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KeyBanc Capital Markets has identified Williams-Sonoma (NYSE:WSM), Lowe’s (NYSE:LOW), La-Z-Boy (NYSE:LZB), and Central Garden & Pet (NASDAQ:CENTA) as stocks with significant upside potential for patient investors, despite near-term challenges in consumer spending.
The investment firm expects consumer and home-related spending to remain "steady but choppy" in the immediate future, citing subdued consumer confidence and tariff concerns that could impact shoppers as early as the back-to-school season. KeyBanc notes these recommended stocks face greater exposure to discretionary spending trends in the short term.
Tariffs remain a significant headwind for retailers and consumers, according to KeyBanc’s analysis. While encouraged by a recent 90-day reduction in China tariffs from 145% to 30%, the firm warns that tariff risks persist until a formal trade deal is signed, potentially leading to increased consumer inflation and pressure on household spending.
The firm calculates that a 1% direct increase in import costs could remove approximately 40 basis points from annual retail sales, based on 2024’s $3.3 trillion in U.S. goods imports and $7.2 trillion in retail sales. This economic pressure could delay high-ticket and discretionary purchases while forcing businesses to control costs.
For retailers navigating the current tariff environment, KeyBanc identifies Walmart (NYSE:WMT), Ollie’s Bargain Outlet (NASDAQ:OLLI), Casey’s General Stores (NASDAQ:CASY), and Upbound Group (NASDAQ:UPBD) as best positioned in the near term, while maintaining its longer-term bullish outlook on housing and home-related spending from "unsustainably low levels." Walmart, with its massive $773.76B market cap and $685.09B in revenue, stands out particularly strong. According to InvestingPro, the retail giant has raised its dividend for 30 consecutive years and received 22 upward earnings revisions from analysts, though current trading levels suggest the stock is trading above its Fair Value. The company maintains a "GOOD" overall financial health score, supported by strong profit and price momentum metrics.
In other recent news, Walmart has garnered attention from several analyst firms, reflecting a positive outlook on its financial performance and strategic initiatives. RBC Capital Markets has raised Walmart’s price target to $103, maintaining an Outperform rating, and predicts a rise in net sales for the years 2025 and 2026, with adjusted earnings per share also expected to exceed consensus estimates. Meanwhile, BMO Capital Markets continues to support Walmart with an Outperform rating and a $110 price target, highlighting significant growth in fresh sales and the successful expansion of expedited grocery delivery services. UBS has reaffirmed a Buy rating and a $110 price target, noting Walmart’s advancements in eCommerce and the integration of agentic artificial intelligence as key growth drivers. DA Davidson has set a $117 price target, emphasizing Walmart’s robust stock performance and its strategic investments in subsidiaries like Flipkart and PhonePe. Piper Sandler maintains an Overweight rating with a $111 target, pointing to Walmart’s intensified advertising efforts and collaborations with influencers to boost its e-commerce visibility. These developments underscore Walmart’s strategic focus and the confidence analysts have in its future market performance.
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