Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. Still, secular trends are working against their favor as e-commerce continues to take share from brick and mortars. This puts retail stocks in a tough spot, and over the past six months, the industry’s 20.3% gain has trailed the S&P 500 by 2.6 percentage points.
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 are three consumer stocks we think can generate sustainable market-beating returns.
Dick's (DKS)
Market Cap: $18.05 billion
Started as a hunting supply store, Dick’s Sporting Goods (NYSE: DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.
Why Are We Positive On DKS?
- Comparable store sales rose by 4.3% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Projected revenue growth of 56.3% for the next 12 months is above its six-year trend, pointing to accelerating demand
- ROIC punches in at 24.3%, illustrating management’s expertise in identifying profitable investments
At $225.38 per share, Dick's trades at 15.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Ross Stores (ROST)
Market Cap: $50.98 billion
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Why Do We Like ROST?
- Rapid rollout of new stores to capitalize on market opportunities makes sense given its strong same-store sales performance
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.1% over the past two years
- Industry-leading 29.6% return on capital demonstrates management’s skill in finding high-return investments
Ross Stores’s stock price of $156.82 implies a valuation ratio of 23.9x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Warby Parker (WRBY)
Market Cap: $2.59 billion
Founded in 2010, Warby Parker (NYSE: WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.
Why Does WRBY Stand Out?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Unique assortment of products and pricing power are reflected in its best-in-class gross margin of 54.9%
- Earnings growth has massively outpaced its peers over the last three years as its EPS has compounded at 68.5% annually
Warby Parker is trading at $21.26 per share, or 49.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
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