Direct selling is popular among customers due to its convenience, personalized recommendations, and discounts. With the growth of e-commerce, more people are using direct selling to buy quality products while supporting the retail industry.
Amid such conducive trends, investors could consider looking into fundamentally sound retail stocks, NIKE, Inc. (NKE), Lululemon Athletica Inc. (LULU), and Crocs, Inc. (CROX).
The retail market is expected to grow at a CAGR of 8.1% by 2028. A rising focus on in-store automation to streamline retail shopping processes, and consideration of investments in interactive vending machine technology to boost brand awareness and enhance customer experience are expected to drive growth.
Moreover, direct-to-consumer distribution allows brands direct access to customers and sales channels, offering opportunities to launch innovative products, promotions, trials, and subscription models. For instance, in Asia, a rising number of e-commerce platforms are enabling retail companies to establish official branded stores, facilitating quick entry into various markets.
Considering these factors, let’s take a look at the fundamentals of the three retail stocks.
NIKE, Inc. (NKE)
NKE engages in the design, development, marketing, and sale of athletic footwear, apparel, equipment, accessories, and services worldwide.
In terms of the trailing-12-month gross profit margin, NKE’s 44.68% is 20.4% higher than the 37.11% industry average. Its 11.49% trailing-12-month levered FCF margin is 106.7% higher than the 5.56% industry average. Likewise, the stock’s 1.36x trailing-12-month asset turnover ratio is 38% higher than the 0.98x industry average.
NKE’s revenues for the fiscal fourth quarter ended May 31, 2024, stood at $12.61 billion. Its gross profit rose marginally year-over-year to $5.63 billion. Additionally, the company’s net income and EPS increased by 45.5% and 50% over the year-ago quarter to $1.50 billion and $0.99, respectively.
Analysts expect NKE’s EPS and revenue for fiscal 2026 to increase 15.1% and 5.5% year-over-year to $3.62 and $51.71 billion, respectively. It surpassed Street EPS estimates in each of the trailing quarters.
Shares of NKE have gained 11.4% over the past month to close the last trading session at $83.41.
NKE’s POWR Ratings reflect its outlook. NKE has a B grade for Sentiment and Quality. It is ranked #10 among 34 stocks in the Athletics & Recreation industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Click here to access the additional NKE ratings (Momentum, Stability, Growth, and Value).
Lululemon Athletica Inc. (LULU)
LULU designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It offers pants, shorts, tops, and jackets for a healthy lifestyle, such as yoga, running, training, and other activities. It also provides fitness-inspired accessories.
In terms of the trailing-12-month gross profit margin, LULU’s 58.34% is 57.2% higher than the 37.11% industry average. Its 15.88% trailing-12-month levered FCF margin is 185.7% higher than the 5.56% industry average. Likewise, the stock’s 22.78% trailing-12-month EBIT margin is 188.5% higher than the 7.90% industry average.
During the first quarter that ended April 30, 2024, LULU’s net revenue increased 10.5% year-over-year to $2.21 billion. Its gross profit grew 11.3% year-over-year to $1.28 billion. Moreover, its net income was reported at $321.42 billion and $2.54 per share, up 10.7% and 11.4% year-over-year, respectively.
Street expects LULU’s EPS for the second quarter ended July 2024, to increase 10% year-over-year to $2.95. The company’s revenue is expected to increase 9.2% year-over-year to $2.41 billion for the same quarter. The company surpassed consensus EPS and revenue estimates in each of the trailing four quarters.
LULU’s stock plunged 7.6% over the past month to close the last trading session at $263.45.
LULU’s fundamentals are reflected in its POWR Ratings. The stock has an A grade for Quality. LULU is ranked #44 in the A-rated Fashion & Luxury industry.
Beyond what is stated above, we’ve also rated LULU for Sentiment, Growth, Stability, Value, and Momentum. Get all LULU ratings here.
Crocs, Inc. (CROX)
CROX designs, develops, manufactures, markets, distributes, and sells casual lifestyle footwear and accessories for men, women, and children under Crocs and HEYDUDE Brand in the United States and internationally.
CROX’s trailing-12-month gross profit margin of 57.11% is 53.9% higher than the industry average of 37.11%. Its trailing-12-month EBITDA margin of 27.90% is 143% higher than the 11.48% industry average. Also, the stock’s net income margin of 20.02% compares to the 4.53% industry average.
For the fiscal second quarter that ended June 30, 2024, CROX’s revenues increased 6.2% year-over-year to $1.11 billion. Its gross profit rose 9.6% from the year-ago value to $681.92 million, while its non-GAAP income from operations stood at $325.74 million, up 3.1% year-over-year.
In addition, the company’s non-GAAP net income and non-GAAP net income per common share grew 12.7% and 15.7% from the prior year’s period to $243.64 million and $4.01, respectively.
Analysts expect CROX’s revenue for the third quarter ending September 2024 to increase marginally year-over-year to $1.05 billion. Its EPS is expected to be $3.10 for the same quarter. The company surpassed Street revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 21.1% over the past six months, closing the last trading session at $142.06.
CROX’s POWR Ratings reflect bright prospects. The stock has a B grade for Quality. It is ranked #30 in the Fashion & Luxury industry.
In addition to the POWR Ratings highlighted above, one can access CROX’s ratings for Value, Growth, Momentum, Stability, and Sentiment here.
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NKE shares were trading at $83.99 per share on Friday afternoon, up $0.58 (+0.70%). Year-to-date, NKE has declined -22.06%, versus a 18.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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