Navigating Tariff-Driven Consumer Behavior and Retail Sector Resilience in a Volatile Market

The U.S. retail sector in 2025 is navigating a complex web of tariff-driven inflation, shifting consumer priorities, and structural market realignments. As Trump's 19.9% tariffs on imported goods continue to reshape spending patterns, investors must pivot toward sectors and stocks that align with the new economic reality. While electronics and auto parts remain vulnerable to price volatility and delayed purchases, essential goods, private-label brands, and secondhand markets are emerging as resilient pillars of the retail landscape. This article identifies undervalued retail stocks poised to capitalize on forward-buying trends and selective pricing strategies, while avoiding overexposure to tariff-sensitive categories.

The Tariff-Driven Shift in Consumer Behavior

The 2025 retail environment is defined by a stark divergence in consumer behavior. Essential goods—groceries, utilities, and healthcare—have maintained steady demand, with 40% of consumers reporting no reduction in spending on these categories. Meanwhile, discretionary sectors like electronics and apparel face declining demand as households adopt a “wait-and-see” approach to high-ticket purchases. This shift has created a bifurcated market: defensive sectors thrive, while cyclical ones struggle.

The rise of private-label and secondhand markets underscores a broader structural change. The 2024 Private Label Shopper Study revealed that 54% of consumers increased their private-label purchases in 2025, driven by price sensitivity and brand fatigue. Similarly, secondhand platforms like ThredUP and Poshmark are redefining value-driven consumption, particularly among Gen Z and Millennials. These trends highlight a critical opportunity for investors: stocks in tariff-insensitive, value-focused sectors are gaining traction.

Undervalued Retail Stocks in Tariff-Insensitive Sectors

TJX Companies (TJX)

TJX Companies, operator of T.J. Maxx, Marshalls, and HomeGoods, exemplifies the power of forward-buying and selective pricing in a tariff-impacted world. The company's off-price model thrives on sourcing overstock and closeout goods at a discount, allowing it to bypass many of the cost pressures faced by traditional retailers. In Q4 2025, TJX reported a 5% rise in comparable sales and a 6% earnings-per-share (EPS) beat, despite having one fewer selling week. Its inventory strategy—sourcing less than 1% of goods from China—ensures minimal exposure to U.S. tariffs.

TJX's “treasure hunting” model enables rapid pivots to tariff-free suppliers, while anti-theft technologies like body cameras have reduced inventory shrink, boosting gross margins. With a forward P/E ratio of 12 and a dividend yield of 1.2%, TJX offers a compelling combination of growth and income.

Target (TGT)

Target's digital transformation and focus on private-label brands position it as a key player in the value retail space. Despite inventory challenges in 2024, the company's digital segment grew 35% in Q1 2025, with same-day delivery services expanding rapidly. Target's private-label offerings, such as its Good & Gather line, have captured market share from national brands, aligning with the 54% surge in private-label demand.

The stock trades at a forward P/E of 14, near the lower end of its three-year range, and offers a 4.38% dividend yield. Target's ability to balance cost efficiency with customer experience makes it a strong candidate for long-term growth.

Kering (KER.PA)

In the luxury sector, Kering (owner of Gucci) has adopted a selective pricing strategy to mitigate tariff impacts. By introducing lower-priced silk scarves and closing 25 underperforming stores, the company has preserved margins while appealing to price-sensitive buyers. Kering's focus on high-margin categories like beauty and accessories—less affected by tariffs—positions it for a potential rebound in luxury demand.

Strategic Considerations for Investors

1. Avoid Tariff-Sensitive Sectors: Electronics and auto parts remain vulnerable to price volatility and delayed purchases. Investors should steer clear of companies like General Motors or Apple, which face direct exposure to tariff-driven cost increases.
2. Prioritize Defensive and Adaptive Sectors: Essential goods (e.g., Walmart, Procter & Gamble) and value-focused retailers (e.g., TJX, Target) offer stability and growth potential.
3. Leverage Forward-Buying and Pricing Flexibility: Companies with agile supply chains and selective pricing strategies—such as TJX's tariff-free sourcing or Target's private-label expansion—are best positioned to thrive.

Conclusion

The 2025 retail landscape demands a strategic approach to stock selection. As tariffs reshape consumer behavior, undervalued stocks in essential goods, private-label, and secondhand markets are gaining momentum. TJX Companies, Target, and Kering exemplify how forward-buying and selective pricing strategies can mitigate tariff risks while capturing value-driven demand. For investors seeking resilience in a volatile market, these stocks represent compelling opportunities to align with the evolving retail ecosystem.