Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. This includes developing an online presence to fend off e-commerce competitors, a strategy that has helped the industry maintain steady demand by giving it more sales channels. In turn, retail stocks were up 20.8% over the past six months compared to 13.9% for the S&P 500.

Regardless of these results, a cautious approach is imperative as many companies in this space can be value traps. Keeping that in mind, here are three consumer stocks that may face trouble.

OneWater (ONEW)

Market Cap: $195.6 million

A public company since early 2020, OneWater Marine (NASDAQ: ONEW) sells boats, yachts, and other marine products.

Why Are We Out on ONEW?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
2. Issuance of new shares over the last three years caused its earnings per share to fall by 66.6% annually while its revenue grew
3. 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

At $12.19 per share, OneWater trades at 19.3x forward P/E. To fully understand why you should be careful with ONEW, check out our full research report (it’s free for active Edge members).

Williams-Sonoma (WSM)

Market Cap: $22.6 billion

Started in 1956 as a store specializing in French cookware, Williams-Sonoma (NYSE: WSM) is a specialty retailer of higher-end kitchenware, home goods, and furniture.

Why Do We Think Twice About WSM?

1. Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
2. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
3. Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 3.3% annually

Williams-Sonoma is trading at $189.50 per share, or 21.1x forward P/E. Dive into our free research report to see why there are better opportunities than WSM.

Genuine Parts (GPC)

Market Cap: $18.64 billion

Largely targeting the professional customer, Genuine Parts (NYSE: GPC) sells auto and industrial parts such as batteries, belts, bearings, and machine fluids.

Why Are We Wary of GPC?

1. Annual sales growth of 4% over the last three years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
2. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.3 percentage points

Genuine Parts’s stock price of $132.66 implies a valuation ratio of 15.9x forward P/E. Read our free research report to see why you should think twice about including GPC in your portfolio.

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