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’ 6.8% return has fallen short of the S&P 500’s 13.6% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one resilient consumer stock at the top of our shopping list and two we would avoid.
Two Consumer Retail Stocks to Sell:
Home Depot (HD)
Market Cap: $320.3 billion
Founded and headquartered in Atlanta, Georgia, Home Depot (NYSE: HD) is a home improvement retailer that sells everything from tools to building materials to appliances.
Why Is HD Not Exciting?
- Annual sales growth of 3% over the last three years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Gross margin of 33.1% is below its competitors, leaving less money for marketing and promotions
Home Depot’s stock price of $320.92 implies a valuation ratio of 20.8x forward P/E. Dive into our free research report to see why there are better opportunities than HD.
Camping World (CWH)
Market Cap: $444.2 million
Founded in 1966 as a single recreational vehicle (RV) dealership, Camping World (NYSE: CWH) still sells RVs along with boats and general merchandise for outdoor activities.
Why Is CWH Risky?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Issuance of new shares over the last three years caused its earnings per share to fall by 67.5% annually, even worse than its revenue declines
- High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Camping World is trading at $6.61 per share, or 9.7x forward P/E. To fully understand why you should be careful with CWH, check out our full research report (it’s free).
One Consumer Retail Stock to Buy:
Ulta (ULTA)
Market Cap: $24.12 billion
Offering high-end prestige brands as well as lower-priced, mass-market ones, Ulta Beauty (NASDAQ: ULTA) is an American retailer that sells makeup, skincare, haircare, and fragrance products.
Why Is ULTA a Good Business?
- Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
- Comparable store sales rose by 4.1% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
At $563.89 per share, Ulta trades at 18.5x 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
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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 Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
