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2 Retail Stocks to Buy and 2 to Avoid Before Earnings
Posted On Nov 14, 2025 by Chris Markoch
Many of the largest retail stocks are getting ready to report earnings the week of November 17. As I write this, we're about two weeks away from the official start of the holiday shopping season. Investors will be waiting to hear if retailers believe this will be a Black Friday or a Black-and-Blue Friday.
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In the prior earnings season, many retailers sounded the alarm on what's being called a "K-shaped" economy. This is a visual representation of the growing disparity between the highest-earning households, which are spending and expanding their wealth, and the lowest-income households, which are struggling to pay their day-to-day bills.
Many retailers have said that low-income consumers have been under pressure for several quarters. However, they also say that the higher-income consumers continue to spend, relatively unabated. There's no reason to believe that things will be any different this earnings season.
In much the same way, you can group retail stocks into the have's and the have not's. But in this case, you may not want to buy stocks that are on sale.
Why Walmart Looks Like a Buy Heading into the Holidays
When the going gets tough, Walmart Inc. (NYSE: WMT)proves why it's the most reliable name among retail stocks. The company's recent updates show traffic is rising among higher-income households who are trading down for essentials and value. That shift is offsetting weaker sales among lower-income customers who are sticking to essentials.
Walmart's e-commerce and membership service, Walmart+, is also a bright spot. In fact, it's helping Walmart close the gap with Amazon in omnichannel retail. Its grocery dominance provides steady cash flow, while digital advertising is becoming an underappreciated growth driver.
What could change my mind?
If inflation eases more quickly than expected, lower-priced retailers could see less trade-down activity. Walmart's valuation is also near its historical high, which could limit short-term upside if earnings disappoint. However, in a mixed economy, Walmart's scale and pricing power still make it one of the few dependable buys in retail.
Why TJX Companies Belongs on Your Buy List
TJX Companies Inc. (NYSE: TJX), the parent company of T.J. Maxx, Marshalls, and HomeGoods, continues to thrive on its "treasure hunt" model, which keeps customers coming back even when budgets are tight. In a K-shaped economy, off-price retailing remains a sweet spot—appealing to value-driven consumers and offering brand-name goods at steep discounts.
The company's efficient supply chain and ability to source excess inventory give it an edge that's hard to replicate. TJX has also shown strong margin discipline and consistent same-store sales growth, even as competitors struggle with overstocked shelves.
What could change my mind?
If consumer sentiment erodes further, discretionary categories like apparel and home décor could weaken. Supply chain normalization might also reduce the availability of excess inventory that fuels TJX's appeal. Still, its loyal customer base and proven model make TJX one of the few retail stocks that perform well in both good and bad times.
Why Target Still Looks Like a Stock to Fade
Target Corp. (NYSE: TGT)remains in a difficult transition. The retailer is trying to reposition itself after misjudging consumer demand in 2023 and facing inventory and traffic challenges throughout 2024. Management has shifted focus toward essentials, affordability, and smaller-store formats, but the company's unique selling proposition has become less clear.
Once positioned as the upscale discount chain, Target continues to face pricing pressure from Walmart and style pressure from specialty retailers. Meanwhile, weak discretionary spending and theft issues continue to weigh on margins and same-store sales.
What could change my mind?
If Target delivers a holiday quarter showing renewed traffic and margin recovery, investor sentiment could turn. New store initiatives and digital growth could eventually gain traction. However, until the company proves it can stabilize earnings and differentiate again, Target is on the naughty list of retail stocks.
Why Lululemon May Not Be Ready for a Rebound Yet
Lululemon Athletica Inc. (NASDAQ: LULU) remains a premium brand in the athleisure category, but competition is catching up fast. Even among higher-income consumers, there are signs of fatigue as rivals like Alo, Vuori, and Nike expand their offerings.
The stock has been trending lower in 2025 as investors question whether growth in men's apparel and international markets can offset slowing North American sales. Margins remain strong, but valuation is still rich for a company showing moderating growth. Lululemon needs a strong holiday season to prove its premium positioning among retail stocks still resonates.
What could change my mind?
If Lululemon posts a surprise beat on revenue or gross margin—driven by international strength or a new product cycle—it could mark the start of a turnaround. For now, however, the risk-reward balance skews negative as the brand battles saturation in a crowded category.
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