Retailers are overhauling their operations as technology redefines the shopping experience. 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 has pulled back by 7.7%. This performance is a stark contrast from the S&P 500’s 5.4% gain.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one resilient consumer stock at the top of our shopping list and two we’re swiping left on.

Two Consumer Retail Stocks to Sell:

Shoe Carnival (SCVL)

Market Cap: $571.9 million

Known for its playful atmosphere that features carnival elements, Shoe Carnival (NASDAQ: SCVL) is a retailer that sells footwear from mainstream brands for the entire family.

Why Do We Think SCVL Will Underperform?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Smaller revenue base of $1.18 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
3. Demand will likely fall over the next 12 months as Wall Street expects flat revenue

At $21.33 per share, Shoe Carnival trades at 7.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SCVL in your portfolio.

Advance Auto Parts (AAP)

Market Cap: $3.34 billion

Founded in Virginia in 1932, Advance Auto Parts (NYSE: AAP) is an auto parts and accessories retailer that sells everything from carburetors to motor oil to car floor mats.

Why Should You Sell AAP?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Inability to adjust its cost structure while its revenue declined over the last year led to a 10.4 percentage point drop in the company’s operating margin
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

Advance Auto Parts’s stock price of $56.81 implies a valuation ratio of 26.1x forward P/E. To fully understand why you should be careful with AAP, check out our full research report (it’s free).

One Consumer Retail Stock to Watch:

TJX (TJX)

Market Cap: $140.4 billion

Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE: TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.

Why Is TJX Interesting?

1. Store expansion strategy is justified by its healthy same-store sales
2. Same-store sales growth averaged 4.4% over the past two years, showing it’s bringing new and repeat shoppers into its stores
3. Massive revenue base of $56.99 billion makes up for its weaker gross margin and makes it a household name that influences purchasing decisions

TJX is trading at $124.57 per share, or 27.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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