"Black Friday" former protagonist exits the stage! Discount stocks vs. high-end retail stocks, who is the real winner of the holiday season?

The annual "Black Friday" marks the official start of the holiday shopping season in the United States. It is noted that, although the National Retail Federation (NRF) predicts a record 186.9 million shoppers during the Thanksgiving to "Cyber Monday" period this year, the complexity of the market environment, especially with ongoing inflation and tightening consumer budgets, indicates that sales growth will slow to 3.7% to 4.2%, with average spending estimated at $890.49 per person. This "high foot traffic, low budget" phenomenon presents a challenge to retailers who rely on the holiday season to generate a third of their annual profits. As the unemployment rate approaches a four-year high, consumers also become more selective, and consumer behavior is showing clear differentiation. Discount retailers lead the way Facing financial pressures and a pursuit of value, retailers who can provide the deepest discounts are favored. Josh Forrest, Chief Investment Officer of Bokeh Capital Partners, observed that shoppers at Walmart Inc. felt "pressure" before Thanksgiving, but Walmart Inc. was successful in meeting the cautious families by "adjusting pricing," such as providing different sizes of potatoes and turkeys. Forrest believes that Walmart Inc.'s in-store "eye-catching displays" - such as well-decorated Thanksgiving dinner tables - outperform its competitor Target Corporation, demonstrating its ability to attract consumers in difficult times. In addition, clearance discount chains are seen as direct beneficiaries. Forrest predicts that sales of the U.S. discount retailer TJX (TJX.US) will outperform traditional department stores, as she points out: "If you are careful with your money, you will want to spend it most wisely." This view is supported by David Swartz, Senior Retail Analyst at Morningstar. Swartz mentioned that investors have favored Ross Stores, Inc. (ROST.US) and TJX in recent years because they pose a "harsh blow of intense competition" to traditional department stores like Macy's, Inc. (M.US) and Kohl's (KSS.US). While Kohl's shares soared due to a smaller-than-expected sales decline, its record of consecutive declining same-store sales in multiple quarters highlights its predicament under the pressure of discount and online giants. High-end market remains resilient Despite lower-income families facing consumer pressure, affluent consumers benefiting from a rising stock market are expected to fill some consumption gaps. Moody's Corporation analysis data shows that in the second quarter of 2025, the wealthiest 10% of individuals with an annual income of at least $250,000 accounted for 48% of total consumption, a continuous increase from 35% in the mid-1990s. Swartz believes that high-end retailers like Ralph Lauren (RL.US), cosmetics retailer Ulta Beauty (ULTA.US), and Tapestry (TPR.US) are expected to perform well this shopping season, although they are already at relatively high valuation levels. Fundstrat economist Hari Haralika Singh emphasizes that investors should closely monitor the spending levels of high-income shoppers, as "if their spending falters, our economy will encounter some trouble." Undervalued dark horse can't be underestimated In addition to expected winners, some retail stocks that are currently undervalued are also seen as potential cyclical opportunities. Swartz specifically pointed out that NIKE, Inc. Class B (NKE.US) and Lululemon (LULU.US) have performed poorly in recent years, but given their current low valuations, "if the situation turns around, you may see these stocks rise significantly." This view provides investors with a strategy to position themselves in a sluggish market. At the same time, Forrest believes that VF Corporation (VFC.US), which has seen its stock price fall by about 19% this year, may have a potential opportunity to turn losses into profits, and points out that the Anthropologie chain store under Urban Outfitters has outperformed its namesake stores. Discount stores and high-end retailers emerge as winners For investors seeking to benefit from Black Friday, the market presents a clear logic. Consumer downgrading and differentiation are major trends, with discount retailers and giants with precise pricing strategies having the advantage. In conclusion, "Black Friday" will be a profound reflection of the polarization of the retail industry. Investors should avoid struggling traditional department stores, as victory will belong to those who can grab cautious consumers through effective discounts and precise pricing (such as Walmart Inc. and TJX), as well as those who can continue to attract high-net-worth clients (such as selected high-end brands).