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US consumer prices increased 0.3% for the month to bump the annual rate of inflation to 2.7% in November, as per data the Bureau of Labour Statistics reported on Wednesday.

Higher inflation tends to weigh on consumer spending which can negatively affect retail sales.

Still, Goldman Sachs analyst Kate McShane sees two retail stocks: Ollie’s Bargain Outlet Holdings Inc (Nasdaq: OLLI) and Target Corp (NYSE: TGT) as worth buying for 2025.

Let’s take a closer at what each of these has in store for investors.

Ollie’s Bargain

Kate McShane dubbed Ollie’s stock a top small/midcap idea for 2025.

Shares of the discount retailer are already up more than 60% this year but she remains bullish as Ollie’s is relatively less exposed to the impact of expected tariffs under the Trump administration.

Plus, the Nasdaq-listed firm stands to benefit if inflation remains somewhat of a problem and makes consumers prefer discounters over other retailers.  

Ollie’s Bargain continues to expand its store footprint and improve operational efficiency which helped it top Street estimates for adjusted per-share earnings in its latest reported quarter.

“Our value proposition is clear, our deal flow is strong, and our ability to execute is as good as it’s ever been,” the company told investors in a press release this week.

Goldman Sachs also has confidence in the leadership of Eric van der Valk who’s scheduled to take the helm from John Swygert at the beginning of fiscal 2025.

Ollie’s shares do not, however, pay a dividend at writing.

Target Corp

Target stock is currently trading more than 20% below its year-to-date high Kate McShane dubs an opportunity to load up on a quality name at a deep discount.

McShane recommends the big box retailer for long-term investors as it’s more exposed to discretionary goods – a category she’s convinced will see strong growth over the next 12 months as the US Federal Reserve continues to lower interest rates.

Target is committed to strengthening its footprint in e-commerce and private label brands to create new revenue streams.

Goldman Sachs expects such efforts to help improve the retailer’s margins and unlock significant upside in its share price next year.

Note that the diversification strategy paid off well at Walmart.

TGT is attractive to own also because it’s been cutting prices on thousands of frequently purchased items to woo price-sensitive consumers this year.

Target shares have an edge over Ollie’s Bargain as they pay a healthy dividend yield of 3.29% at writing which makes them all the more enticing for those interested in generating passive income over the long term.

The Street-high price target of $170 on Target stock translates to a more than 25% upside from here.

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