It’s a month before Christmas and crumbs falling off vests, the traders have put down their last bets on retail stocks. The positions are hanging on desks with great care while out in the world the best deals sit there. The events of The Night Before Christmas took place just a few miles from Wall Street, in what’s now the Chelsea neighborhood. Author Clement Moore later became wealthy by dividing his estate into smaller lots.

A fitting start to the modern celebration of mass merchandising and conspicuous consumption. Retailing has changed a lot from what it was in Moore’s Day when the Ladies Mile of clothing stores defined high-end shopping. But the model has only been fully replaced recently, as department stores gave way to discounters and online merchants.

This is the age of the “omnichannel,” with success defined as much by shipping as by marketing, as much by technology as by merchandising. The 21st century has reshuffled the retailing deck. But it can easily be reshuffled again, with some of the top retail stocks.

This year, it might be.

Retail Stocks: Walmart (WMT)

One of the top retail stocks to buy is Walmart (NYSE:WMT), America’s biggest and possibly smartest retailer. Sales for fiscal 2023, which as with most retailers ends in Jan. after post-Christmas returns and inventory are taken, should grow 5.5% over last year. Operating cash flow last year came to $15.7 billion. For the three months ending in October, sales were $152.8 billion, but there was a loss of $1.8 billion, 66 cents/share.

That’s because, as with great retail companies, Walmart keeps spending even when sales fall. Walmart spent $4.5 billion on dividends and share repurchases in the last year and had capital expenses of $12.1 billion. Still, the company predicts 3% growth this holiday season and has now raised its outlook for the full year to 5.5%. Growth is fastest at its international unit and Sam’s Club warehouse stores., where sales grew nearly 13%.

Walmart is spending big on technology, trying to replicate Amazon.Com’s (NASDAQ:AMZN) online operations, at least in the U.S. market. One big innovation that has been copied by others is using its stores as fulfillment centers. It also has a membership program called Walmart Plus, which includes free shipping.

This makes Walmart a pure value play, falling behind the averages when growth is in fashion, and catching up when profits are demanded. This has been a catch-up year, the shares are up 6% while the average S&P stock is down over 15%. But the rush to quality has brought its price-to-earnings ratio up to an eye-popping 47 and the dividend yield down to 1.46%. This Christmas season, Walmart’s dominant position will remain, according to Placer.AI, which measures store visits. If you see the stock on sale, at say $150-$152/share, TheStreet.Com says buy it. But as with anything else, you pay up for quality.

Retail Stocks: Target (TGT)

Under Brian Cornell, who became CEO in 2014, Target’s (NYSE:TGT) returns were easily beating those of Walmart, until recently. In 2022, supply chain issues and organized theft clobbered the stock. Over five years it’s up 177%, but since Jan., it’s down 29%.

This was reflected in third-quarter earnings, which were cut in half from a year ago at $712 million, $1.55 per share, on sales of $26.5 billion. Management also cut its guidance for Christmas sales to 3%. While Target is often compared to Walmart, it’s just one-sixth the size. This can increase volatility. When it was growing fast, late in the last decade, the stock zoomed. As growth slowed in 2022, it nosedived. The third quarter numbers sent it down 13%. 

But that weakness isn’t reflected in store visits, says Placer.ai. Store visits to Target are growing faster than those to Walmart, and its share of the market has held steady.

I’m a long-time fan of Cornell. I liked his moves in the 2010s to build smaller, urban stores, and to improve online delivery. What I like better is his willingness to adjust. Target is now going directly after Walmart with a 150,000-square-foot store design that can also act as an online fulfillment center. This lets it deliver orders to many customers the same day they’re placed. Change is constant, and the best retailers recognize that.

Its recent problems have made Target a cheaper stock. The price-to-earnings ratio is now below 23 and the dividend yield is above 2.6%. The market cap is just 75% of the store’s sales. When I see those kinds of prices, on quality merchandise, I call it a bargain.

