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Key Points

• Home Depot is an excellent stock to profit off a housing recovery.

• TJX has one of the most resilient business models in the retail sector.

Retail stocks have lagged the broader market for most of the past decade. High inflation in recent years has certainly not helped consumers build the confidence to open their wallets. The upside is that when the economy finds firmer footing, the strongest retailers are often the first to show it in stronger sales.

With uncertainty still in the mix, investors should stick with retailers that have proven they can hold up through just about any environment. Two that have been doing exactly that are Home Depot (NYSE: HD) and The TJX Companies (NYSE: TJX).

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Here's why these are the two retail stocks I'd consider buying right now.

Home Depot

Home Depot is the first retail stock to consider buying. It's a solid way to position for a housing-market recovery, after weak growth over the past few years was weighed down by high inflation and interest rates.

Even in a challenging backdrop, Home Depot has performed well. The stock is up 18% over the past three years, while the company's trailing-12-month revenue has climbed to more than $164 billion. That leaves plenty of long-term upside, as management estimates its addressable market to top $1 trillion. Its comparable sales in the fourth quarter grew 0.4% year over year -- a solid result in a weak housing market.

Home Depot is not only the leading home improvement retailer, but also one of the largest consumer discretionary companies by market cap, according to research from The Motley Fool. Its supply chain and distribution network are major advantages, and its e-commerce business continues to grow. It recently partnered with Alphabet's Google Cloud to launch agentic AI tools to assist homeowners in planning remodeling projects, which should help Home Depot continue to gain market share.

High rates are still pressuring spending on big projects, but that won't last forever. When housing improves, Home Depot should be positioned for stronger sales and earnings growth. In the meantime, shareholders get paid to wait with a 2.7% dividend yield that's well supported by annual earnings.

The TJX Companies

TJX is one of the most resilient retail stocks for long-term growth. As the leading off-price apparel and home fashions retailer, it has a wide moat built on standout inventory management and its ability to buy name-brand merchandise at steep discounts. Savings of up to 50% off regular retail helps build a loyal base of repeat shoppers.

TJX sources from thousands of vendors worldwide, giving it the flexibility to adjust quickly to almost any economic environment. This advantage has served it well in recent years. Net sales crossed $60 billion last year, with comparable sales up 5%. All of TJX's operating businesses reported sales growth, including Marmaxx, HomeGoods, TJX Canada, and its international segment.

The stock is trading at an elevated price-to-earnings multiple, so I would consider buying it in stages. But the premium also reflects the value investors place on its resilient business model and opportunities to expand overseas.

The dividend has grown about 13% annually over the past three years, and that's with a relatively low payout ratio of about 34% of earnings. The yield is around 1.1%, near the S&P 500 average. With plenty of runway in international markets, TJX could deliver solid growth for many years.

Should you buy stock in Home Depot right now?

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Home Depot, and TJX Companies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.