Piper Sandler Identifies Retail Stocks with Historical Year-End Rally Potential

A new analysis from investment firm Piper Sandler suggests that select retail stocks are poised for a strong year-end performance following a historically weak period in early autumn. The firm identified a recurring pattern over the past three years where a lull in consumer spending creates a seasonal sell-off, presenting a potential entry point for investors before the holiday shopping rush.

A Seasonal Dip Creates Opportunity

According to Piper Sandler, the consumer discretionary sector typically underperforms from mid-September through late October. This period lacks major holidays, large-scale promotions, or other significant spending events, leading to a temporary slowdown in retail activity.

This seasonal weakness has historically been followed by significant outperformance in November and December as holiday spending accelerates. The pattern suggests that the autumn dip can serve as a strategic buying window for stocks that benefit most from increased holiday-related consumer traffic and promotions.

Key Stocks Across Retail Segments

Piper Sandler's analysis highlighted specific companies across several retail categories that have demonstrated the most significant seasonal performance swings.

Home Furnishings

This category has shown some of the largest seasonal swings. Two notable stocks are:

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• Signet Jewelers (SIG): The company recently beat second-quarter earnings expectations and raised its full-year outlook.
• Arhaus Inc. (ARHS): Also surpassed Q2 analyst estimates for profit and revenue, leading to an increase in its full-year profit guidance.

Discount Retail

Discount retailers have exhibited a consistent pattern of underperformance in the fall followed by a strong rebound. Key names include:

• Target Corp. (TGT): Reported a better-than-expected 3.8% increase in second-quarter comparable sales.
• Dollar Tree Inc. (DLTR): Posted a Q2 comparable sales increase of 3.7%, driven by a return to positive customer traffic.
• Dollar General Corp. (DG): Saw a 3.5% rise in second-quarter comparable sales, marking its seventh consecutive earnings beat.

Specialty Brands and Beauty

While this group's autumn underperformance has been less pronounced than in other categories, it has still lagged the S&P 500. Stocks identified include:

• American Eagle Outfitters (AEO): Reported fiscal Q2 earnings and revenue that exceeded Wall Street expectations.
• Ulta Beauty (ULTA): Surpassed expectations on comparable sales and profit in its most recent quarterly report.
• Revolve Group (RVLV): The e-commerce retailer saw net sales grow 12% year-over-year in its second quarter.
• Warby Parker (WRBY): Revenue grew 9.8% year-over-year in Q2, and the company reaffirmed its full-year guidance.