TJX Companies (TJX +0.41%) has an unusual retail model that does well in almost any economic climate. The stock has delivered market-beating results reliably over time, including a 30% gain in 2025. It's likely to keep growing and providing value for investors, but there's a different stock I'd buy for 2026 first.
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TJX's recession-proof model
TJX is an off-price retail company that includes the TJ Maxx, Home Goods, and Marshalls' chains, among others. Since it buys overproduction runs and similar merchandise, its inventory is constantly changing, which doesn't lend itself to a digital retail model. But rather than being hampered by that reality in what's increasingly becoming an omnichannel world, the company enjoys an edge in getting people into its physical stores to see what's new. It's the "treasure hunt" model, and customers often come to get the best deals.
While this works any time, it's even more attractive when inflation is high, and many consumers are looking for low prices. TJX has some of its best performance under adverse circumstances, making it a top "recession-proof" stock.
In the 2025 fiscal third quarter (ended Nov. 1), comparable sales (comps) increased 5% year over year, and earnings per share (EPS) were up 12% to $1.28. Both exceeded expectations. Management expects that to continue. "Going forward, we see great potential to continue capturing market share and successfully growing TJX around the globe," CEO Ernie Herrman said.
NASDAQ: URBN
Key Data Points
High potential, low price
I recommend TJX stock, but the retail stock I'd buy first in 2026 is Urban Outfitters (URBN +0.93%). Urban Outfitters has reported phenomenal results for several years running, and its stock has reflected that: it's up 224% over the past three years, more than double TJX's gain. However, it trades at a P/E ratio of less than 15, or less than half TJX's P/E ratio of 35. It's not easy to find bargains on the market today, but at this price, Urban Outfitters' stock can easily expand.
In the 2026 fiscal third quarter (ended Oct. 31), sales were up 12.3% over last year, with an 8% increase in comps. EPS increased 16% to $1.28.
Those are powerful results in a tough climate, and management believes it can continue to grow and capture market share in any environment. It's guiding for strong growth in the fourth quarter, and it attributes its success to its diversification across channels, brands, and product types. It's well-positioned to keep it up in 2026 and beyond, and it's trading at a great price.
