Consumer Spending Remains Strong Despite Economic Headwinds

While everyone seems to worry about the consumer, TD Cowen's Oliver Chen isn't buying the doom and gloom. Speaking on CNBC's "Closing Bell" on Saturday, Chen said the holiday season delivered strong results that prompted his team to bump up their estimates by 4% to 5%.

The spending picture looks bifurcated, though. Chen noted that "the top 10% account for 50% of spending," while shoppers across the board are becoming "highly selective" about where they open their wallets. But here's the thing: despite whatever macro challenges 2025 might throw at us, Chen believes the consumer "has and will continue to be resilient." His reasoning? "Low unemployment" combined with "savings and dollars on the sidelines."

Why Walmart Beats Amazon in This Analyst's View

Against that backdrop, Chen is going all-in on Walmart Inc. (WMT) as his top retail pick for the year. What makes the retail giant so compelling? It's the rare company that can serve "high-end customers" while simultaneously being "a retailer very famous for value" among middle and low-income shoppers. That's not an easy trick to pull off.

"Walmart's our top idea for the year," Chen declared, while spotlighting the company's upcoming CEO transition as "happening from a position of strength." That's analyst-speak for: they're not scrambling to fix problems, they're handing off a well-oiled machine.

Chen gave props to outgoing CEO Doug McMillon for positioning Walmart "very strongly against" Amazon.com Inc. (AMZN) through initiatives like "bricks plus clicks," which emphasizes the retailer's ability to compete both online and in physical stores. Turns out having 4,600 stores across America is actually an advantage when everyone wants same-day delivery.

The Hidden Growth Engine Worth Billions

Here's where it gets interesting: Walmart's retail media business. Chen called it "a $5 billion business that could be much, much bigger," with potential to "quadruple" and generate "60% plus margins." For context, that's the advertising business where brands pay to promote their products on Walmart's website and app. It's basically free money since Walmart already has the traffic and the data.

Chen wrapped up his thesis by saying, "Overall, we're bullish for the consumer and the health of the consumer," with Walmart positioned at the center of that opportunity.

Shares of Walmart rose 1.21% on Friday, closing at $112.76, though they slipped 0.19% in after-hours trading. The stock scores high on Momentum and Quality metrics, showing favorable price trends across short, medium, and long-term timeframes.