JPMorgan highlights top retail plays into early 2026 as tailwinds harmonize

Investing.com -- JPMorgan expects multiple forces to converge in the first half (H1) of 2026 to create a favorable setup for select U.S. retailers.

Analysts led by Christopher Horvers point to “the potential harmonization of four positive factors” — wage growth, replacement cycles, stronger home sales, and tax stimulus — which they see as driving upside to consensus estimates for home and goods-oriented chains.

The Wall Street bank added Home Depot to its Analyst Focus list as a Growth idea, highlighting “the rising prospect of positive revisions fueling further multiple expansion.”

It also reiterated its contrarian call on Best Buy, which remains on the firm’s Focus list as a Value pick, and placed Wayfair back on its Positive Catalyst Watch, expecting upward revisions over the coming quarters.

Wage growth above 4% remains the most important driver of retail sales, analysts note, with historical correlations exceeding 80%.

JPMorgan added that goods consumption should benefit as “replacement cycles increasingly activate” after the pandemic pull-forward.

The analysts also cited net sales benefits from tariff-related inflation, a recent Fed rate cut that supports future demand, and powerful tax stimulus from the “One Big Beautiful Bill.”

The tax reform is estimated to provide a roughly 3 percentage point boost to monthly core retail sales growth during the peak refund season between February and May 2026, lifting full-year core retail sales by about 1%.

The bill primarily benefits mid-to-high-income households, while being relatively punitive to lower-income consumers through SALT and SNAP changes.

Costco and Target screened well in the analysis, while the analysts flagged that companies with greater lower-income exposure, such as Walmart and BJ’s, may face headwinds from a softening labor market and reduced SNAP benefits.

On a relative basis, the team said the current housing cycle “should relatively favor HD vs. LOW/FND,” while Wayfair offered the most torque among home-related names, followed by Williams-Sonoma and RH.

The analysts cautioned that a seasonal “shopping valley” between back-to-school and the holidays could weigh on near-term results, though they expect investors to look through to tax benefits arriving in early 2026.

Back-to-school spending itself was solid, with Chase card data showing category growth of more than 6% in July–August and 4.4% in September to date.

“All in, our favorite names based on our analysis and today’s prices include: BBY, HD, and W,” the note said, while also citing compelling upside in AutoZone, Ulta Beauty, and Walmart for retailers less tied to housing dynamics.