Retailers are overhauling their operations as technology redefines the shopping experience. 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 6.4%. This performance is a noticeable divergence from the S&P 500’s 4.5% return.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one resilient consumer stock at the top of our shopping list and two best left ignored.
Two Consumer Retail Stocks to Sell:
Five Below (FIVE)
Market Cap: $7.52 billion
Often facilitating a treasure hunt shopping experience, Five Below (NASDAQ:FIVE) is an American discount retailer that sells a variety of products from mobile phone cases to candy to sports equipment for largely $5 or less.
Why Is FIVE Not Exciting?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Subscale operations are evident in its revenue base of $4.04 billion, meaning it has fewer distribution channels than its larger rivals
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
Five Below is trading at $135.13 per share, or 29.3x forward P/E. To fully understand why you should be careful with FIVE, check out our full research report (it’s free).
Target (TGT)
Market Cap: $45.34 billion
With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.
Why Does TGT Worry Us?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Demand will likely fall over the next 12 months as Wall Street expects flat revenue
- Gross margin of 28% is an output of its commoditized inventory
At $99.90 per share, Target trades at 11.7x forward P/E. Read our free research report to see why you should think twice about including TGT in your portfolio.
One Consumer Retail Stock to Buy:
Lululemon (LULU)
Market Cap: $23.51 billion
Originally serving yogis and hockey players, Lululemon (NASDAQ:LULU) is a designer, distributor, and retailer of athletic apparel for men and women.
Why Will LULU Beat the Market?
- Comparable store sales rose by 6.6% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Collection of products is difficult to replicate at scale and leads to a best-in-class gross margin of 58.9%
- LULU is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Lululemon’s stock price of $196.75 implies a valuation ratio of 13x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
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