Resilient retail
Not all retail companies are the same. Some are built to win.
This is intended for educational purposes only. It is not a recommendation. You should consult your financial advisor before taking any action.
My granny celebrated her 81st birthday this week. When I called to wish her a happy 81st birthday, she quickly corrected me: “Baby, it’s my 18th birthday. You’ve got the numbers backwards.” We laughed, and I told her to be on the lookout for a gift.
If you know my granny, you know she loves to shop. I spent countless Saturdays as a kid running from store to store with her, which is probably why I avoid malls as an adult. But her lifelong love for retail got me thinking: while everyone is hyper-focused on AI and political headlines, retail has quietly been one of the more resilient corners of the market. That’s shocking because, on paper, the consumer backdrop looks a mess.
To understand why retail companies’ resilience is surprising, you have to look at the employment backdrop.
A tale of two consumers
On the surface, the data is confusing. Layoff announcements are surging; Challenger, Gray & Christmas reported 108,435 job cuts in January 2026—the highest January total since 2009 and more than double the prior year.
Meanwhile, the official January jobs report showed 130,000 jobs were added to the economy. However, the devil is in the details: nearly all those gains were concentrated in Healthcare (+82,000) and Construction (+33,000). If you strip those two sectors out, the rest of the private economy added a negligible amount of jobs.
So is the consumer weak or resilient? The answer is: both.
We are seeing a massive “K-shaped” divergence. The top 20% of earners now account for roughly 60% of total consumer spending. This group is buoyed by record equity prices and stable high-end employment. Meanwhile, lower-income consumers are hitting a wall, evidenced by rising delinquencies in subprime auto loans and credit cards. Retail performance now depends entirely on which consumer a company serves.
Retail is consolidating, not collapsing
To track this space broadly, I look at the XRT (SPDR S&P Retail ETF). It’s an equal-weighted fund that includes everything from discount chains to luxury giants. Despite the shaky headlines, the underlying fundamentals for the “right” retailers are surprisingly robust:
Median revenue growth expectations for this year is currently running around 8.5%, outperforming 3 and 5-year averages.
Median earnings growth is expected to clock in at over 13%.
So retail isn’t collapsing; it’s consolidating. The winners are those offering either “Value” or “High-End Status.”
Value-focused retailers
Five Below (FIVE) represents experiential value. In January 2026, they reported a 14.5% jump in holiday comparable sales, raising their full-year outlook. Their model is built around fun, affordable discretionary products rather than pure essentials. Improved merchandising and marketing have helped support sales growth. In addition, the expiration of certain one-time costs in 2026 should support operating margins.
They aren't just selling "cheap stuff"; they are selling an experience. However, FIVE carries a high rent structure and is concentrated in lifestyle centers. That works well when foot traffic is strong, but it adds risk if consumer demand softens.
Luxury retailers
At the high end, retailers like Ralph Lauren (RL) have become a masterclass in brand elevation. In their February 2026 earnings, they reported an 18% increase in Average Unit Retail (AUR), meaning they are selling fewer items at much higher prices, and the wealthy consumer isn't blinking.
Furthermore, RL raised its 2026 revenue guidance to "high-single to low-double digits." While U.S. tariffs and timing of marketing expenses remain a risk that could pressure margins in Q4, their move toward "full-price selling" (less discounting) acts as a powerful margin buffer.
Pick your side of the "K"
In a bifurcated economy, you cannot treat “retail” as one trade. Luxury, premium brands, warehouse clubs, and well-positioned omni-channel players can continue to perform if the higher-income consumer remains healthy. Discount chains and subprime-exposed retailers may struggle if credit stress builds. This is where analysis matters.
Just like my granny on her “18th birthday,” some shoppers aren’t slowing down anytime soon. As an investor, the objective is to ensure your portfolio is positioned to benefit from consumers like her—the ones who are still out spending, traveling, and filling carts without hesitation.
Ken Johnson, CFA | Wall Street taught me the numbers. My community taught me the culture. InvestorBloc is where the two come together so you can build wealth in a way that feels authentic and attainable.