4 Retail Stocks Set to Gain From Record Holiday Consumer Spending

Retail Industry Overview - Core retail sales in the 2024 holiday season increased by 4% year-over-year to a record $994.1 billion, surpassing the National Retail Federation's forecast of 2.5%-3.5% growth [1] - The robust holiday performance reflects a rebound in consumer spending and solid U.S. economic growth, with spending patterns returning to pre-pandemic levels [2] - Despite a shorter holiday shopping calendar favoring online shopping, in-person shopping saw a resurgence, and consumers focused on early purchasing [2] Consumer Behavior and Market Conditions - Consumers defied challenges posed by a resilient labor market and steady wage growth, with retailers leveraging compelling promotional strategies to drive spending on both big-ticket items and essentials [4] - The Federal Reserve's strategic rate cuts and easing inflation allowed consumers to better manage their budgets, contributing to increased spending [4] Category Performance - Online and other non-store sales surged 8.6% year-over-year, leading growth across retail categories [5] - Furniture and home furnishing stores saw a 5.6% increase, while electronics and appliance stores posted a 3.7% rise [5] - Health and personal care stores experienced a 3% boost, and clothing and clothing accessory stores recorded a 2.8% gain [6] - General merchandise and grocery/beverage stores posted modest growth of 2.4% and 2.1%, respectively [6] - Sales at building materials and garden supply stores, as well as sporting goods stores, remained flat compared to the previous year [6] Company Highlights Abercrombie & Fitch (ANF) - The company revised its Q4 net sales outlook upward to 7%-8% growth, up from the prior forecast of 5%-7%, driven by a successful holiday sales season [9] - Abercrombie & Fitch excels in integrating digital and physical retail channels, offering a seamless shopping experience and driving higher customer satisfaction and loyalty [9] - The company has a trailing four-quarter earnings surprise of 14.8% on average, with Zacks Consensus Estimate suggesting 15.1% sales growth and 69.4% EPS growth for the current financial year [10] Amazon (AMZN) - Amazon's robust e-commerce platform, vast product selection, and efficient delivery services continue to drive revenue growth [11] - Prime membership fosters customer loyalty and drives recurring revenues through subscription fees and exclusive services [11] - The Zacks Consensus Estimate suggests 10.9% sales growth and 82.4% EPS growth for the current financial year, with a trailing four-quarter earnings surprise of 25.9% on average [12] Costco (COST) - Costco's membership model, strategic investments, and customer-centric approach have driven effective navigation of market ups and downs [13] - High membership renewal rates, efficient supply chain management, and bulk purchasing power ensure competitive pricing and strong customer loyalty [13] - The Zacks Consensus Estimate implies 7.2% sales growth and 11.8% EPS growth for the current financial year, with a trailing four-quarter earnings surprise of 2% on average [14] Walmart (WMT) - Walmart has strengthened its market presence through strategic e-commerce initiatives, including acquisitions, partnerships, and improvements in delivery and payment systems [15] - The company is committed to elevating merchandise offerings and enhancing supply chain capacity with cutting-edge solutions [15] - The Zacks Consensus Estimate suggests 4.8% sales growth and 11.7% EPS growth for the current financial year, with a trailing four-quarter earnings surprise of 9.3% on average [16]