Get ready. Black Friday is just around the corner. While Americans haven't even sat down to eat their Thanksgiving turkey yet, holiday decorations are already cropping up in stores and on city streets and retailers are busily preparing for an onslaught of holiday shoppers.
Consumers are expected to buy more this year and retailers will be rolling out the red carpet to entice shoppers in the door.
"Many stores and malls start preparing for the holiday season as early as August in an effort to attract holiday shoppers right before and after Thanksgiving," says Henry To, chief investment officer at CB Capital Partners in Dallas. "Economists estimate that as much as 25 percent of all personal spending occurs during the holiday shopping season."
Healthy consumer spending is expected this holiday season. Rising incomes, confidence regarding the economy and employment support the belief that the consumer is willing to spend, says John Conlon, chief equity strategist of People's United Wealth Management in Bridgeport, Connecticut.
American consumers plan to spend an average $935.58 during the holiday shopping season this year, according to a National Retail Federation survey. Overall, the group expects sales in November and December to increase a solid 3.6 percent to $655.8 billion. Online sales are forecast to increase between 7 percent and 10 percent over last year to as much as $117 billion.
Retail sales so far this year are tracking up 2.1 percent, which is one reason the there is enthusiasism about a holiday uptick, says Hilary Kramer, New York-based editor of the GameChangers stock newsletter.
For investors shopping for stocks that could benefit from the holiday season, "the obvious No. 1 choice is Amazon (ticker: AMZN) because of its business model and the continuing trend toward buying online," Conlon says.
"They're the house. It's where the easy money goes. The mall in the middle is where the risks are," she says. "Amazon has grabbed about 25 percent of the growth in non-store retail, basically e-commerce as the Census Bureau classifies it, over the last year."
For investors looking for a long-term retail play, Amazon is a long-term juggernaut, Kramer says.
"You don't bet against Bezos," she says. "Meanwhile, 40 percent of the population plans on buying books, CDs or DVDs for the holidays, and at this point that really boils down to Amazon or Wal-Mart depending on choice of channel."
Conlon also likes Wal-Mart, noting it has successfully re-adjusted its business model.
In the apparel sector, To points to Ralph Lauren Corp. ( RL) as a top pick. He expects the stock appreciate by at least 40 percent from during the next 18 to 24 months. Overseas growth could play a factor.
"The brands Ralph Lauren and Polo are still very well-regarded outside of the U.S., particularly in Asia and China where it is well-known as a highly aspirational brand. As the company continues to build its international distribution platform and international sales, its operating margins should improve substantially," To says.
In the discount retailing sector, Conlon says TJX Companies ( TJX) is a top pick for investors. He points to TJ Maxx's "successful model of being an off-price retailer. It benefits from the sluggish sales of the traditional retailers which provides TJ Maxx with inventory at attractive prices," Conlon says.
"I also believe the consumer is cost conscious and not as stuffy about whether they shop at Bloomindales or TJ Maxx," Conlon says.
In the luxury arena, To likes Tiffany & Co. ( TIF). More than 50 percent of Tiffany's revenues come from its overseas stores, which have experienced weak sales due to a strong dollar and an ongoing luxury retail spending slowdown in China, To says.
"This year, Tiffany should fare better as the year-over-year comparison effects of the strong dollar wear off, while Chinese luxury retail spending has held up much better in the second half of 2016 so far," he says.
"The fourth quarter is generally a good one for UPS, which has seen more of its overall business turn seasonal over the last few years," Kramer says. "While it's never a sure thing, this year I think will turn out a little more nice than naughty. The stock is a little cheaper relative to earnings than it was this time two years ago. There's room here to rally."
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