Two retail stocks to buy as the holiday shopping season kicks off next week

Loop Capital picks Best Buy and Five Below as its top retail long ideas for the 2025 holiday season despite a slower retail-sales backdrop (consultancies forecast +3.6% year/year) and a cloudier U.S. macro outlook with softer confidence and jobs. Analyst Anthony Chukumba raises conviction in Best Buy based on an ongoing Windows 11 refresh, expected smartphone growth in F4Q25 and a strong video-game cycle tied to Nintendo (which raised fiscal‑2026 net‑sales guidance 18% and forecasts Switch 2 unit growth of 27% hardware/7% software); Best Buy shares are down ~10% YTD. He cites Five Below’s merchandising improvements under CEO Winnie Park—more product newness, licensed merchandise, and higher‑priced in-line items—plus movie tie‑ins and exposure to consumer “trade‑down” behavior as reasons to favor the stock, which is up ~46% in 2025. These idiosyncratic catalysts, Loop says, make both retailers its highest‑conviction holiday picks despite the uncertain consumer backdrop.

Analysis

Loop Capital identifies Best Buy (BBY) and Five Below (FIVE) as its top retail picks for the 2025 holiday season despite consultancies forecasting retail sales growth of only 3.6% year-over-year and a cloudy U.S. macro backdrop characterized by waning consumer confidence and a softer jobs market; analyst Anthony Chukumba notes these macro headwinds give him "significant pause" but still higher-than-normal conviction in these two names. For Best Buy, Loop cites three specific catalysts: an ongoing Windows 11 refresh cycle, expected smartphone sales growth in F4Q 2025, and a robust video-game cycle tied to Nintendo Switch 2; Nintendo raised fiscal 2026 net-sales guidance 18% and projects Switch 2 hardware/software unit growth of 27% and 7% respectively, while Best Buy shares are down roughly 10% year-to-date. For Five Below, Loop points to merchandising execution under CEO Winnie Park—more product newness, licensed merchandise, higher-priced in-line items—and recent movie partnerships that amplify a "trade-down" consumer theme; Five Below stock has rallied about 46% in 2025. Together these idiosyncratic, product-driven catalysts suggest differentiated upside potential versus broader retail peers, but outcomes depend on holiday sell-through, margin sustainability, and how much macro softness dampens discretionary spending.

Key Decisions for Investors

• Consider initiating or adding a modest, conviction-weighted position in Best Buy on weakness given the Windows 11 refresh, anticipated F4Q smartphone strength and Nintendo-driven video-game demand, but scale exposure as sell-through and inventory signals during holiday weeks confirm demand
• For Five Below, maintain or selectively add exposure to capture value-oriented "trade-down" demand and merchandising momentum, yet consider partial profit-taking or limiting new allocation after the ~46% YTD run-up and monitor same-store sales and margin trends closely
• Keep overall retail exposure selective given the 3.6% retail growth forecast and softer macro; hedge timing risk by monitoring weekly holiday sales prints, consumer confidence and jobs data as triggers to reweight positions or implement tail-risk hedges