4 Retail Growth Plays On Our Holiday Wishlist

Deck the Halls with SA’s Quant Picks

‘Tis the season for holiday shopping.

The US dollar is surging, dampening expectations for a December rate cut. Steady economic growth, strong labor data, and monetary policy shifts have increased the dollar’s strength, as evidenced by the Dollar Index (DXY), which was up last week by nearly 2%, its biggest gain since September 2023. Over the last month, the USD has substantially outperformed all other major currencies.

USD has outperformed all other major currencies over the last month and YTD.

In addition to the strengthening dollar, President Donald Trump’s aggressive trade policies could reignite inflation, but there are reasons to feel the holiday cheer.

The retail sector is set for strong growth throughout the remainder of the year, as consumers prepare to spend an average of $1,778 on holiday purchases for their nearest and dearest, according to Deloitte’s 2024 holiday retail survey. That’s an 8% increase from last year, driven higher by a flurry of Black Friday and Cyber Monday sales as retailers look to capitalize on shoppers’ increased frugality in the face of persistent inflation.

That’s good news for retail stocks across the board, particularly affordable brands, and companies looking to appeal to the wallets of bargain-savvy shoppers with well-timed promotional events and loyalty programs.

Technology will also play a powerful role in consumer spending this holiday season, with many retail executives prioritizing artificial intelligence-driven personalized product recommendations and appealing to Gen-Z’s growing purchasing power by placing an emphasis on the mobile shopping experience and social media-driven sales.

In this article, we are identifying value by capitalizing on a single or combination of key metrics such as Overall Value, Price-to-Earnings (P/E) ratio and Price/Earnings divided by Growth Rate (PEG ratio).

Retail Stocks to Spread Holiday Cheer

Equities have soared in 2024, with the S&P 500 up 24.3% (YTD), driven by strong economic growth, higher employment rates, and the market-moving power of AI and other bullish investment trends.

Meanwhile, steady wage increases, lower gas prices, and a gradual easing of borrowing rates by the Fed have given consumers more spending power. With consumer spending poised to remain robust even as inflation-curbing measures face uncertain political headwinds and 2024 predicted to be another record-breaking year for holiday spending, according to the National Retail Federation, the retail sector has been a red-hot incubator for growth stocks.

The holiday season is all about giving, and we’re feeling generous here at Seeking Alpha, which is why using Seeking Alpha’s SA’s Quant Rating system to make a list of the top retail growth stocks (and checking it twice) can help deliver some strong stock deals this holiday season.

1. Abercrombie & Fitch Co. (ANF)

• Market Capitalization: $7.28B
• Quant Rating: Strong Buy
• Quant Sector Ranking (as of 11/18/24): 39 out of 491
• Quant Industry Ranking (as of 11/18/24): 3 out of 37

Abercrombie & Fitch has gone through multiple transformations in its 130-year history, from an outfitter to the likes of Amelia Earhart, Ernest Hemingway, and John F. Kennedy to the early 2000s mall mecca famed for its low-rise jeans.

After being voted America’s least preferred retailer in 2016, however, ANF has made a miraculous comeback, overhauling its entire operation to become a Gen-Z favorite and recapture the hearts of its millennial customers. The company was the top performer in the S&P Composite 1500 Apparel Retail Index in 2023 and has kept up its winning streak in 2024 – ANF continues to outperform both the S&P 500 and Russell 2000, powered by strong earnings growth.

Meanwhile, analysts predict ANF is in for another strong quarter, with sales of its California-cool Hollister brand expected to even outpace the Abercrombie & Fitch brand. Earnings per share (EPS) are estimated to grow 66.43% for the fiscal year ending January 2025 – so it’s likely to be the gift that keeps on giving this holiday season.

A&F Growth

A&F received an ‘A+’ growth grade, according to SA’s Quant metrics, making it the perfect stocking-stuffer in more ways than one. The company has charted noteworthy year-over-year revenue growth of 21.11% and holds an above-industry average EBITDA forward growth rate of 55.31% – a staggering 1,977.22% difference to the sector thanks to a strong digital strategy, creating a seamless online shopping experience for customers via ANF’s website and mobile app.

ANF also boasts a gross profit margin (TTM) of 64.61% – a 71.3% difference to the sector – indicating that the stock is showing impressive returns to shareholders while still having room to grow. Paired with outstanding growth metrics, ANF is set to remain one of the most sought-after retail stocks all the way into the new year.

And with 8 upward analyst revisions in the last 90 days, SA’s ‘A+’ in the category indicates that ANF shares have a track record of exceeding expectations.

2. The GAP, Inc. (GAP)

• Market Capitalization: $7.9B
• Quant Rating: Strong Buy
• Quant Sector Ranking (as of 11/18/24): 43 out of 491
• Quant Industry Ranking (as of 11/18/24): 4 out of 37

Ranked #3 top Quant performer in the Apparel Retail Stocks industry, The GAP (GAP) has more to offer this holiday season than just cashmere-soft sweaters and festive party dresses. Scoring an ‘A+’ in the growth category by our Quant metrics, GAP offers compelling projections in terms of forward EBITDA growth – coming in at 43% compared to the sector’s 2.66% – an impressive 1,514.92% difference to the sector.

YoY EBITDA growth of 68.16% compared to the industry’s 1.3%, a jaw-dropping 5,137.14% difference compared to the wider retail sector, also holds clues into its potential for long-term, outsize returns.

