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The holiday season is of significant importance to retailers as peak sales are achieved in the last quarter of every year. Both brick and mortar and online retailers come up with different strategies that boosts competitive pressures. Despite such fierce competition, some retail stocks have grabbed our attention as potential value generators for investors in the coming quarters. These stocks are Wal-Mart (WMT), Target Corp (TGT) and Coach Inc (COH).

Wal-Mart

With its strong financial performance and cheaper valuations, WMT remains a good investment opportunity. WMT was able to increase revenue by 3.4% in Q32012. Its cost control measures have been pretty effective as well. Moreover, its capital structure is also more modest now as debt-to-equity ratio has gone down from 58% to 49%. If analyzed relatively, WMT is undervalued with a P/E of 13x compared with the competitor's average of 15x.

The reason behind a strong operational performance is its success in related diversification. Apart from its core broad-line retail, WMT is a company that has successfully stepped in big box as well as discount retailing. Its subsidiary called Sam's Club has been able to outperform its parent. Sam's Club has shown a 2.7% comp growth compared with Wal-Mart's U.S. comp of 1.5% and international comp of 2.4%. We strongly feel that this performance can enable WMT to strengthen its position versus its key rival Costco (COST) .

Still another reason why we feel there's value in WMT is its strategy of focusing more on smaller-store formats. Because of worsening economic conditions, the company plans to open 80-100 small-sized stores in the coming fiscal year. These stores will have an average space of 15,000-square-feet compared with the traditional store's average of 100,000 to 150,000-square-feet. The focus on these stores adds to its strategic competitive advantage as it taps into the market of discount stores with its strong brand name.

Target Corp

In the recent earnings release, Target has reported an operational performance beyond analyst estimates. While the company's $0.96 EPS came as a surprise, its $1.69-$1.74 guidance has also beaten analysts' estimates of $1.51. We believe that the company will be witnessing a rise in shareholder value in the near future because of a recent move to generate cash by selling receivables to TD bank. The company aims to use this cash for servicing debt and repurchasing shares. Both moves are expected to increase shareholder value.

If analyzed relatively, TGT has one of the lowest multiples compared with its competitors, making it a lucrative company to invest in. It is trading at a P/E of 13x versus an industry average of 15x. Still another reason to believe in TGT's future prospects is its efficiency in pricing strategies. A survey by Citi reveals that TGT is one of the leaders in pricing and promoting for this holiday season and has beaten Amazon (AMZN) in this regard. Although AMZN has become quite competitive through a 6.7% price reduction, it still lags behind WMT and TGT. The Citi survey also revealed that TGT offers lower prices in 87% of the goods. This makes us feel that the company will be able to generate higher revenue in the coming quarter and will be able to beat sell-side estimates.

Coach Inc

The global downturn in the luxury accessories market has hit international operations of many European fashion retailers such as Burberry (OTCPK:BURBY) and Tiffany & Co (TIF). However, despite the worsening economic and financial horizons, Coach has performed exceptionally well and therefore attracted our attention as a potential buy. From an operational perspective, the financial results as per June 2012 have shown considerable improvements. The total revenue has gone up by 4% compared with the previous quarter. However, some cost-control issues seem prevalent as the cost of sold goods has increased by 9% because of which the gross profit has gone down to 73% compared with the previous quarter's 74%. However, the company has managed to reduce the expenses by 1%.

A big reason why we see value in COH is its success in international as well as the U.S. markets. While other European competitors have suffered in markets like China, COH has been able to witness double-digit growth this quarter. While BURBY and TIF witnessed a 20% drop in revenue in the Chinese market, COH's new store productivity in China was 60.9% and it is generating 8.9% of its revenue from the Chinese market. On the same grounds, sales in North America were up by 11%.

The stock is trading at a P/E of 12.5x and its earnings for the next five years are expected to grow by 15%.

Source: 3 Stocks You Should Buy For This Holiday Season