Retail Stock Rally: How Far Can Best Buy, Kohl’s, and Macy’s Go?

Ready to Ride the Holiday Wave

The SPDR S&P Retail ETF (NYSEARCA:XRT) has surged approximately 10% over the past three months, capitalizing on a historically bullish period for retail stocks following Labor Day. 

This uptick aligns with seasonal trends, as retailers gear up for a cascade of high-spending events: back-to-school shopping, Halloween, and the pivotal Christmas holiday season, culminating in the frenzy of Black Friday and Cyber Monday. 

These months are critical for retailers to bolster their balance sheets, as consumer spending peaks with gift-buying and festive promotions. The XRT’s performance reflects broad sector strength, but individual retailers must navigate unique challenges and opportunities to sustain momentum.

Best Buy (NYSE:BBY | BBY Price Prediction), Kohl’s (NYSE:KSS), and Macy’s (NYSE:M) have seen their shares climb off yearly lows, driven by recent results. But investors need to ask if they can maintain this upward trajectory post-holidays, and are their stocks worth buying today?

Best Buy (BBY)

Best Buy has staged an impressive recovery, with its stock rising 40% from its 52-week low of $55 per share in April. The retailer’s fiscal 2026 second quarter results showed a 1.6% year-over-year revenue increase to $9.4 billion, beating analyst expectations, driven by strong demand for electronics, particularly laptops and gaming devices. As Best Buy heads into the back-to-school season, it says the momentum is continuing from the sales events it’s running.

Cost-cutting measures and an enhanced e-commerce platform weren’t enough, though, to help boost operating margins, which fell to 2.7% from 4.1% a year ago as it sold more lower margin products. Best Buy’s focus on exclusive partnerships, such as those with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Samsung and Nintendo, as well as new collaborations with IKEA — along with its Geek Squad services — strengthens its competitive edge. 

After the holidays, BBY’s momentum hinges on sustaining online sales growth and navigating potential tariff impacts on electronics. With a forward P/E of 11 and a 4.95% dividend yield, BBY appears undervalued compared to the retail industry average, making it a compelling buy for value and income investors.

Kohl’s (KSS)

Kohl’s has seen its stock climb 171% from its 52-week low of $6.05, closing yesterday at $16.42 per share. Its Q2 earnings revealed a 5.1% decline in revenue on a 4.2% drop in comparable sales, but better-than-expected adjusted earnings of $0.56 per share, handily topping estimates $0.30, fueled by improved inventory management and focusing on rebuilding private label brands, simplifying its promotions, and improving the omnichannel experience. It is seeking to remind consumers it is the place for value and quality.

However, Kohl’s faces headwinds: its “murky middle” positioning — neither a discount leader like Walmart (NYSE:WMT) nor a premium brand — makes it vulnerable to competition and softening discretionary spending. 

Post-holiday, Kohl’s must leverage its proprietary brands and store remodels to maintain momentum. With a P/E of 8, Kohl’s is cheap, but its C-suite turmoil, high debt, and analyst consensus “sell” rating suggest caution. Risk-tolerant investors might see upside, but KSS is a speculative buy.

Macy’s (M)

Macy’s stock has rallied 76% from its 52-week low of $7.62 per share, closing yesterday at $17.24. Its Q2 2025 results showed a 2% drop in revenue on a 1.1% increase in go-forward business comparable sales — the strongest growth seen in 12 quarters. While earnings of $0.41 per share were down from last year, they were more than twice the $0.19 per share Wall Street expected. Helping the strong performance was its luxury brands like Bloomingdale’s and Bluemercury. 

Macy’s “Bold New Chapter” strategy, including store modernization and expanded online offerings, has resonated with consumers. However, post-holiday challenges include potential consumer spending slowdowns and tariff-related cost pressures, which could squeeze margins. With a forward P/E of 8.8, Macy’s is undervalued, and its 4.3% dividend yield adds appeal. Analysts are mixed, with a consensus “hold” rating, reflecting cautious optimism. 

Macy’s disciplined cost management and brand strength make it a solid buy for investors betting on a sustained retail recovery.

Key Takeaway

All three retailers have capitalized on seasonal demand, but their ability to sustain momentum varies. Best Buy’s tech focus and operational efficiency make it the strongest candidate for continued growth. Kohl’s high-risk, high-reward profile suits aggressive investors, while Macy’s balanced approach offers stability. 

Investors should monitor consumer spending trends and tariff developments, but BBY and M present more compelling cases than KSS.