3 Retail Stocks to Watch as Back-to-School Spending Ramps Up

Key Points

• Walmart benefits from essential back-to-school purchases as low- to middle-income consumers prioritize value.
• DICK’S Sporting Goods is positioned to gain from athletic gear demand, strong omnichannel sales, and its upcoming Foot Locker acquisition.
• Target offers deep value with upside potential as tariff clarity and possible executive changes improve investor sentiment.

We’re past the Fourth of July, which marks the official second half of the year. For retailers, this also means the beginning of the back-to-school shopping season. This is the second biggest retail season after the holiday season.

According to estimates from the National Retail Federation, in 2024, U.S. consumers spent $38.8 billion on back-to-school supplies, an average of $874.68 per household.

That number was down from the record high of $41.5 billion spent in 2023. But this year, 71% of parents expect to spend more, with estimates that households will spend an average of $1,230 to get their kids back to school ready.

For investors, this is a good time to look at companies that could be ready to deliver strong numbers. Many retailers don’t report earnings until the end of August or early September. That will give investors their first look at spending trends. However, it’s never too early to forecast the likely winners and here are 3 compelling stocks to consider.

Walmart Is an Established Leader With Room to Grow

Walmart Inc. NYSE: WMT stock has delivered a total return of more than 39% in the last year and over 144% in the last five years. Through a global pandemic, generational high inflation, followed by generational high interest rates, the retailer has continued to show why it’s a great investment.

However, even Walmart hasn’t been immune to changes in consumer discretionary spending. The company is noticing that the low- to middle-income consumer is holding back on discretionary purchases. But back-to-school spending isn’t discretionary, and Walmart will be a place that those shoppers go for the lowest prices.

Among retail stocks, it’s hard to find areas of concern with Walmart. However, it’s fair to note that investors are paying a premium for the stock. That’s been true for some time. But the company’s full-year earnings per share (EPS) guidance for 2026 was between $2.50 to $2.60. Even at the high end, that’s not much of a boost from the prior year.

Still, the Walmart analyst forecasts on MarketBeat give WMT stock a consensus price target of $106.67, which would be an 11% gain from its July 10 levels. Investors are also nearly certain to receive a dividend increase, which would make it 54 consecutive years of increases for this dividend king.

DICK’S Stock Has Their Omnichannel Game on Point

Back-to-school shopping is about more than pens and paper. It’s also about cleats and other equipment that student athletes need. That’s where DICK’S Sporting Goods Inc. NYSE: DKS comes in. The company is a go-to retailer for sporting equipment. In fact, the company just concluded its DICK’S Deal Days summer sporting event.

Over the last five years, DICK’S has accelerated its online presence. This was one reason the stock spiked in 2020 and enjoyed another strong year in 2024.

At around $212 per share, DKS stock is trading near the analyst consensus price of around $219. However, since the company’s last earnings report in May, several analysts have issued price targets over consensus, with the highest coming from Bank of America NYSE: BAC at $240. Plus, the stock is trading in the middle of its 52-week range, which leaves even more room to the upside.

Another reason for investors to eye DKS stock as a back-to-school winner is its recent acquisition of Foot Locker. That’s expected to close in the second half of 2025 so it won’t impact the current results but is likely to provide an upside boost to future guidance.

Target Is a Contrarian Pick That Offers Strong Value

Target Corp. NYSE: TGT isn’t just one of the worst-performing retail stocks in 2025; it’s held that crown for several years. In fact, despite being a dividend king with 54 consecutive years of dividend increases, Target has generated a negative total return of around 1.4% for investors over the last five years.

However, there are some glimmers of hope that may serve as a catalyst for an objectively undervalued stock. First, the United States has reached a tariff agreement with Vietnam. The new 20% tariff on imports from Vietnam is double the prior 10% level, but significantly better than the 46% level the administration proposed on Liberation Day.

That should help Target provide more specific guidance. The company said in its prior earnings call that it expects to offset much of the new tariff costs through diversified sourcing, vendor negotiations, and assortment adjustments rather than price increases.

Plus, analysts expect a change in the C-suite with current chief executive officer (CEO) Brian Cornell’s contract ending in September. Cornell agreed to a 3-year extension in 2022 but is now past Target’s traditional retirement age. However, investors may see that as a welcome change, particularly if the next executive comes from outside the company.

TGT stock may fall further. However, it is also undervalued at 11x earnings and a 0.44 price-to-sales (P/S) ratio. Both statements can be true, but investors should look at the scenario that offers the best upside. A little boost in revenue and earnings would do a lot to boost the TGT share price.