Retailers are overhauling their operations as technology redefines the shopping experience. But many seem to be moving too slowly as their demand is lagging, causing the industry to underperform the market - over the past six months, retail stocks were flat while the S&P 500 climbed by 10.9%.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. 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:
Sally Beauty (SBH)
Market Cap: $1.55 billion
Catering to both everyday consumers as well as salon professionals, Sally Beauty (NYSE: SBH) is a retailer that sells salon-quality beauty products such as makeup and haircare products.
Why Are We Out on SBH?
- Lack of new stores suggest it’s attempting to increase revenue at existing locations because demand is sluggish
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Modest revenue base of $3.73 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
Sally Beauty’s stock price of $16.58 implies a valuation ratio of 7.4x forward P/E. If you’re considering SBH for your portfolio, see our FREE research report to learn more.
Penske Automotive Group (PAG)
Market Cap: $14.24 billion
With a diverse global network spanning the US, UK, Canada, Germany, Italy, Japan, and Australia, Penske Automotive Group (NYSE: PAG) operates automotive and commercial truck dealerships across the globe, selling new and used vehicles while providing service, parts, and financing options.
Why Should You Sell PAG?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 13% that must be offset through higher volumes
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 10.1% annually while its revenue grew
At $217.82 per share, Penske Automotive Group trades at 15.6x forward P/E. To fully understand why you should be careful with PAG, check out our full research report (it’s free).
One Consumer Retail Stock to Watch:
Sprouts (SFM)
Market Cap: $7.56 billion
Playing on the secular trend of healthier living, Sprouts Farmers Market (NASDAQ: SFM) is a grocery store chain emphasizing natural and organic products.
Why Are We Positive on SFM?
- 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 5.8% over the past two years
- Market share will likely rise over the next 12 months as its expected revenue growth of 10.8% is robust
Sprouts is trading at $81.33 per share, or 13.3x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
