Goldman Sachs sees an improved path ahead for retail stocks and offered some ways to play the space. Managing director Kate McShane said retail stocks should continue to rise in 2025. That is because consumer spending is likely to remain strong as interest rates come down. Plus, some retail stocks should be helped by company efforts to build out alternative revenue streams, she added. “We think discretionary is poised for growth and as a result we reposition our stock ratings distribution to favor companies that are more exposed to discretionary goods,” McShane told clients. “We see this as an area for stronger growth trends over the next 12 months as the interest rate environment eases, and we see a possible normalization of share of wallet which should drive top line and improved gross margins.” In this environment, McShane told clients about long ideas that fit these themes and her favorite stock ideas within the space. Here is that group: Ollie’s Bargain Outlet was one of her “best small/mid cap ideas” and a stock she said would be less exposed to any potential tariffs that have been floated by President-elect Donald Trump . The designation comes amid a strong year for the stock, with shares climbing more than 48% in 2024. A chunk of those gains came on Tuesday alone, when shares surged more than 14% to a new 52-week high. With that gain, the stock is on track to notch its best day since 2022. OLLI 1D mountain Ollie’s, 1-day Earlier, the Pennsylvania-based retailer posted stronger adjusted earnings per share and EBITDA for the third quarter than analysts polled by FactSet expected. Revenue, on the other hand, came in slightly under Wall Street’s consensus forecast. However, after 2024’s big run, the average analyst polled by LSEG sees shares pulling back about 5%. Still, most analysts also have a buy rating. Elsewhere, McShane named Target as one stock that can be a long play on these larger retail themes. She explained that the Minnesota-based company may see margin expansion as it creates new revenue streams. This has been a winning strategy for rival discounter Walmart, which has created subscription and in-store advertising businesses and padded its revenue growth. Target has emerged as a laggard within what is shaping up to be a field of clear winners and losers for the major retail stocks this year. Shares have tumbled more than 4% in 2024, while the SPDR Retail ETF (XRT) has climbed more than 16%. Yet, Wall Street sees a rebound ahead, with an average price target of analysts surveyed by LSEG suggesting a gain of just over 6%. On the other hand, the majority of analysts have a hold rating. McShane was not so optimistic on some other retailers. She remains on the sidelines when it comes to Ulta and Williams-Sonoma , while seeing AutoZone and RH as the “best” sell ideas.