Retail Stocks: Costco Wholesale (COST)

Costco runs have become as popular as beer runs in America’s high-end suburbs. Over the last five years, the stock is up over 188%, and even in 2022, the shares are up 6%. The key is that Costco doesn’t sell. Instead, it creates an environment where people happily buy in mass quantities. The warehouse concept, of buying in bulk, and paying a membership fee for the privilege, helps justify America’s desire for SUVs and oversized houses.

The result for Costco is double-digit growth, even when currency losses in its international unit are factored in.  Earnings, which once averaged no more than its take from membership fees, have now gone far beyond that, to $5.84 billion in the 12 months ending in August.

Following Costco has become a cottage industry at sites like Eat This, Not That. Some shoppers camp out next to a new store before its opening.

Costco is a quality name, but you pay for quality. Sometimes you can pay too much. We saw that a year ago with companies like Alphabet (NASDAQ:GOOGL, GOOG) and Amazon (NASDAQ:AMZN). Will we see it next year with Costco?

The dividend of 90 cents/share now yields just 0.68%. It’s been low for years. But the price-to-earnings ratio is over 40. You’re paying more for Costco earnings than those of Microsoft (NASDAQ:MSFT).

Macy’s (M)

Macy’s (NYSE:M) is one of the last of the giant department stores that dominated retailing in the 20th century. It was left for dead during the worst of the COVID pandemic, trading for a little over $6/share. It’s now over $23, nearly making up the ground lost over the last five years. Management has even brought back its dividend.

Macy’s may be a full-price retailer, but the stock sells at off-price. We’re talking a price-to-earnings ratio of under 5, a dividend yielding 2.72%, and a market cap of $6.3 billion which is just one-quarter of last year’s sales. Meanwhile, visits to department stores are surging, according to Placer.ai. There are strong indications many of these shoppers are heading to Macy’s. It may just be post-COVID nostalgia, but it’s an opportunity.

Macy’s has begun opening small stores outside traditional malls. The stores, called Market by Macy’s, even have a doppelganger under the chain’s other store label, Bloomingdale’s. Macy’s is also downsizing some of the existing stores and using the space as fulfillment centers for online orders. (It’s doing what Target is doing, only using real estate it already controls.) After years of effort, Macy’s now has 0.9% of the U.S. e-commerce market, more than the long-standing e-commerce brand Etsy (NASDAQ:ETSY).

Simon Property Group (SPG)

In all my years covering finance, few stocks have intrigued me as much as Simon Property Group (NYSE:SPG). It’s a Real Estate Investment Trust (REIT) that, when malls began dying in the last decade, became its own landlord. 

Working with privately held Authentic Brands, which first monetized dead celebrities like Marilyn Monroe, then moved into the business of live ones like Shaquille O’Neal, it began buying its tenants. 

Simon began with Aeropostale. It now owns Forever 21. It owns Brooks Brothers and even JCPenney. Simon and Authentic buy brands in bankruptcy, using money from partners like Blackrock (NYSE:BLK), then sell the brand online and offline. What Simon can’t sell at full retail it moves to its own outlet centers. By getting into these deals, Simon was able to collect 90% of its rents during the worst of the pandemic. This also lets it play hardball when other tenants threatened to go under because it knew the value of its brands.

While Simon doesn’t deliver capital gains, the stock is down over 26% in 2022, its REIT structure means it always hands investors back its profits. Over the last year that has meant $7.20 in dividends for stock that currently trades at around $118/share, a yield of over 6%. Where the real estate value of its malls has fallen, it can redevelop the land for long-term capital gains. The last decade has given malls a bad odor, but at least for this Christmas, that may be the smell of nostalgia. Simon’s moves have made it a popular choice for REIT investors but it is also, now, a retail bellwether.

On the date of publication, Dana Blankenhorn held long positions in COST, AMZN, MSFT, and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.