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 13.7%. This performance was worse than the S&P 500’s 5.5% decline.
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. With that said, 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:
Five Below (FIVE)
Market Cap: $4.69 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 Does FIVE Worry Us?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Smaller revenue base of $3.88 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- ROIC of 10.4% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Five Below’s stock price of $85.25 implies a valuation ratio of 16.8x forward P/E. Read our free research report to see why you should think twice about including FIVE in your portfolio.
Two Consumer Retail Stocks to Watch:
Sprouts (SFM)
Market Cap: $15.83 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 Is SFM Interesting?
- Offensive push to build new stores and attack its untapped market opportunities is backed by its same-store sales growth
- Comparable store sales rose by 6.6% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Free cash flow margin grew by 2.1 percentage points over the last year, giving the company more chips to play with
At $162 per share, Sprouts trades at 33.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Warby Parker (WRBY)
Market Cap: $1.91 billion
Founded in 2010, Warby Parker (NYSE: WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.
Why Are We Fans of WRBY?
- Fast expansion of new stores indicates an aggressive approach to attacking untapped market opportunities
- Differentiated product assortment leads to a best-in-class gross margin of 55.1%
- Free cash flow margin grew by 3.4 percentage points over the last year, giving the company more chips to play with
Warby Parker is trading at $16.53 per share, or 42.1x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
