Three Retail Stocks Set to Excel in 2025

In recent years, investors have often heard the term "stock picker’s market." This refers to situations where significant gains are concentrated among a select few stocks rather than being broadly distributed across all stocks in the market. As we look ahead to 2025, retail investors can observe this phenomenon with three major companies dominating the U.S. retail sector.

These three companies collectively account for 17% of all retail sales in the U.S., a notable increase from about 11% in 2024. They not only boast large, loyal customer bases but also have established strong e-commerce operations and possess ample cash reserves for driving future expansions.

It’s no surprise that these stocks outperformed the S&P 500 in 2024, and projections suggest they will continue this trend into 2025.

Walmart's Strong Performance and Promising Outlook

Walmart Inc. (NYSE: WMT) has been a standout performer, showing a remarkable 72% increase in stock price as of January 9, 2025. Throughout the first three quarters of 2024, Walmart reported a year-over-year revenue growth of 5%, with an even more impressive 14% increase in net income.

Current Stock Forecast for Walmart:
12-Month Price Target: $94.08 (1.12% Upside)
Rating: Moderate Buy (Based on 31 Analyst Ratings)

Walmart's business strategy focuses on attracting both existing and new customers through everyday low prices rather than relying solely on pricing power. During recent earnings calls, the company noted that even higher-income shoppers are choosing to purchase more items from Walmart, while lower-income consumers continue to depend on the retailer for essential goods.

Walmart's consumer engagement occurs through both in-store experiences and its mobile app, which enhances its competitiveness in e-commerce.

Analysts predict a 10% growth in earnings over the next year, with rising price targets suggesting confidence in Walmart's continued success.

Costco's Membership Model Fuels Growth

Another strong candidate is Costco Wholesale Corp. (NASDAQ: COST), whose unique business model contributes significantly to its strong performance. The requirement of a membership fee provides consumers with added incentives to prioritize shopping at Costco beyond just pricing.

Current Stock Forecast for Costco:
12-Month Price Target: $1,013.59 (8.18% Upside)
Rating: Moderate Buy (Based on 27 Analyst Ratings)

Costco's recent membership fee increase marks its first adjustment in seven years, further supporting its robust growth narrative. The company enjoys a retention rate exceeding 90%, with the additional revenue directly benefiting earnings. The full impact of this increase is anticipated to materialize in 2025 and 2026.

Costco's stock has grown by approximately 39% over the past year, although it has experienced a slight dip since hitting a high of around $1,007 prior to its December earnings report. Analysts are optimistic that the stock will recover, especially if Costco surpasses the estimated earnings growth of about 9%.

Amazon's E-Commerce Revival Expected

Amazon.com Inc. (NASDAQ: AMZN) presents an intriguing investment case after its tumultuous years following the pandemic. Initially, Amazon's e-commerce segment surged during COVID-19, significantly enhancing its cash reserves.

Current Stock Forecast for Amazon:
12-Month Price Target: $243.67 (11.29% Upside)
Rating: Moderate Buy (Based on 44 Analyst Ratings)

While Amazon Web Services buoyed the company during challenging times, e-commerce is showing signs of recovery as we enter 2025. The company’s investments in automation and robotics are expected to start reflecting positively on its profitability and cash flow.

AMZN stock has appreciated by 46% over the past year. Analysts foresee a 17% growth in earnings, though this potential has not yet been fully reflected in current price targets.

Conclusion

The retail landscape is poised for continued evolution, and these three companies are well-positioned for growth. Each offers unique advantages that may appeal to investors looking for opportunities in 2025.

Retail, Stocks, 2025