Despite macroeconomic concerns, retail sales are likely to rise this year as a result of easing inflation and a solid job market. So, quality retail stocks NEXT plc (NXGPY), MINISO Group Holding Limited (MNSO), and Sally Beauty Holdings, Inc. (SBH) could be wise additions to your portfolio.
Consumer spending showed resiliency in the face of high inflation and rising borrowing costs. Retail sales increased 0.3% in May compared to the prior month. Moreover, according to the National Retail Federation, retail sales will increase between 4% and 6% in 2023.
NRF President and CEO Matthew Shay said, “In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards. While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilize to more historical levels.”
Moreover, the global retail market is expected to grow to $37.67 trillion in 2027 at a CAGR of 7.4%.
Investors’ interest in retail stocks is evident from the SPDR S&P Retail ETF (XRT) 6.9% returns over the past three months.
Take a detailed look at the stocks mentioned above:
NEXT plc (NXGPY)
Headquartered in Enderby, the United Kingdom, NXGPY engages in the retail of clothing, beauty, footwear, and home products in the United Kingdom, rest of Europe, the Middle East, Asia, and internationally.
NXGPY’s forward EV/EBITDA of 9.07x is 6.4% lower than the industry average of 9.69x. Its forward EV/EBIT of 11.22x is 19.8% lower than the industry average of 14x.
NXGPY’s trailing-12-month ROCE of 65.58% is 566.5% higher than the industry average of 9.84%. Its trailing-12-month ROTA of 17.86% is 390.5% higher than the industry average of 3.64%.
For the year ended January 30, 2023, NXGPY’s total trading sales increased 8.4% year-over-year to £5.15 billion ($6.72 billion). Also, its profit after tax increased 5% from the year-ago value to £711.70 million ($928.62 million). The company’s EPS came in at £573.4p, representing an increase of 8% from the prior-year period.
The consensus revenue estimate of $6.78 billion for the year ending January 2024 represents a marginal increase year-over-year. NXGPY’s shares have gained 74.4% over the past nine months to close the last trading session at $42.60.
NXGPY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NXGPY has a B grade for Stability and Quality. It is ranked #10 out of 42 stocks in the Specialty Retailers industry. Click here for the additional POWR Ratings for Growth, Sentiment, Momentum, and Value for NXGPY.
MINISO Group Holding Limited (MNSO)
Based in Guangzhou, China, MNSO is an investment holding company, engages in the retail and wholesale of lifestyle products in China, Asia, the Americas, and Europe.
On July 11, 2023, MNSO is excited to announce a new partnership with Peanuts, the brand based on the world-famous comic strip, which will pave the way for a cooperation based on the popular characters of Snoopy, Charlie Brown, and the Peanuts gang.
The collaboration intends to merge the special appeal of Peanuts’ best-known characters with MINISO’s mission to providing customers globally with innovative, high-quality, and fun-filled products.
MNSO’s forward non-GAAP PEG of 0.46x is 68.5% lower than the industry average of 1.45x.
MNSO’s trailing-12-month levered FCF margin of 8.27% is 124.3% higher than the industry average of 3.69%. Its trailing-12-month net income margin of 13.61% is 224.2% higher than the industry average of 4.20%.
MNSO’s revenue for the quarter ended March 31, 2023, increased 26.2% year-over-year to RMB2.95 billion ($430.20 billion). Its gross profit increased 64.4% from the year-ago value to RMB1.16 billion ($169.20 million).
In addition, the company’s adjusted net profit and EPS for ordinary shares increased 336.30% and 78.4% year-over-year to RMB483 million ($70.30 million) and RMB0.37, respectively.
Street expects MNSO’s revenue to increase 8.6% year-over-year to $1.60 billion for the year ending June 2023. Its EPS is expected to grow 120.8% year-over-year to $0.76 for the same period. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 247.3% to close the last trading session at $17.92.
It’s no surprise that MNSO has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and Sentiment and a B for Quality. It is ranked #9 in the same industry.
Beyond what is stated above, we’ve also rated MNSO for Value, Stability, and Momentum. Get all MNSO ratings here.
Sally Beauty Holdings, Inc. (SBH)
SBH operates as a specialty retailer and distributor of professional beauty supplies. The company operates through two segments, Sally Beauty Supply and Beauty Systems Group.
SBH’s forward EV/Sales of 0.77x is 35.1% lower than the industry average of 1.19x. Its forward EV/EBIT of 8.48x is 39.4% lower than the industry average of 14x.
SBH’s trailing-12-month ROCE of 45.60% is 363.5% higher than the industry average of 9.84%. Its trailing-12-month ROTC of 10.17% is 66.8% higher than the industry average of 6.10%.
For the second quarter ended March 31, 2023, SBH’s total net sales increased marginally year-over-year to $918.71 million. Also, its total assets came in at $2.68 billion for the period that ended March 31, 2023, compared to $2.58 billion for the period that ended September 30, 2022. Its total liabilities came in at $2.25 billion, compared to $2.28 billion for the same period.
Analysts expect SBH’s revenue to increase marginally year-over-year to $3.84 billion for the year ending September 2024. Its EPS is expected to grow 11.2% year-over-year to $2.10 for the same period. It surpassed EPS estimates in three of four trailing quarters. SBH’s shares have lost marginally intraday to close the last trading session at $11.91.
SBH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #11 in the same industry. It has a B grade for Value, and Quality. To see additional SBH ratings for Momentum, Stability, Growth, and Sentiment, click here.
What To Do Next?
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NXGPY shares were trading at $45.61 per share on Thursday morning, up $3.01 (+7.07%). Year-to-date, NXGPY has gained 19.09%, versus a 18.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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