In 2023, wholesale challenges, inflation and an uncertain consumer environment made for a volatile retail industry. Some brands withstood the challenges while others took a hit to their business, widening the gap between the winners and losers in retail.
As we enter 2024, here are the retail stocks that stand out above the rest and will likely continue to perform well in the coming year, according to analysts and market watchers:
WMT — Walmart
TD Cowen analyst Oliver Chen named Walmart as one of his “Best ideas” for 2024, in part due to the retailer’s powerful store reach and technology capabilities. He described the big box retailer as the “best in class retail-tech leader in our coverage.”
“We view Walmart as a retail-tech leader and strategic investments in Walmart+, e-commerce marketplace and digital advertising will drive margins higher,” Chen wrote. “We feel these initiatives alongside artificial intelligence applied across all stakeholders will drive a new retail nexus. We monitor macro factors including pricing headwinds, higher income traffic gains and consumer balance sheets.”
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ONON — On Holding
Throughout 2023, On has managed to consistently post positive results in North America as other brands like Adidas, Steve Madden, Skechers, Deckers, Puma and Columbia Sportswear lamented the challenges in the U.S. Looking ahead, On plans to add fewer additional wholesale doors as it looks to focus on its existing partners as well as growing its DTC presence through e-commerce and its owned retails stores.
In a Dec. 13 note to investors, Stifel analyst Jim Duffy highlighting Swiss running shoe brand On as “a top pick for 2024.”
“Standout revenue growth is poised to continue behind growing global awareness, a compelling product pipeline, and gradual distribution expansion,” Duffy wrote.
FIVE — Five Below
Like other value retailers, Five Below is in a good position to capture demand from cost-conscious consumers.
A special report from William Blair Equity Research in December named Five Below as a top stock pick for 2024.
“Value-based, youth-centric offering, and broad category assortment supports ongoing top-line momentum against discretionary demand pressures, potential pricing headwinds, and emerging online competition,” read the report.
Additionally, the report noted Five Below’s store expansion plans and said it expects to see the chain open about 255 new stores in 2024, with a longer-term goal of 3,500 stores.
“In our view, the company is well positioned for comparable sales growth of at least 4 percent in 2024 with upside from expanding brand awareness across a wider set of demographics, product newness, and a new in-house international sourcing team,” the report read.
SHOO — Steve Madden
BTIG analyst Janine Stichter in a Dec. 14 note named Steve Madden as a top stock pick for 2024. While the shoe brand experienced some trouble in 2023 due to weakness in the North American wholesale market, Stichter expects wholesale improvement in 2024, which will bolster brands like Steve Madden.
“The brand is fine, the product is fine,” Stichter told FN in an interview. “What really hurt them over the last year is that they just didn’t have much appetite from their wholesale customers.”
In addition to this expected improvement, Steve Madden will also benefit from its short lead times for order fulfillment, which will be attractive to retailers looking to quickly fill their shelves with more inventory when they need it. Plus, a renewed interest in ballet flats and loafers bodes well for Steve Madden’s assortment.
TJX — TJX Companies
In a Dec. 14 call with investors and media, Jefferies analyst Corey Tarlowe made a strong case for stocks in the off price sector, which have benefited from cost-conscious consumers.
“[Off-price] continues to be a bright spot,” Tarlowe said, rating TJX Companies, which owns TJ Maxx and Marshalls, as one of his top stock picks.
In a Dec. 7 note, Tarlowe said “TJX should benefit from the secular migration toward the Off-Price sector, likely leading to share gains from other, more traditional retailers, in our view.”
DECK – Deckers Brands
The Deckers-owned Hoka and Ugg brands have been standout performers throughout 2023. (In November, Hoka was honored with the Brand of the Year award at the 37th annual FN Achievement Awards.)
BTIG’s Stichter said the momentum of Hoka and Ugg will continue to bolster Deckers’ stock in 2024, naming the shoe company as one of her top stock picks.
“You have two really high-growth, quality brands and it’s really rare to see two brands working to this extent in the same portfolio,” Stichter told FN. “And the nice thing about them is that they’re kind of counter seasonal.” In other words, Hoka is more of a spring/summer running brand while Ugg shines during the winter and falls months, which makes for a strong brand portfolio year round.
