Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. Still, secular trends are working against their favor as e-commerce continues to take share from brick and mortars. This puts retail stocks in a tough spot, and over the past six months, the industry has pulled back by 8.8%. This drawdown was worse than the S&P 500’s 2.8% decline.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here are two resilient consumer stocks at the top of our shopping list and one we’re swiping left on.
One Consumer Retail Stock to Sell:
OneWater (ONEW)
Market Cap: $161.6 million
A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.
Why Do We Avoid ONEW?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 53.6% annually while its revenue grew
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
OneWater is trading at $9.75 per share, or 38.4x forward P/E. Dive into our free research report to see why there are better opportunities than ONEW.
Two Consumer Retail Stocks to Watch:
Dick's (DKS)
Market Cap: $17.11 billion
Started as a hunting supply store, Dick’s Sporting Goods (NYSE: DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.
Why Do We Like DKS?
- Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 3.9% growth over the past two years
- Exciting sales outlook for the upcoming 12 months calls for 29.6% growth, an acceleration from its three-year trend
At $191.45 per share, Dick's trades at 13.8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Urban Outfitters (URBN)
Market Cap: $5.72 billion
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ: URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Why Are We Fans of URBN?
- Store expansion strategy is justified by its healthy same-store sales
- Same-store sales growth averaged 4.6% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 47.3% exceeded its revenue gains over the last three years
Urban Outfitters’s stock price of $63.75 implies a valuation ratio of 10.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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