2 of the Best Retail Stocks to Buy in 2026

Costco and TJX are highlighted as top-performing retailers, with Costco posting 6.6% comparable sales growth in the latest three-month period and 11.3% year-over-year operating income growth, while TJX delivered 8% constant-currency comps growth and 29.3% EPS growth to $1.19. Costco’s membership renewal rate remained near 90% and TJX expanded gross margin to 31.3%, underscoring strong demand and disciplined execution despite a tougher consumer backdrop. The article is broadly constructive on both names, but it is primarily an opinion piece rather than new market-moving news.

Analysis

The key market signal here is not that COST and TJX are “defensive,” but that they are taking share from the middle of retail by monetizing consumer stress without needing to chase margin through promotions. That tends to be a late-cycle winner pattern: as households trade down and become more disciplined, traffic consolidates around formats that convert value-seeking into habit. The second-order effect is pressure on conventional department stores, mall apparel chains, and inventory-heavy specialty retail that lack either membership lock-in or opportunistic sourcing.

What matters over the next 3-6 months is that both models are still in the phase where unit growth can offset any eventual deceleration in comp growth. COST has the cleaner quality profile, but its re-rating is already closer to “bond proxy with growth” than bargain retail; TJX likely has more runway because incremental inventory availability can persist even if the consumer stabilizes, preserving merchandise advantage. The risk is that if input costs ease broadly and consumers re-accelerate into full-price channels, TJX’s sourcing edge narrows before COST’s membership engine meaningfully inflects again.

The bigger contrarian takeaway is that the market may be underpricing how durable this bifurcation is. These are not just cyclical beneficiaries; they are structurally advantaged aggregators of fragmented demand and distressed supply. The relevant question is whether earnings revisions remain positive for another two quarters—if yes, both can keep compounding despite already elevated expectations. If no, COST is more vulnerable to multiple compression because the market is paying upfront for predictability, while TJX has more operating leverage to cushion a reset.

Key Decisions for Investors

• Stay long TJX vs. short a basket of weak discretionary/department store names for a 3-6 month relative-value trade; upside is sustained earnings revisions, while downside is limited if the consumer merely normalizes rather than rebounds sharply.
• Add to COST only on broad retail multiple compression, not on strength; use a 6-12 month horizon and expect lower upside but better capital preservation than most consumer names if macro data softens.
• Pair long TJX / short a leveraged apparel or home-furnishings retailer that depends on promotional clearance; this isolates sourcing advantage and inventory optionality versus margin-fragile peers.
• For tactical traders, consider selling out-of-the-money puts on TJX into any market-wide drawdown; the stock’s fundamental support makes implied volatility less likely to fully compensate for downside unless the consumer materially weakens.
• Avoid chasing COST above market on short-term strength; the risk/reward is compressed unless renewal or membership growth surprises materially to the upside over the next 1-2 quarters.