Top 3 Christmas Retailer Stocks

Christmas trading is one of the most important times for retail stocks, but with the cost of living crisis, it could be a challenge for retailers this year.

New trends, new opportunities

Usually, around Christmas, consumers open their pocketbooks to buy more pricey items, and often brands such as Tiffany's, Macy's, and Watches of Switzerland see better sales. But with households facing the inflation pinch, particularly in the UK, it might be the more budget-focused retailers who get a push from the holiday season. Here are three major retailers that are positioned to take advantage of thrifty consumers:

Amazon

As the largest retailer in the world, it would be surprising if Amazon didn't make the list. Being online, it has a couple of advantages in the current circumstances, such as less energy costs to heat stores and less real estate and licensing costs for maintaining brick-and-mortar stores. It also prices shipping separately, which helps offset some of the increased costs in energy for transportation.

Walmart

The world's largest physical retailer has already noticed a change in consumer behaviour, moving away from discretionary spending. That means sales are concentrated in areas which are the basis for a supermarket: grocery items. Walmart could use the opportunity to move through some of the inventory it grew through the summer and autumn and doesn't expect supply chain issues this year.

Alibaba

Most of Alibaba's sales are domestic in China, with no major holidays around the end of the year. But with Chinese authorities lifting sanctions, it could be an opportunity to catch the upswing in sentiment from Chinese consumers. Particularly ahead of the major shopping ahead of China's Lunar New Year, which falls on January 22.

Technical perspective

Walmart (WMT) is the dissenter; it has already spiked 4.76% in positive territory this year. Although this doesn't change consumer behaviour, it does change trader behaviour. 

Of the two remainders, Alibaba (BABA) has left Amazon (AMZN) behind since November. The two stocks started to diverge in the later first part of November when both were down around 40%. Since AMZN is mostly down, it naturally has more chances of returning to the mean, but it must break past the -40% territory to get a good end to the year. Below there, BABA might have better chances of continuing higher after a short-term pullback. 

Perhaps a bit of both, or all, during the holiday season will offer better diversification.

Chart: Barchart

Key takeaways

This Christmas may be challenging for retail stocks due to the cost of living crisis. Consumers may be more likely to shop at budget-focused retailers rather than splurge on more expensive brands. Amazon, Walmart, and Alibaba are three retailers well-positioned to take advantage of thrifty consumers. Amazon has the advantage of being an online retailer, Walmart expects to move through some of its inventory and not experience supply chain issues this year, and Alibaba may benefit from the lifting of sanctions and increased sentiment among Chinese consumers ahead of the Lunar New Year shopping season.