Although consumers' paychecks got a bit lighter this year when the 2 percent payroll tax cut expired, Wall Street analysts see reason to remain bullish on those retailers that can benefit even in a more uncertain environment for consumer spending.
Oppenheimer's Brian Nagel said it's difficult to make a broad-based comment on the American consumer right now. But on the home-improvement retail front, lower mortgage rates along with improvements in confidence and the housing market are helping to bolster spending.
"My overall view is the combination of a strengthening housing market, strong equity markets, improving jobs growth are going to offset — more than offset — any type of higher taxes on consumer spending," he told CNBC.
Nagel also expects the same-store sales growth gap between Lowe's and Home Depot narrow. As part of an ongoing makeover, Lowe's has closed locations, cut jobs, streamlined its supply chain and invested in stores. "I think that effort is beginning to bear fruit for them," said Nagel. "You're going to see that comp-gap narrow, I think, over the next few quarters or so."
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Wells Fargo, meanwhile, upgraded Target this week to "outperform," citing improvements in its Canada business as well as its increasing exposure to household consumables which should hold up even if consumers pullback a bit.
"Target is a relatively defensive play in retail given its increasing exposure to consumables and exposure to the housing recovery," the analysts wrote in a research note.
Macy's, meanwhile, has been able to offset any potential impact from higher taxes on consumer spending through company-specific initiatives, Matthew Boss, a retail analyst at JPMorgan, told CNBC.
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"Listen, I think it's a choppy background," he said. "I think that the consumer is stretched today, but I think Macy's is in the right place at the right time. The reason I say that is I think they have company-specific initiatives and drivers that are setting them apart."
A stretched consumer is also good news for the dollar stores. CNBC's Jim Cramer said that dollar stores have always had a "strong secular theme," and that "these stocks have a lot of room to run higher." Cramer said that investors can take signals from names like Dollar Tree, which posted significantly higher sales and profit on Wednesday.
Nagel is also bullish on J.C. Penney despite a nearly 20 percent drop after a grim earnings report. The retailer posted a 32-percent dive in same-store sales and 28-percent revenue decline and saw margins contract sharply as it pursued discounts to lure shoppers.
"I think over the longer term, a more profitable, a higher return on invested capital J.C Penney will emerge," that analysts said. "The near term is very difficult to call."
Investors may be waiting a year for the company to turn the profitability corner, Nagel forecast.
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Scott Black of Delphi Management suggests defensive stocks given the lingering economic uncertainty and questions about how well consumer spending will hold up given the sequester and higher tax rates.
He likes CVS Caremark. "The nice thing about CVS is they generate over $4 billion a year in free cash, which was greater than their net income, and they're wed to buy back over $4 billion worth of stock this year." The stock is also trading at 12.9 times expected earnings.
Disclosures can be found in the individual Stock Blog posts.