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The Best Way to Profit From the Holiday Shopping Frenzy


Keep an eye open for those retailers that might be immune to price matching, either because they are offering something that their rivals can't readily replicate or because they are a brand that really commands loyalty.

And there is a reasonable chance that those massive discounts offered over Thanksgiving may have tilted the spending in favor of the early part of the season and that the final weeks may see much more sluggish sales levels – or retailers feeling forced to offer just as hefty deals or even more alluring discounts to keep the volumes up.

The bottom line is all about the bottom line. The National Retail Federation's survey-based calculation that shoppers spent $59.1 billion over the holiday weekend is certainly impressive. But what did retailers have to do in order to accomplish that? Is it profitable, and can it be sustained?

The renewed fuss over Wal-Mart's labor practices and low wages have reminded shoppers that somewhere along the line, someone pays some kind of a price for a big bargain. Few retailers are as aggressive as Wal-Mart on both prices to consumers and wages, but the fact remains that if a hyper-competitive retail market means margins come under pressure, it is hard to see how many of these retailers will emerge as attractive investments.

So as the sales offers keep hitting the circulars or landing in your e-mail inbox, and as the data keep making headlines, you may want to keep an eye open for those retailers that might be immune to this kind of price matching, whether because they are offering something that their rivals can't readily replicate or where a brand really commands loyalty.

Elizabeth Arden (NASDAQ:RDEN) is a publicly-traded cosmetics company whose products would be an example of this: While shoppers may buy special offers, those who already have chosen to use Arden cosmetics, perfumes or other products aren't likely going to be tempted to switch brands simply because they are offered a $5 bargain. Similarly, a teenager convinced that certain brands of jeans or athletic shoes are "must owns" isn't going to be satisfied with a discount on an alternative. And then there are products that have intellectual property behind them, like Activision's (NASDAQ:ATVI) Call of Duty game series, a perennial hot seller during the holiday shopping season.

When you spot a retailer that is somehow managing to get the trends right, that has proven able to manage its inventories and profit margins appropriately, and that controls its own distribution, well, that's fine, too. Gap Stores (NYSE:GPS), though its stock is less of a bargain than it was a year ago at this time, has the ability to offer merchandise directly to consumers via its own stores. Yes, shoppers can snap up colored corduroy pants elsewhere – but not Gap brand ones, and Gap has found a way to make that brand an asset once more, at least for the time being. But when you're hunting for bargains in the stock market, you'll likely be better off bypassing the retailers altogether and looking for the hot products and brands.

Editor's Note: This article by Suzanne McGee originally appeared on The Fiscal Times.

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Follow The Fiscal Times on Twitter @TheFiscalTimes.
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