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3 Top Retail Stocks to Watch in December

By Demitri Kalogeropoulos - Dec 2, 2019 at 12:14PM

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These companies could make big moves during one of the retail industry's biggest months.

December is a huge month for retailers since it includes the peak holiday shopping period, which can make or break their wider fiscal year. That's why stocks in this industry can swing wildly as investors process day-by-day updates on consumer spending trends around the holidays.

And this month promises even more volatility for a few retailers set to announce quarterly earnings results while giving shareholders updates on how the season is progressing. With that in mind, let's look at why Stitch Fix ( SFIX 0.96% ), GameStop ( GME -5.05% ), and lululemon athletica ( LULU -3.32% ) are retail stocks worth watching in December.

1. Stitch Fix: Delivering faster growth

Its subscription-based selling approach means Stitch Fix doesn't have the same seasonal sales bump as traditional rivals like Amazon.com. That could change a bit this year thanks to the apparel seller's new direct-purchase functionality. But there are bigger reasons investors will be closely following Stitch Fix's earnings announcement on Monday, Dec. 9.

A customer receives a delivery box.

Image source: Getty Images.

The e-commerce specialist said back in early October that a few challenges were likely to harm its growth in the fiscal first quarter. But CEO Katrina Lake and her team assured investors that the slowdown would be temporary and that sales gains would speed back up as profitability improved through the rest of the year.

Wall Street took the more cautious view and sent shares lower over the last few months. We'll find out whether investors were right to prepare for a potential downgrade when Stitch Fix updates its official 2020 outlook in early December.

2. GameStop: Resetting the game

GameStop's shares have soared in the last three months, yet remain in deeply negative territory for the year: down roughly 50% in 2019. Investors should get more clarity about which of those conflicting outlooks is right when the video game retailer announces its fiscal third-quarter results on Tuesday, Dec. 10.

GameStop's last report contained few hopeful signs, with declines in comparable-store sales worsening to 11% as gamer spending continued shifting online. The chain is also dealing with pressure from a move to next-generation video game consoles, which always tends to hurt results in the year leading up to their release.

These issues are likely to dominate the retailer's third-quarter results, which are expected to show a 15% sales drop. Yet the stock's movement will be more sensitive to the comments that management makes about its wider rebound strategy. CEO George Sherman is on a mission to win back investors' trust, and that starts with improving GameStop's finances and articulating a clear path back toward sales growth.

3. Lululemon: Stretching for higher growth

Lululemon has given investors plenty of good news in 2019, and all signs point to that happy trend continuing in its fiscal third-quarter release on Wednesday, Dec. 11. The yoga-inspired apparel retailer is aiming for its seventh consecutive quarter of surprisingly strong sales growth, which would occur if revenue reaches $890 million or higher in Q3.

More importantly, investors are looking for signs that Lululemon is still winning in its online selling strategy and with its latest product launches. Successes here should show up in rising profit margins, which have soared since 2015.

And look for Lululemon to update shareholders on its long-term ambitions to push into new geographies and new product niches like outerwear and menswear. These goals wouldn't be threatened by a lackluster end to fiscal 2019, but a strong finish for the year could provide the resources that executives need to accelerate their moves into these attractive areas in 2020.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$435.72 (-3.32%) $-14.96
GameStop Corp. Stock Quote
GameStop Corp.
GME
$172.39 (-5.05%) $-9.17
StitchFix Stock Quote
StitchFix
SFIX
$23.17 (0.96%) $0.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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