10 retailer stocks to watch for a holiday bounce

Most retailers get a much-needed pop from the holidays. But a few are expected to get a massive lift.

There are 10 retailers in the Russell 3000, including general merchandise seller Fred's (FRED), online retailer Amazon.com (AMZN) and women's apparel seller Chico's FAS (CHS), that are expected to post 40% or greater adjusted profit growth during the fourth calendar quarter compared with a year-ago period, according to a USA TODAY analysis of data from S&P Capital IQ.

Retail becomes top of mind with investors this time of year as many retailers count on the holidays for a big chunk of their sales. Macy's put retail investors on edge Wednesday after it reported third-quarter revenue of $5.87 billion, which not only missed expectations but was down 5% from the same period a year ago.

Investors are looking for some bright spots. Fred's isn't exactly a holiday seasonal spending play, but more of a case of a retailer getting its profit mojo back at the end of the year. The company fell into the red in the second and third quarters of last year and earned just 2 cents a share in the fourth quarter. This year, analysts think the company can earn 16 cents a share in the fourth quarter for a more than 700% increase.

Amazon is viewed as being a big winner, too. Profits are expected to jump 261% in the fourth calendar quarter compared with the same period a year ago. The retail giant is a perennial winner from the shift of consumer spending online.

Three apparel retailers are seen as being big profit winners in the fourth quarter: Chico's, Francesca's (FRAN) and Ascena (ASNA). Adjusted profit at these three companies is seen gaining 52%, 44.4% and 42%, respectively. Such growth at select specialty retail outlets continues to be a strong contrast of the troubles with department stores.

Making money from these fast-growth retailers, though, is more difficult. It's no surprise business picks up in the fourth quarter, so investors anticipate the uptick and price it into stock prices. The S&P 500 Retailing index has underperformed the market in three of the past five years between Thanksgiving and the end of the year.

But last year, retail stocks gained 3.5% while the S&P 500 fell 0.7%. That is a reminder that it's possible to make money on retail — if you know where to shop.

RUSSELL 3000 RETAILERS EXPECTED TO POST 40% OR HIGHER ADJUSTED PROFIT GROWTH IN THE HOLIDAY QUARTER *

Company, symbol, Expected Q4 earnings growth

Fred's, FRED, 710%

Amazon.com, AMZN, 261.2%

Tile Shop, TTS, 137.4%

Chico's, CHS, 51.9%

Office Depot, ODP, 49.4%

Mattress Firm, MFRM, 45.6%

Shoe Carnival, SCVL, 44.4%

Francesca's Holdings, FRAN, 44.4%

Shutterfly, SFLY, 42%

Ascena Retail, ASNA, 41.5%

* Based on calendar fourth quarter, includes the consumer discretionary retail and food and staples retail industries

Sources: S&P Capital IQ, USA TODAY

Follow Matt Krantz on Twitter @mattkrantz