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 were flat while the S&P 500 climbed by 4.8%.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here are two consumer stocks we think can generate sustainable market-beating returns and one we’re swiping left on.
One Consumer Retail Stock to Sell:
Best Buy (BBY)
Market Cap: $13.28 billion
With humble beginnings as a stereo equipment seller, Best Buy (NYSE: BBY) now sells a broad selection of consumer electronics, appliances, and home office products.
Why Is BBY Risky?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Widely-available products (and therefore stiff competition) result in an inferior gross margin of 22.5% that must be offset through higher volumes
At $63.53 per share, Best Buy trades at 10.2x forward P/E. Check out our free in-depth research report to learn more about why BBY doesn’t pass our bar.
Two Consumer Retail Stocks to Watch:
O'Reilly (ORLY)
Market Cap: $78.58 billion
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ: ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
Why Should You Buy ORLY?
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 3.8% growth over the past two years
- Excellent operating margin of 19.5% highlights the efficiency of its business model
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
O'Reilly’s stock price of $93.39 implies a valuation ratio of 29.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Boot Barn (BOOT)
Market Cap: $5.01 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 Could BOOT Be a Winner?
- Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 4.8% over the past two years
- Demand for the next 12 months is expected to accelerate above its three-year trend as Wall Street forecasts robust revenue growth of 14.4%
Boot Barn is trading at $164.63 per share, or 20.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
