Retailers are overhauling their operations as technology redefines the shopping experience. Still, demand can be volatile as the industry is exposed to the ups and downs of consumer spending. This has stirred some uncertainty lately as retail stocks have tumbled by 9.1% over the past six months. This drop was worse than the S&P 500’s 2.1% fall.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one resilient consumer stock at the top of our shopping list and two best left ignored.
Two Consumer Retail Stocks to Sell:
Dollar Tree (DLTR)
Market Cap: $18.69 billion
A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ:DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.
Why Does DLTR Fall Short?
- Annual sales growth of 3.2% over the last five years lagged behind its consumer retail peers as its large revenue base made it difficult to generate incremental demand
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 31.3%
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
At $89 per share, Dollar Tree trades at 15.1x forward P/E. If you’re considering DLTR for your portfolio, see our FREE research report to learn more.
Grocery Outlet (GO)
Market Cap: $1.32 billion
Due to its differentiated procurement and buying approach, Grocery Outlet (NASDAQ:GO) is a discount grocery store chain that offers substantial discounts on name-brand products.
Why Do We Think Twice About GO?
- Already-low operating margin of 1.8% fell over the last year, and the smaller profit dollars make it harder to react to unexpected market developments
- ROIC of 2.3% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Grocery Outlet is trading at $13.51 per share, or 17x forward P/E. To fully understand why you should be careful with GO, check out our full research report (it’s free).
One Consumer Retail Stock to Watch:
Tractor Supply (TSCO)
Market Cap: $26.53 billion
Started as a mail-order tractor parts business, Tractor Supply (NASDAQ:TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.
Why Do We Like TSCO?
- Rapidly increasing store base reflects a desire to sell in new markets and scale quickly
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable six-year growth trajectory
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Tractor Supply’s stock price of $50.05 implies a valuation ratio of 22.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.