The holiday shopping season is shaping up much better than last year, when retail sales rose a meager 3%. This year, holiday spending is set to surge 10% and reach its highest level since the Great Recession, says tax and business consulting firm PwC. A resilient consumer is the key reason for the firm’s cheerful holiday outlook.

The University of Michigan Consumer Sentiment Index, a monthly measure of consumer confidence in the economy, sits at 91.6. Although that’s down a bit from a few months ago, it’s still far above the recession’s mid-50s readings and substantially greater than the six-decade average of 85.9, indicating consumers are as willing as ever to splurge during the holidays.

With the projected spending increase, holiday budgets will average more than $1,100, PwC estimates. The firm expects millennials to be the biggest spenders, shelling out $500 more than average over the holidays.

Most retail industry analysts also foresee a continued transition from shopping at physical store locations to buying online, as well as a further decline in demand for trendy clothing and footwear. We’re capitalizing on these shifts in the Profit Catalyst Alert portfolio, as we’ll describe shortly.

Online Retail Pulls Ahead

E-commerce continues to usurp traditional retail this holiday season. In its annual holiday survey, business consulting firm Deloitte found that half of consumers anticipate shopping online, well above the percentages for shoppers who plan to visit discount outlets (43%), local independent retailers (38%) or traditional department stores (32%).

Of course, consumers often combine e-commerce with traditional retail, buying some gifts online and others at the store. Many will also use mobile devices as virtual shopping assistants to find store locations, get product information and compare prices.

About four out of 10 anticipate using a mobile device to pay for holiday purchases, either with a retailer app or on a retailer’s website, reports Deloitte. However, mobile wallets—which let consumers carry digital credit or debit cards on a mobile device—have yet to catch on. Only 2% of Americans use the technology, a Gallup poll found last year.

Retailers of all types will be looking to stoke sales any way they can, with most offering free shipping and returns, along with the usual deals and deep discounts. Most retailers also hope to attract more business with better customer service such as price matching, a combination of online and in-store ordering, delivery and pickup options, and flexible payment plans.

On the product front, clothing and footwear fads like Ralph Lauren polo shirts and Ugg boots are fading fast as holiday retail increasingly goes high-tech for gadget-loving millennials.

Along with established tech staples like the latest iPhone and PlayStation, consumers are flocking to a variety of exotic devices such as Samsung’s virtual reality headgear, the HP mobile device-compatible pocket printer and the Amazon Fire TV Stick, a portable streaming player that works on any TV with Amazon Prime and other media services.

Also on many holiday shopping lists: Amazon Echo, a voice-controlled speaker that streams music, radio and news, reads audiobooks, and remotely controls lights, switches and thermostats. A huge fleet of remote-control drones will be available, too, such as the HoverBlast Quadcopter Drone, which is designed to look like a UFO, and the Sky Viper v950HD Drone with its high-definition video camera and stunt capability.

Poised to Profit

Several Profit Catalyst Alert picks should benefit directly from robust holiday retail sales, including semiconductor maker Ambarella (NSDQ: AMBA), whose software-on-a-chip is integral to high-def cameras and virtual reality headsets, among other hot tech products. Over the holidays, we see Ambarella doing especially well with premium high-def cameras, as its chips give these cameras resolution and image stabilization few other chipmakers can match.

At portfolio holding Brunswick Corp. (NYSE: BC), we expect strong holiday sales from the fitness equipment segment as Americans strive to keep New Year’s resolutions to get in shape. The segment covers all its bases, offering health club and home versions of several leading fitness equipment lines, including Cybex and Life Fitness.

Despite the projected overall decline in foot traffic at department stores and other traditional retail outlets, the holidays could mark a turning point for struggling handbag and accessories designer Vera Bradly (NSDQ: VRA). Down around 10% since we added it to the portfolio in January, the stock has major rebound potential thanks to store revamps, renewed marketing efforts and new product launches just in time for the holidays.

We’re playing the broader shift away from department stores with puts, which are options contracts enabling investors to profit from stocks they expect to perform poorly. We currently recommend buying Jan. 20, 2017, puts on PVH (NYSE: PVH), best known for brands like Calvin Klein and Tommy Hilfiger, because sales are set to slow dramatically following temporary surges in underwear orders and distribution in Asia.

We also recommend Big Lots (NYSE: BIG) puts with the same expiration date. Although the discount retailer’s stock soared earlier in the year, it has since pulled back sharply and is headed for rougher times because of declining sales in several key areas, such as furniture and food. With so much competition from Amazon and other online retailers, the trend will be extremely difficult to reverse.

There are certainly no guarantees with options. About 80% expire worthless. However, winners can yield huge returns like the 69.8% we recently earned from puts on shares of apparel manufacturer VF Corp. (NYSE: VFC).