As holiday shopping gets into full swing, several retailers are poised to outperform, according to UBS. New market research shows that U.S. consumers have strong intentions to spend, and that their ability to do so is improving, analyst Jay Sole said. But conversations UBS has had with professional investors suggest few are expecting this. Nearly 25% of consumers plan to spend more this holiday season compared to last year, data from UBS shows. That’s the second-highest number in the past 13 years, Sole noted. Plus, only 21% of Americans finished their shopping, as of mid-November, he added. He expects clothing to be one of the most popular gifts this year. “Therefore, we anticipate the Softlines group experiences upward EPS revisions paired with [price-to-earnings] multiple expansion over the coming months,” Sole wrote in a note on Monday. Softline refers to retailers who sell “soft” goods, such as clothing, bedding and towels. Here are some of the softline retail stocks on the UBS buy list. The names all have a premium position in the marketplace and the best opportunity to “go it alone,” without malls or third parties to drive consumer engagement and sales growth, Sole said. The companies can fuel growth with strong category tailwinds, and by adding new categories or entering new markets, he added. Other characteristics include a disciplined brand management strategy, consistent full-price selling and inventory control. “Not only should these companies outperform because of their long-term growth opportunities, but also these growth stocks have the best chance of maintaining or regaining high P/Es,” Sole said.