Another standout metric is its ‘A+’ diluted (EPS) YoY growth rate, a measure of a company’s profitability over time. At 582.49% to the sector’s 2.9%, a 19,967.70% difference, this figure suggests that GAP’s strong financial performance is set to continue. Also key to SA’s ‘Strong Buy’ rating of GAP is its earning revisions grade, which holds valuable insight into its future growth potential.

The more professional analysts’ earnings per share ((EPS)) revisions associated with a stock, the more it is deemed to have a higher than expected earnings growth compared to their sector in the long run. At 17 upward analyst revisions in the last 90 days, GAP International is trending high.

GAP Valuation

Certain value metrics also suggest that GAP makes for a great bargain for investors doing their holiday shopping. GAP’s ‘A+’-rated trailing and forward price-to-earnings-growth (PEG) ratios, which come in at 0.02 and 0.24, a -97.39% and -85.19% difference to the sector, respectively. These ratios suggest that the company’s shares are relatively cheap compared to its earnings performance. A (PEG) ratio below 1 often indicates that a company’s shares are undervalued.

And with a forward price-to-Earnings (P/E) ratio of 11.43x, its valuation remains attractive with a healthy cash position.

3. Brinker International, Inc. (EAT)

• Market Capitalization: $5.43B
• Quant Rating: Strong Buy
• Quant Sector Ranking (as of 11/18/24): 2 out of 491
• Quant Industry Ranking (as of 11/18/24): 1 out of 42

EAT, drink, and be merry!

Also falling among my Top 5 Black Friday picks, Brinker International has landed high on Quant investors’ holiday wishlists due to an impressive mix of growth and profitability. The parent company behind fast-casual chains Chili’s and Maggiano’s Little Italy posted YoY revenue growth of 12.49% in the first quarter of 2025 to $1.2B thanks to an aggressive turnaround strategy that included catering to cash-strapped customers looking to dine on a budget amid persistent inflation.

With holiday spending set to break records this year, two key drivers of that activity will be family gatherings and in-person experiences, according to Deloitte’s analysis.

Those trends set up EAT’s restaurants for increased foot traffic, according to Seeking Alpha Contributor Pedro Goulart, which it is now more effectively capturing thanks to the introduction of new menu items at wallet-friendly prices and targeting a new set of younger, social media-savvy customers.

Kevin Hochman, CEO of Chili’s parent company Brinker International, said this year that the Chili’s Triple Dipper’s newfound TikTok fame accounted for roughly 40% of the chain’s sales growth in the second quarter.

EAT Valuation and Growth

From a valuation perspective, the (PEG) Grade of B shows that the stock is at a discount to the sector on this core metric thanks heavily in part to EAT’s price performance – as evidenced by its stellar ‘A+’ overall momentum grade.

The company returned more than 75% over the past three months compared to the S&P’s 2.53%, and 218.81% over the past year compared to the S&P’s 35.6% – performance that looks especially impressive given that most stocks in the industry have had mixed to weak growth.

The company’s overall ‘A+’ earnings revisions grade also suggests strong future growth potential – with 18 upward analyst revisions in the last 90 days, Brinker International is on a strong path.

4. Norwegian Cruise Line Holdings Ltd. (NCLH)

• Market Capitalization: $11.58B
• Quant Rating: Strong Buy
• Quant Sector Ranking (as of 11/18/24): 4 out of 491
• Quant Industry Ranking (as of 11/18/24): 2 out of 36

Who wouldn’t want to spend Christmas in the Caribbean?

With steady revenue growth in the first half of this year and healthy earnings growth, Norwegian Cruise Lines (NCLH) is in for smooth sailing this holiday season and beyond. The cruise line scores ‘A+’ grades in momentum and EPS revisions, carried by strong price performance (62% compared to the industry’s 2.53% over the past three months and 79.97% to the industry’s 6.12% over the past year) and 16 upward analyst revisions in the last 90 days.

NCLH Growth

‘A+’ marks in YoY EBITDA growth – 155.83% to the industry’s 0.79%, a 19,601.35% difference to its peers – and sturdy forward revenue growth of 28.21% to the industry’s 28.21% (an 803.59% difference) indicate strong growth tailwinds going forward.

Norwegian’s ‘A+’ score in return on common equity (TTM), a 558.46% difference compared to the sector, hints at the possibility of dividends in the future.

Ranked the #2 Quant Pick when it comes to Hotel, Resort, and Cruise Lines stocks, investors unable to book a tropical winter holiday can enjoy the gift of NCLH shares with this strong momentum play.

Conclusion

As shoppers prepare for one of the biggest holiday shopping seasons yet, we have visions of retail stocks dancing in our heads. The data shows that even as inflation looms, smart and strategic retailers can still capitalize on a boom in consumer spending, so long as they can offer compelling sales and customer experiences.

SA’s Quant System constantly analyzes the Top Growth and Top Value Stocks in real-time. Whatever your investing preference, Quant aims to help you identify the best options. The stocks featured here can help complement a diverse portfolio.

So consider these four Quant picks in your letter to Santa this year, or if you prefer a list of monthly best of the best strong buy quant stocks, consider Alpha Picks.

I am Steven Cress, Head of Quantitative Strategies at Seeking Alpha. I manage the quant ratings and factor grades on stocks and ETFs in Seeking Alpha Premium. I also lead Alpha Picks, which selects the two most attractive stocks to buy each month, and also determines when to sell them.

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