, and up approximately 10% during the third quarter of the year, May to July. Looking towards the last stretch of the year, Amazon could help bolster consumer activity, with additional deals, and more discounts on key holidays such as Black Friday and Cyber Monday. 

Costco Wholesale 

Retailers may be grappling with supply chain disruptions in the coming weeks as roughly 45,000 longshoremen at ports and facilities have decided to walk out following months of negotiations that have ended without a deal. On Tuesday, October 1, workers at ports along the East Coast and Gulf went on strike, calling to fight for their demands for “as long as necessary.” 

Now, with 51% of America’s ports impacted by walkouts, retailers will need to start seeking alternatives in the coming days, as the festive season looms and further disruptions could bring more challenging conditions to the forefront for consumers. 

However, Costco (COST) has told investors that it’s not necessarily concerned about the current longshoremen strike and has started making alternative arrangements, implementing strategies that allowed the company to secure holiday goods in advance. 

During the company’s earnings call on September 26, Costco CEO Ron Vachris told investors “We have done a little bit of everything. We’ve got contingency plans, We’ve cleared the ports. We’ve pre-shipped.” However, only time will tell if Costco is being overly ambitious, or if they have plans in place to skirt possible supply chain disruptions.

Last December, the wholesale giant reported more than $26.15 billion in net sales during the five-week retail period, ending December 31, 2023. This represented a strong increase of 9.9% from $23.80 billion compared to December 2022. 

Overall, the company’s last quarter of the year was marked by stronger-than-usual demand and overall robust consumer spending. For the seventeen weeks ending December 31, 2023, Costco reported a total net sales of $82.86 billion, which was an increase of 5.9% for the same period the year before. 

Recently, the company delivered its 16-week Q4 2024 and 52-week fiscal year, ending September 1, 2024 results. In total, net sales increased 1.0% for the 16-week period, with more than $77.4 billion in net sales. Overall, the fiscal year delivered $249.6 billion in net sales, which marked an increase of 5% compared to 2023. 

The upcoming holiday season could bring a much-needed windfall for the company and should provide them with an additional opportunity to bolster physical performance in light of potentially challenging supply chain conditions and consumer budgets that are feeling extra stretched this year. 

Walmart 

A holiday portfolio isn't complete without discount retailer Walmart (WMT). During last year’s festive period, the company witnessed a surge in online customers, with e-commerce sales improving 17% led by string pickup and delivery options for online shoppers. On top of this, global e-commerce sales grew 23% during the 13 weeks ending January 26, 2024. 

Stronger performance was recorded across all major corporate segments of the company, including Walmart U.S., Sam’s Club, and Walmart International. For the full-year fourth quarter of 2024, the company reported total revenue of $173.4 billion, an increase of 5.7% compared to the same period in the year before. 

More recently in August, the company reported its Q2 2025 performance, and again e-commerce witnessed the most robust growth. In total, online sales were up 21%, globally, the majority led by increased in-store fulfillment pickup and marketplace delivery.

On top of this, the company delivered impressive revenue gains of 4.8%, with an even faster growing operating income of 8.5%. Walmart executives raised their 2025 outlook, expecting full-year 2025 net sales to increase from 3.75% to 4.75%, while adjusted operating income to grow from 6.5% to 8.0%. 

Overall, Walmart is set to benefit from yet another strong holiday period. The company has become a staple for lower-income earners and households. Having completed major price rollbacks during the summer, the company could likely win over more consumers this year, as it aims to make the festive period a lot less expensive for almost every American. 

Banking On The Holidays 

The festive holiday period is one of the most important times of the year for big-box retailers as they pull out all the stops and offer consumers more choices and more discounts. This year might look different in many ways, with more consumers expected to shop online, and possible supply chain disruptions hampering in-time deliveries across the country. 

With inflation sharply down, and now within arms reach of the Federal Reserve’s target range, and another possible rate cut on the books for the central bank’s November meeting, this holiday season is expected to bring a lot of festive cheer for investors looking to win big as the year draws to a close.