The US economy continued to show resilience, with gross domestic product (GDP) growing at an annualised rate of 4.3% in the third quarter – its fastest pace in about two years.
Household spending was the dominant driver (up 3.5%), underscoring the strength of the American consumer.
Against that backdrop, TD Cowen’s senior research analyst Oliver Chen has identified three retail stocks outside the mainstream big-box names that could outperform next year: Warby Parker, Ulta Beauty, and Levi’s.
Here’s what each of these three has in store for investors in 2026.
Warby Parker (NYSE: WRBY)
WRBY shares have already rallied some 60% since mid-November, but Oliver Chen remains super convinced that they aren’t out of juice just yet.
“Warby Parker Inc. is in a unique industry, eyeglasses, which is very duopolistic. It offers compelling value,” he argued in a recent CNBC interview.
Importantly, the NYSE-listed firm has recently teamed up with Google on smart glasses, which could open new revenue streams.
According to the TD Cowen analyst, store rollouts remain a growth lever, while WRBY’s digital-first DNA continues to resonate with younger consumers.
All in all, progress on the profitability front and innovation could drive Warby Parker stock up to $28 in the coming year, he concluded.
Levi Strauss (NYSE: LEVI)
Much like the first name on this list, LEVI stock has been in a sharp uptrend since early April, but Oliver Chen believes it will still push higher in 2026.
The firm’s dominant share in denim and its global growth strategy – including direct-to-consumer expansion and international penetration will help unlock further upside, he told CNBC.
Additionally, inventory simplification and supply chain agility will support margin growth as well.
Levi Strauss is TD Cowen’s top apparel retail idea heading into the new year after the company’s beat-and-raise quarter in early October.
On “Power Lunch”, Chen touted LEVI for offering exposure to a heritage brand that continues to innovate while benefitting from renewed consumer interest in denim.
His $26 price target indicates potential upside of another 23% from current levels.
Ulta Beauty (NASDAQ: ULTA)
Oliver Chen sees apparel as a difficult category as “there are many low-cost alternatives, and it’s a willingness to pay model.” That’s why he recommends owning Ulta Beauty shares for 2026.
TD Cowen sees the company’s differentiated positioning in beauty retail, robust loyalty program, and continued expansion as key drivers of growth.
While ULTA isn’t a particularly inexpensive name, Chen believes its premium valuation is justified – especially given the strong Q3 performance.
His “buy” rating on Ulta Beauty comes with a $725 price target, which suggests potential upside of another 20% from current levels.
Unlike Levi Strauss, however, Ulta Beauty Inc. does not currently pay a dividend.
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