As consumers continue to pocket more money due to a growing economy, booming stock market and the federal tax cuts, companies with the most to gain are "aspirational" retailers like Target Corp. (TGT) and Nordstrom Inc. (JWN) rather than discount retailers, analysts say.
The continued economic growth underway bodes well for retailers that aren't simply looking to compete at the lowest prices, Tigress Financial CIO Ivan Feinseth told Real Money.
"The more flush consumers are, the more they'll look to choices like Target or Nordstrom, which is really the ultimate aspirational shopping experience," he said.
He added that as long as the economy continues to improve, these retailers should see continued growth.
Jim Cramer's Action Alerts Plus Team is certainly inclined to agree on Nordstrom continuing to grow as well, recently raising their price target for the luxury retailer.
For Target, Feinseth was backed up by Deutsche Bank analyst Michael Baker, who pointed to the "undeniable strength" of the U.S. consumer as a driver of sales.
"We think strong results suggest both strength in the U.S. consumer as well as company-specific share gains," he wrote in an Aug. 22 note.
Baker remained cautious however, issuing a hold rating for the retailer. He's not sure how the company can continue to surpass an ever-rising bar it has set in its recent meteoric growth.
Feinseth contrasted the Target and Nordstrom shopping experience with that of low-price retailers like Walmart (WMT) , indicating his belief that the retail giant is benefiting from e-commerce, but is inferior at competing with the on-site experience.
"My overall view of Walmart is neutral because they are not an aspirational shopping experience," he said. "People tend to go up-market as the economy grows."
Walmart executives disagree with Feinseth's view, pointing out that strong consumer confidence bolstered their recent quarterly results.
"The consumer backdrop is favorable, we're getting a little bit of benefit from that, hard to disaggregate exactly how much is weather vs. the macro economy," Walmart executives said during the company's August 16 earnings call. "There's a lot in there for Walmart specific initiatives because we are taking market share in key categories."
Moving forward, the company is also confident that a strong consumer would benefit sales growth.
"Overall, we feel good about the consumer going into the back half of the year," Walmart executives said.
To be sure, Feinseth also noted that in the event of a "significant downturn" in the economy, consumers would indeed fall back to the lowest price retailers like Walmart for their shopping necessities.
However, without such an event, as the CPI remains fairly stable and wages grow at a relatively steady rate, consumers will certainly find more places to use their wallet.
He added that this movement toward better-quality retailers, along with their own management missteps, has led to Sears (SHLD) and JC Penney (JCP) "dying on the vine."
