Retail stocks have been coming back to life lately, but they are far from outperforming the indices. While that may have more active investors looking away from consumer-based stocks, value-oriented investors may be looking at retail stocks to buy.

There is one problem though, and that’s a potential recession. For several quarters now, investors have been worried about a looming economic slowdown. So far though, we’re not seeing any drastic declines in economic output and companies continue to generate solid results.

Granted, we are in a tightening cycle and many concerns still linger. But inflation continues to run higher than normal and the labor market remains strong. That’s keeping consumer spending alive (and mostly well).

Despite this, most retail stocks continue to struggle. I want to look at three names that are still down more than 30% from the highs, but that I believe will go back to make new all-time highs.

With that, let’s look at three retail stocks to buy.

Home Depot (HD)

Like stocks, real estate is an asset class that continues to perform well over the long term. Therefore, there’s a vested interest in keeping momentum alive in the home improvement category. Note how the rapid rise in interest rates has yet to really trigger large declines in the housing market. That may come in time should we see a recession, but for now, it’s holding up pretty well.

In that vein, Home Depot (NYSE:HD) should continue to perform well over the long term too.

After enjoying a strong boom during the Covid-19 years, Home Depot stock has fallen on tough times. Shares have almost doubled off the 2020 low, but are still down about 29.2% from the all-time high. It doesn’t help that analysts expect roughly flat revenue growth this year and a 5% dip in earnings.

To me though, what does it matter if it takes a year or two for Home Depot stock to find its footing? It wouldn’t be too surprising if that were the case, given the run-up off the low (although I think it’s a conservative view). At the end of the day, consumers are going to continue making home improvements and in my view, that will eventually drive Home Depot stock higher.

Nike (NKE)

Nike (NYSE:NKE) is a top-level consumer company, which dominates with high-level athletes and performers donning the “Swoosh.” Other retailer stocks that I’m fond of, such as Starbucks (NASDAQ:SBUX), show promise for the long-term, but are approaching an all-time high. Nike still has a ways to go.

Nike uses a combination of wholesale, retail and direct-to-consumer (or DTC) via online channels to drive its business. As long as consumers own houses, they’ll go to Home Depot and as long as they play sports, they’ll wear Nike.

Like Home Depot though, Nike’s bottom line is under pressure. Analysts expect a 14% decline in earnings this year despite a near-10% gain in revenue. Next year, the top and bottom line are forecast to improve, growing 7% and 25%, respectively.

Here’s the thing, though. Nike is in its last quarter of the fiscal year. Meaning that 14% earnings dip for the year is coming to an end, setting the stage for a strong fiscal year rebound in the coming quarters.

Target (TGT)

Last but not least, we have Target (NYSE:TGT). Shares fell 46.7% from the August 2021 high to the June 2022 low. Despite a mild rally and a decent couple of trading days lately, the stock still remains 35% below the all-time high.

While retail may not be experiencing the best environment right now, Target is one of the premiere names in the space. Like Walmart (NYSE:WMT), Costco (NASDAQ:COST) and others, Target retail stock shows promise as it has built out a strong omni-channel presence, allowing it to leverage a digital and physical footprint while benefiting from the logistics that were already in place.

Not to mention, the company has raised its dividend for more than 50 consecutive years. Despite periods of high inflation and deep recessions, this company’s dividend continues to chug along. Now yielding about 2.6%, it’s worth paying attention, particularly as this name should eventually return to all-time highs, making it one of the top retail stocks to buy.

It won’t, but just for argument’s sake, say Target stock hit new highs before its next dividend increase (likely in June). It would yield just 1.6%.

Interestingly, estimates call for robust earnings growth and strong revenue growth in 2024. If that comes to fruition, bulls should be pleased.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.