In this article, we will look at the 10 Best Retail Stocks To Invest In.

What Does the Holiday Shopping Season Look Like?

On December 2, Lindsey Bell, Chief Strategist at 248 Ventures, appeared on CNBC to discuss the consumer and economy in the holiday shopping season and the impact of proposed tariffs and the strong dollar on earnings. She said that the economy will see a resilient consumer, economy, and marketplace this week and at the end of the year. Bell expressed optimism going into the end of the year and was of the view that there is opportunity in retail at the present after staying in the shadows as a forgotten area.

As consumers have shifted in how they spend money and what they spend it on over the last several years, the retail sector is starting to see a comeback to discretionary items. Although an opportunity exists, retailers can only avail of it if they have the right merchandise at the right price or offer the right experience for the consumer. This is because the consumer is still value-oriented and price-sensitive simultaneously.

Tariff Threats: Are They Real for Investors and Consumers?

Concerns are circulating in the retail industry about the potential effects of “tariff threats” on the economy. Bell was of the view that it is undoubtedly necessary to stay on top of the potential threats that the president-elect’s proposed tariffs might cause to the markets.

However, she took us back to Trump’s first term as a president and the tariff increases he made, that Joe Biden continued in his term, highlighting that there wasn’t a significant lasting inflationary impact to them. She explained how tariffs work, saying that they go up when put on and have an impact in the near term, but eventually subside over time.  The markets saw that in 2018 and 2019, while real inflation came in 2021 and 2022 with the pandemic. She reiterated that although the tariffs are something we need to keep an eye on, the scenario is not something we need to worry about from a consumer perspective this holiday shopping season.

Although the tariffs may not pose threats to consumers, what do they mean for investors? With the dollar up by half a percent at the time of the interview, concerns are rising about the dollar’s possible strength going into the next earnings season and the possible impact on rates that these “tariff threats” might bring about.

Bell agreed that the dollar’s strength impacts the earnings season, as about 50% of the S&P 500 gets its revenues from overseas multinational companies. She said that the dollar’s strength can continue into the year ahead, but this is a relative game. It is important to consider the currency and the strength of the economy around the world, as a strong dollar does depict a strong economy here in the US.

With these trends in view, let’s look at the 10 best retail stocks to invest in.

Our Methodology 

For this article, we used the Finviz stock screener to identify around 40 retail stocks and narrowed our list to 10 stocks with the highest number of hedge fund holders, as of fiscal Q3 2024. We sourced the hedge fund data from Insider Monkey’s database. The stocks are arranged in ascending order of the number of hedge funds that have stakes in them.

At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

10 Best Retail Stocks To Invest In

10. Dollar General Corporation (NYSE:DG)

Number of Hedge Fund Holders: 45

Dollar General (NYSE:DG) is a discount retailer that offers an elaborate array of merchandise, including seasonal items, consumable items, apparel, home products, and more. Its merchandise includes brands from manufacturers and its own private brands that are sold at a discount.

The company has focused labor hours on perpetual inventory management in its store to improve its in-stock levels and support its sales growth. These efforts have paid dividends and have led to year-over-year improvements in its in-stock levels. Dollar General’s (NYSE:DG) merchandising and supply chain teams have also contributed to this in-store progress by simplifying operations for the company’s teams.

The company has also undertaken the first full-scale refresh of its sorting process within its distribution centers. With this initiative, Dollar General’s (NYSE:DG) ultimate goal is to enable its store teams to stock shelves more quickly and drive higher on-shelf availability for customers. This is expected to ultimately support ongoing sales and boost profitability. The company expects to complete this work by the end of the year.  It ranks tenth on our list of the 10 best retail stocks to invest in.

9. Lululemon Athletica Inc. (NASDAQ:LULU)

Number of Hedge Fund Holders: 45

Lululemon Athletica (NASDAQ:LULU) is a technical athletic apparel retailer that also offers footwear and accessories. The company operates stores in the US, China Mainland, Canada, Australia, and South Korea. Its international markets are seeing continuous strength as the Lululemon brand is resonating with consumers around the globe.

One of the company’s largest opportunities is growing its business outside of North America. Lululemon Athletica (NASDAQ:LULU) is on track to quadruple its international revenue from 2021 levels by the end of 2026. The company’s near-term action plan involves leveraging its chase and fast-track design capabilities to bring more seasonal newness into its women’s assortment as promptly as possible. It is focusing on its strong performers, including its gold zip scuba in Softreme, aligned leggings in colors and prints, and new silhouettes and seasonal fabrics.

Lululemon Athletica (NASDAQ:LULU) plans to fast-track several new styles of performance shorts, tops, and tracksuits in 2025. Through these strategies, it aims to return to its historic levels of newness, no later than Spring 2025.

Middle Coast Investing stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q2 2024 investor letter:

“I mentioned last quarter and higher above that I like buying quality stocks on sale. Lululemon Athletica Inc. (NASDAQ:LULU), the 2nd worst performer in the S&P 500 this year, qualifies. I published a full thesis on the stock before its most recent earnings, but the basics: the yoga pants and clothing company has had an amazing post-pandemic run that is approaching its end. Its growth in the US is slow/non-existent at the moment, but it is growing very fast in China and Europe. I think that international growth is likely to endure, and that its US slowness is likely to be temporary. Lululemon shares are not ‘cheap’, but they are on sale for an average price, and I think the company will grow faster than average over the next five years. I would be wrong if Lululemon is a fad gone bust, or faces a huge post-pandemic hangover as people get used to leaving the house more. We’ll see.”