Best retail stocks to own heading into the 2025 holiday season

Ritholtz CEO Josh Brown highlights TJX and Ulta as top retail plays into the 2025 holiday season, citing resilience in value-oriented spending and strong loyalty-driven demand. TJX reported EPS rising from $2.97 (FY2023) to $4.26 (FY2025), raised FY2026 guidance to $4.34–$4.43, delivered +5% comparable-store sales in the latest quarter and pays a 1.12% dividend; Brown flags technical risk levels near $140 and $134. Ulta’s loyalty base approaches 46 million members (representing ~95% of sales), reported +6.7% comparable sales in Q2 FY26, shows broad channel gains, has technical resistance at ~$570 and support near $500, and does not pay a dividend.

Analysis

Market structure: Off‑price (TJX) and prestige/loyalty-driven specialty retail (ULTA) are direct beneficiaries as value-seeking consumers trade down or concentrate spend; full‑price mass merchants (e.g., TGT, department stores) are the likely losers. TJX’s decentralized pricing and inventory sourcing increases short‑term pricing power and traffic, while Ulta’s 46M loyalty members (95% of sales) raise share-of-wallet and reduce marketing elasticity, implying higher gross margin resilience through holiday season. Supply/demand: steady comp gains (TJX +5%, ULTA +6.7%) signal demand durability that could tighten inventories for off‑price picks and sustain beauty sell‑through, reducing markdown pressure. Cross‑asset: a stronger retail beat can lift 2s and 5s by ~5–15bp via higher near‑term CPI expectations, tighten credit spreads for retail credits, strengthen USD modestly, and compress equity option skew (lower demand for tail hedges if consensus bullish).

Risk assessment: Tail risks include a faster‑than‑expected macro slowdown (GDP downshift or shock to payrolls), supply disruptions (brand pullbacks from off‑price channels), and privacy/regulatory hits to loyalty data monetization; any of these could erase 20–40% of upside. Time horizons: immediate (days) sensitivity to weekly retail prints and earnings whispers; short‑term (weeks/months) driven by Black Friday and Thanksgiving cadence; long‑term (quarters) tied to FY26 guidance execution and membership growth sustaining ARPU. Hidden dependencies: TJX relies on vendor flow and opportunistic buys — brand delisting or tightened channel controls would raise cost of goods; Ulta depends on continued partnerships with prestige brands and experiential marketing. Key catalysts: Oct–Dec retail sales, Nov CPI, individual Q3/Q4 earnings and FY26 guide updates.

Trade implications: Direct — establish a 2–3% long position in TJX (ticker TJX) ahead of holiday shopping, with principled stops at $134 and add-on range $120–$130; hold through Q1 2026 and trim into positive FY26 guide revisions. For ULTA, use a conditional entry: only buy on breakout above $570 (or on sustained close >$570), target 1–1.5% position, hard stop $500; alternatively buy Dec‑2025 call spread (e.g., 570–640) to cap capital at risk and capture holiday upside. Pair trade — long TJX vs short TGT (equal notional 1–2% each) to express off‑price share gain; expect 5–10% relative outperformance into Q1 2026. Options — sell put spreads only if attractive implied vol, or buy call spreads on ULTA to limit premium; avoid uncovered calls given potential post‑holiday mean reversion.

Contrarian angles: Consensus underweights the sourcing risk for TJX — brands tightening distro or reducing excess inventory (if margin squeeze elsewhere) could rapidly compress TJX’s buy advantage, a 30–50% downside if supply dries. For ULTA, the market may be underpricing durability risk: elevated marketing/activation spend (Super Bowl, festivals) could be less ROI‑efficient post‑holiday and amplify margin sensitivity to discretionary pullback. Historical parallels: 2019–20 off‑price strength reversed when brand sell‑through normalized; use that as a guardrail for sizing and stops. Unintended consequence — crowded longs into holidays can amplify post‑season washouts; scale positions modestly and size to volatility rather than conviction alone.

Key Decisions for Investors

• Establish a 2–3% long equity position in TJX (TJX) before early November; place a protective stop at $134, add incremental size on pullbacks into $120–$130, and plan to reassess/trim into Q1 2026 results or a 15–25% unrealized gain.
• Enter a conditional 1–1.5% long in ULTA only on a confirmed breakout above $570 (sustained close >$570) with a hard stop at $500; if unwilling to hold stock, buy a Dec‑2025 call spread (strike range ~570–640) to cap downside and capture holiday upside.
• Implement a 1–2% pair trade: long TJX vs short TGT (equal notional) to express off‑price outperformance; set a relative spread stop if TJX underperforms TGT by >5% within 6 weeks and target 5–10% relative return into Q1 2026.
• Monitor three high‑impact data triggers and act: (1) weekly retail sales cadence Oct–Dec (if weekly sales miss by >1% vs. consensus, cut ULTA exposure by 50%), (2) Nov CPI release (if m/m >0.4% tighten discretionary exposure), and (3) Dec consumer credit delinquency trends (if 30‑60 day delinquencies rise >20bps reduce positions across discretionary).