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 19.6% compared to 22.7% for the S&P 500.
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 consumer stock poised to generate sustainable market-beating returns and two we’re passing on.
Two Consumer Retail Stocks to Sell:
Five Below (FIVE)
Market Cap: $8.48 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 Are We Cautious About FIVE?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Smaller revenue base of $4.23 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Underwhelming 10.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
Five Below’s stock price of $154 implies a valuation ratio of 30.7x forward P/E. If you’re considering FIVE for your portfolio, see our FREE research report to learn more.
Bath and Body Works (BBWI)
Market Cap: $5.36 billion
Spun off from L Brands in 2020, Bath & Body Works (NYSE: BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.
Why Does BBWI Worry Us?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Estimated sales growth of 2.5% for the next 12 months implies demand will slow from its six-year trend
- Earnings per share lagged its peers over the last six years as they only grew by 8.5% annually
Bath and Body Works is trading at $26.25 per share, or 7.2x forward P/E. To fully understand why you should be careful with BBWI, check out our full research report (it’s free for active Edge members).
One Consumer Retail Stock to Watch:
Urban Outfitters (URBN)
Market Cap: $6.44 billion
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ: URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Why Could URBN Be a Winner?
- Same-store sales provide a solid foundation for the steady expansion of its stores
- Same-store sales growth averaged 4.3% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 64.3% annually
At $71.60 per share, Urban Outfitters trades at 13.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
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 5 Strong Momentum 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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