2 of the Best Retail Stocks to Buy in 2026

Many retailers have had a tough time over the last couple of years. High prices are weighing on consumers, and tariffs and high gas prices have only made things more challenging.

But not all retailer stocks have done poorly. Costco Wholesale (NASDAQ: COST) and TJX Companies (NYSE: TJX) have posted impressive results and rewarded shareholders.

Nonetheless, there's plenty of upside for long-term investors who purchase their shares this year. Here's why these two companies remain top-of-the-class retailers.

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1. Costco

When you ask people to pay a fee to shop at your warehouses, you need to make members happy. Costco has excelled at doing so for decades by offering a wide range of high-quality goods and services at attractive unit prices.

Management has even shown a willingness to forgo short-term profitability in an effort to service customers and engender their loyalty. For instance, it held off on raising its annual fee, increasing it effective Sept. 1, 2024, after a longer-than-usual seven years.

And it's done a fine job of retaining members over the years. Its global renewal rate typically hovers around 90%, including 89.7% in the fiscal third quarter, which ended on May 10.

Costco also consistently grows same-store sales (comps). That's particularly impressive during recent times when many retailers have struggled to increase comps in the face of broad-based inflationary pressures. In the most recent three-month period, comps increased 6.6%, after removing foreign-currency translations and the impact of gasoline price changes, driven by increased spending and traffic to its stores.

The company is not merely growing sales at the expense of profitability, either. Third-quarter operating income increased 11.3% year over year.

Costco has a simple business plan that management executes very well. It continues to open new warehouses, and fortunately, it has room for more expansion. It started the year with 914 warehouses and opened 14 during the first nine months. Management anticipates adding another 12 this quarter. Most of the new warehouses are located in the U.S. and Canada, but it will also open a couple internationally.

Consistently strong results and expansion opportunities are a powerful combination.

2. TJX Companies

TJX Companies attracts customers by offering apparel and home goods merchandise at a 20% to 60% discount. Its popular retail banners include TJ Maxx, Marshalls, and HomeGoods.

How can the company offer goods at such deep discounts? It buys excess inventory from manufacturers. Better still, the more challenging the economic times, the better the opportunity for TJX to buy goods at attractive prices.

It does well during normal times, but it has more high-quality, low-priced inventory amid challenging conditions. That's perfect, since that's when consumers, who always look for bargains, become particularly price-sensitive.

These may be stressful times for consumers, but they've clamored for TJX's merchandise across all of its retail chains. Its fiscal first-quarter comps increased 8% on a constant-currency basis. That's for the period that ended on May 2. Management expects a strong 3% to 4% comps growth for the year.

TJX has 6% more inventory than a year ago, but unlike some retailers, that's not a negative right now. It has found an abundance of attractive buying opportunities, allowing the company to provide more offerings to customers. After all, the retailer didn't have to discount goods to clear shelves, as seen by its 31.3% gross margin, a 1.8-percentage-point expansion from last year.

It's also highly profitable. TJX's first-quarter diluted earnings per share grew 29.3% year over year to $1.19.

Management also sees a growth opportunity, adding 48 locations during the first quarter. It finished the period with 5,262 stores.

With its sales growth, there's clearly room for more locations.

Lawrence Rothman, CFA has positions in Costco Wholesale. The Motley Fool has positions in and recommends Costco Wholesale and TJX Companies. The Motley Fool has a disclosure policy.