Holiday Shopping: 6 Retail Stocks to Watch

NEW YORK (TheStreet) -- Holiday sales are expected to grow this year, according to analysts.

Industry group the National Retail Federation predicts that retail sales will grow 2.8% in November and December this year to a total of $465.6 billion. Growth will be marginally higher than the 10-year average of 2.6%, the group says.

A recent Deloitte survey shows that U.S. consumers (59%) intend to spend the same amount as they did last year on shopping or raise the level this year, despite the general discontent about the economy.

Online sales are expected to continue to grow. An annual holiday shopping survey by Accenture finds that almost 68% of retailers foresee online sales surging almost 15% from last year.

We have identified six retail stocks that should benefit from the holiday shopping season.

The stocks are listed in ascending order of potential upside, based on analysts' price targets.

6. Dollar General ( DG) is a discount retailer that sells a wide variety of merchandise from brands such Procter & Gamble, Kimberly Clark, Unilever, Kellogg's, General Mills, Nabisco, Coca-Cola and PepsiCo. It operates 9,414 stores in 35 states.

Of the 20 analysts covering the stock, 60% rate it a buy and the rest rate it a hold. There are no sell ratings on the stock. The average analyst price target is $41.13, according to Bloomberg. That's 4.3% greater than the stock's recent levels.

In the last week of October, Dollar General revealed its stores would offer more than 300 toys priced at $5 or less. Also, starting Dec. 24, Dollar General will offer 10% discounts on toy purchases of $100 or more. Meanwhile, in the first week of September, the discount retailer launched its eCommerce channel to meet the rising demand for online purchases.

For its second quarter of 2011, Dollar General recorded net income of $146 million, or 42 cents a share, up from $141 million, or 41 cents a share, a year before. Adjusted net income surged 25% to $181 million, or 52 cents per diluted share. Sales for the quarter were up 11.2% year over year to $3.58 billion. During the first half of 2011, Dollar General opened 301 new stores and remodeled or relocated 371 stores.

5. Tiffany & Co. ( TIF) sells jewelry, sterling silverware, china, crystal, stationery, fragrances and accessories.

Of the 22 analysts covering the stock, 50% rate it a buy and the rest rate a hold. There are no sell ratings on the stock. The stock's average 12-month price target is $82.76, according to Bloomberg. That is 6.4% higher than the current price.

In the last week of October, Tiffany announced plans to open a store in Prague, the luxury retailer's first location in Europe. The store is scheduled to opening in the summer of 2012. Also, in September 2012, Tiffany plans to open a third New York City store, in the Soho neighborhood.

For the second quarter ended July 31, 2011, the company recorded a 30% increase in net sales to $872.7 million. Meanwhile, net earnings expanded 33% to $90 million, or 69 cents per share, compared with $67.7 million, or 53 cents per share, in the year-ago quarter. The company has raised its full-year EPS guidance to $3.65 to $3.75 from the previous range of $3.45 to $3.55.

The company is scheduled to release third-quarter earnings on Nov. 29. On average, analysts polled by Bloomberg expect net income of $77.29 million, or 60 cents a share, compared with $58.92 million, or 46 cents a share, in the year-ago quarter.

Sales are seen rising 17% to $798.85 million from the same quarter in the 2011 fiscal year. Cash flow per share is seen increasing 71% to 46 cents.

4. Coach ( COH) sells bags, accessories, business cases, footwear, jewelry, travel bags, watches and fragrances for men and women.

Of the 27 analysts covering the stock, 74% rate it a buy and the remainder rate it a hold. There are no sell ratings on the stock. On average, analysts surveyed by Bloomberg have a 12-month price target of $71.63. That's 9.4% higher than Coach's current price.

For the first quarter of fiscal-year 2012, the company recorded sales of $1.05 billion, vs. $912 million in the same quarter a year ago. Meanwhile, net income for the quarter increased to $215 million, or 73 cents per share, compared with $189 million, or 63 cents per share, in the previous year's first quarter. For fiscal-year 2012, the company expects to achieve at least $300 million in sales, the higher end of the range provided in August.

The company recently launched its first European flagship store in London and expects it to be the centerpiece of its U.K. distribution strategy. Industry analysts believe that Coach will have a strong holiday season as it remains a hot source for gifts. The company's chief executive comments that the men's business is a significant driver of sales.

3. Amazon.com ( AMZN) is an online retailing giant.

Of the 35 analysts covering the stock, 63% rate it a buy and 34% rate it a hold. The average 12-month price target of analysts surveyed by Bloomberg is $241.17, which is 10.6% higher than the current price.

For the third quarter of 2011, the company recorded sales of $10.88 billion, up 44% from the same quarter last year. Operating cash flow increased 19% to $3.11 billion for the trailing 12 months from $2.62 billion for the trailing 12 months ended Sept. 30, 2010. Meanwhile, the company has announced the launch of four new Kindle devices for the upcoming holiday season.

For the fourth quarter of 2011, the company's net sales are pegged between $16.45 billion and $18.65 billion, indicating a 27% to 44% increase from the year-earlier quarter.

2. Best Buy ( BBY) is a brick-and-mortar and online retailer of consumer electronics, home office products, entertainment products and appliances.

Of the 25 analysts covering the stock, 36% rate it a buy and 60% rate it a hold. The average 12-month price target from analysts surveyed by Bloomberg is $31.00, which is 15.5% higher than the current price.

For the second quarter of 2011, the company recorded a marginal increase in total revenue to $11.35 billion from $11.34 billion in the year-ago quarter. Best Buy recorded strong revenue growth in tablets and appliances. Net earnings stood at $177 million, or 47 cents a diluted share. For fiscal-year 2012, the company estimates revenue in the range of $51 billion to $52.5 billion, while net earnings per diluted share are pegged between $3.35 and $3.65.

Best Buy recently announced acquiring MindShift Technologies for $167 million, to expand its IT offerings to small- and mid-sized businesses.

Best Buy has announced it will buy back its stake in a cell phone joint venture with U.K.'s Carphone Warehouse Group for $1.3 billion. Along with this, Best Buy Europe plans to focus on the installed base of almost 2,500 small-box stores and transform them into Wireless World format and simultaneously close down one big box pilot store in the U.K. These measures are forecast to be accretive to fiscal-year 2013 diluted earnings per share by 35 to 40 cents.

1. eBay ( EBAY) is an online marketplace.

Of the 31 analysts covering the stock, 55% rate it a buy and 42% rate it a hold. The average 12-month price target of analysts surveyed by Bloomberg is $39.17, which is 19.0% higher than the current price.

For the third quarter of 2011, revenue increased 32% to $3 billion from the same period a year ago. The acquisition of GSI Commerce in the second quarter of 2011 generated revenue of $202.6 million and $608 million in global e-commerce merchandise sales. Net income stood at $490.5 million, or 37 cents per diluted share, compared with $432 million, or 33 cents per diluted share, in the prior year's third quarter. For the fourth quarter, eBay estimates net revenue to range from $11,500 million to $11,600 million with GAAP earnings per diluted share seen at $2.42 to $2.48.

The company recently launched eBay.com/celebrity, a unique shopping destination that combines celebrity experiences, memorabilia and merchandise with philanthropic causes.

>>To see these stocks in action, visit the 6 Holiday Retail Stocks to Watch portfolio on Stockpickr.

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