Retailers are overhauling their operations as technology redefines the shopping experience. Still, demand can be volatile as the industry is exposed to the ups and downs of consumer spending. This has stirred some uncertainty lately as retail stocks have lagged the market over the past six months, posting a return of 2.8% compared to 8.9% for the S&P 500.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here are two consumer stocks boasting durable advantages and one that may face trouble.
One Consumer Retail Stock to Sell:
Floor And Decor (FND)
Market Cap: $5.81 billion
Operating large, warehouse-style stores, Floor & Decor (NYSE:FND) is a specialty retailer that specializes in hard flooring surfaces for the home such as tiles, hardwood, stone, and laminates.
Why Should You Dump FND?
-
Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
-
Incremental sales over the last three years were much less profitable as its earnings per share fell by 12.9% annually while its revenue grew
-
ROIC of 8% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
At $53.00 per share, Floor And Decor trades at 25.1x forward P/E. To fully understand why you should be careful with FND, check out our full research report (it’s free).
Two Consumer Retail Stocks to Watch:
Costco (COST)
Market Cap: $432.7 billion
Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ:COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.
Why Should COST Be on Your Watchlist?
-
Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 6.6% over the past two years
-
Unparalleled revenue scale of $293.6 billion offsets its poor gross margin and gives it advantageous pricing and terms with suppliers
-
ROIC punches in at 35%, illustrating management’s expertise in identifying profitable investments, and its returns are growing as it capitalizes on even better market opportunities
Costco is trading at $951.95 per share, or 44.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Ulta (ULTA)
Market Cap: $20.48 billion
Offering high-end prestige brands as well as lower-priced, mass-market ones, Ulta Beauty (NASDAQ:ULTA) is an American retailer that sells makeup, skincare, haircare, and fragrance products.
