3 Retail Stocks to Buy to Profit From Record Holiday Spending

Stocks to buy

The holiday shopping season is off to a rip-roaring start. Industry data shows that consumers spent a record $9.8 billion shopping for Black Friday deals this year, and a record $12.4 billion shopping during Cyber Monday. On average, consumers spent $321.41 on holiday-related purchases over the Thanksgiving holiday weekend, with toys, electronics, and gift cards the top items purchased, according to data from the National Retail Federation (NRF).

The record spending should make for a jolly holiday season this December for both retailers and the stock market as investors eagerly await a year-end Santa Claus rally. The strong consumer spending also defies the skeptics who continue to forecast a recession in the U.S. and expect the current rally in equities to sputter heading into year’s end. With consumers feeling merry, we look at three retail stocks to buy to profit from record holiday spending.

Ulta Beauty (ULTA)

ULTA stock Ulta Beauty store front sign located at Laurel Town Centre in Laurel, Maryland.

Source: Ryan P Stephans / Shutterstock.com

Ulta Beauty (NASDAQ:ULTA) just reported a big quarter and its stock jumped 11% higher as a result. The cosmetics retailer and its stock appear to have momentum heading into the holidays. For this year’s third-quarter, Ulta Beauty announced earnings per share (EPS) of $5.07 and revenue of $2.49 billion. Analysts on Wall Street had forecast earnings of $4.96 and $2.47 billion in sales. The company also lifted its forward guidance, which impressed both analysts and investors.

Ulta executives said they anticipate full-year sales of $11.10 billion to $11.15 billion, up from a previous range of $11.05 billion to $11.15 billion. Full-year EPS is forecast at $25.20 to $25.60, up from a previous outlook of $25.10 to $25.60. Ulta Beauty also just announced that its long-time chief financial officer (CFO), Scott Settersten, will retire in April 2024. Paula Oyibo, the company’s current senior vice president of finance, will take over the CFO role, ensuring continuity at the company.

Despite the big post-earnings bounce, ULTA stock is flat on the year (up 0.08%). This suggests that it’s not too late for investors to take a position and ride this stock higher.

Costco (COST)

A Costco Wholesale (COST) warehouse in Auburn Hills, Michigan.

Source: ilzesgimene / Shutterstock.com

Also riding a hot hand into the holidays is Costco (NASDAQ:COST). The company just released its sales figures for November and they show the company got a nice boost during this year’s Black Friday shopping event. Costco’s sales increased 5% from a year earlier to $20.10 billion in November, while same-store sales were 3.5% higher year-over-year. If it weren’t for a steady decline in gasoline prices during November, Costco’s same-store sales in the month would have been up 4.4%.

When releasing its November data, Costco singled out the Thanksgiving weekend, and Black Friday in particular, saying the holiday event helped to drive its e-commerce sales up nearly 10% from a year earlier. The company said that it’s seeing strong consumer shopping trends on discretionary items such as electronics related to the year-end holidays. COST stock is up 32% this year. The company next reports quarterly results on Dec. 14.

Target (TGT)

Image of the Target (TGT) logo on a storefront.

Source: jejim / Shutterstock.com

Discount retailer Target (NYSE:TGT) appears to have wind in its sails as it navigates through the holidays. The department store chain’s stock has gained 21% in the last month after the company issued better-than-expected financial results and issued a bullish outlook for Christmas this year. The company reported EPS of $2.10 versus $1.48 that was expected on Wall Street. Revenue came in at $25.40 billion compared to $25.24 billion that was forecast.

During their earnings call with media and analysts, Target executives emphasized that they are optimistic about holiday sales this year and are seeing shoppers hit stores and the corporate website to buy decorations, gifts, and other items. The company noted that its website was full of Black Friday deals in October of this year. And, to help boost sales during the holidays, Target is offering thousands of items for $25 or less. Despite the current rally, TGT stock is down 11% on the year.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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