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 tumbled by 7.9% over the past six months. This drawdown was worse than the S&P 500’s 2.3% fall.
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 is one resilient consumer stock at the top of our shopping list and two best left ignored.
Two Consumer Retail Stocks to Sell:
Torrid (CURV)
Market Cap: $180.8 million
Promoting a message of body positivity and inclusiveness, Torrid Holdings (NYSE: CURV) is a plus-size women’s apparel and accessories retailer.
Why Do We Pass on CURV?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- 7.9 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
At $1.82 per share, Torrid trades at 8.2x forward EV-to-EBITDA. If you’re considering CURV for your portfolio, see our FREE research report to learn more.
Sleep Number (SNBR)
Market Cap: $26.98 million
Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ: SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.
Why Do We Steer Clear of SNBR?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Sales were less profitable over the last three years as its earnings per share fell by 41.7% annually, worse than its revenue declines
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Sleep Number’s stock price of $1.20 implies a valuation ratio of 11.2x forward EV-to-EBITDA. To fully understand why you should be careful with SNBR, check out our full research report (it’s free).
One Consumer Retail Stock to Watch:
Burlington (BURL)
Market Cap: $20.37 billion
Founded in 1972 as a discount coat and outerwear retailer, Burlington Stores (NYSE: BURL) is now an off-price retailer that has broadened into general apparel, footwear, and home goods.
Why Is BURL on Our Radar?
- Offensive push to build new stores and attack its untapped market opportunities is backed by its same-store sales growth
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3% over the past two years
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
Burlington is trading at $329 per share, or 28.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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