The holiday season is set to provide a much-needed boost to the retail sector, with consumer spending projected to hit a record average of $902 per person, according to the National Retail Federation.
This represents a notable increase from last year’s $877, driven by easing inflation and improved economic conditions following the Federal Reserve’s rate cuts.
Cyber Week, the five-day shopping period including Thanksgiving, Black Friday, and Cyber Monday, has become a cornerstone of the retail calendar. Online sales during this critical period are expected to grow 7% year-over-year, reaching $40.6 billion and accounting for 16.9% of overall holiday season sales, according to Adobe Analytics.
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This highlights the growing dominance of e-commerce during the busiest shopping season of the year.
Amid this favorable environment, two standout retail stocks, Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT), are well-positioned to capitalize on the holiday shopping frenzy.
Amazon: The e-commerce titan
Amazon is set to benefit from the surge in holiday shopping thanks to its unmatched e-commerce dominance, extensive logistics infrastructure, and expanding cloud-computing segment.
Analysts are optimistic about Amazon’s potential, with JPMorgan naming it their “best idea on the internet.” Amazon’s Prime program, bolstered by its vast distribution network, remains a cornerstone of its retail success, further supported by its presence in physical retail through Whole Foods Market.
The recent launch of “Haul,” a low-cost online storefront aimed at competitors like Temu, reinforced its global e-commerce dominance.
The company is also leveraging AI-driven initiatives, such as Project Private Investigator, to enhance operational efficiency and reduce return rates. Meanwhile, its advertising segment, which generated $14.3 billion in Q3 2024, continues to grow rapidly, with additional untapped revenue potential from platforms like Prime Video and Twitch.
Amazon’s stock currently trades at $197.12, reflecting a 3% loss over the past five days but a 7% gain for the month.
With its strong presence across multiple sectors and promising growth prospects, Amazon represents a compelling investment opportunity ahead of the holiday season.
Walmart: A retail powerhouse
Walmart also emerges as a strong buy heading into the holiday season, bolstered by its impressive financial performance and strategic initiatives. The stock, trading at $90.44, has gained 6% over the past five days and 8% in the past month, signaling robust investor confidence.
In Q3, Walmart exceeded Wall Street expectations, delivering an adjusted EPS of $0.58 compared to estimates of $0.53 and revenue of $169.6 billion, surpassing projections of $167.7 billion.
Key growth drivers included a 27% increase in e-commerce sales, a 28% rise in advertising revenue, and a 22% boost in membership income, showcasing Walmart’s ability to grow profits faster than sales.
Walmart’s strategic investments in automation and delivery efficiencies have strengthened its e-commerce operations.
The company’s success in e-commerce is driven by its focus on delivery densification, expedited delivery options, and automation. By automating over 50% of its fulfillment center volume, Walmart has effectively lowered delivery costs per order while enhancing service levels.
Additionally, its diversified revenue streams, including advertising and memberships, continue to bolster profitability.
As the holiday season approaches, Walmart’s optimized inventory levels, reduced markdowns, and technology-driven innovations such as Scan & Go enhance its appeal to price-conscious shoppers.
With the National Retail Federation projecting holiday sales growth of 2.5%-3.5%, Walmart is well-positioned to capitalize on consumer trends and sustain its momentum, making it an attractive stock to own this season.
As consumer spending continues to rise, these retail giants offer compelling opportunities for those looking to capitalize on the holiday season’s momentum.
Featured image via Shutterstock
