Retailers are adapting their business models as technology changes how people shop. 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 have shed 12.5%. This drop was seriously discouraging since the S&P 500 held steady.
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 RetailStocks to Sell:
Gap (GAP)
Market Cap: $8.34 billion
Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE:GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.
Why Are We Hesitant About GAP?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.3%
- ROIC of 7.1% reflects management’s challenges in identifying attractive investment opportunities
Gap’s stock price of $22.33 implies a valuation ratio of 9.5x forward P/E. Check out our free in-depth research report to learn more about why GAP doesn’t pass our bar.
Boot Barn (BOOT)
Market Cap: $4.96 billion
With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE:BOOT) is a western-inspired apparel and footwear retailer.
Why Is BOOT Not Exciting?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Revenue base of $1.91 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Free cash flow margin shrank by 7.1 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
At $161.01 per share, Boot Barn trades at 26.1x forward P/E. If you’re considering BOOT for your portfolio, see our FREE research report to learn more.
One Consumer Retail Stock to Watch:
Abercrombie and Fitch (ANF)
Market Cap: $3.76 billion
Founded as an outdoor and sporting brand, Abercrombie & Fitch (NYSE:ANF) evolved to become a specialty retailer that sells its own brand of fashionable clothing to young adults.
Why Do We Like ANF?
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 14.8% over the past two years
- Unique assortment of products and pricing power are reflected in its best-in-class gross margin of 63.6%
- Strong free cash flow margin of 10.7% enables it to reinvest or return capital consistently
Abercrombie and Fitch is trading at $79.47 per share, or 7.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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 9 Market-Beating Stocks. 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-micro-cap company Tecnoglass (+1,754% 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.