Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. 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 13% over the past six months. This performance was especially disappointing since the S&P 500 held its ground.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here is one consumer stock poised to generate sustainable market-beating returns and two best left ignored.
Two Consumer RetailStocks to Sell:
Sleep Number (SNBR)
Market Cap: $176.3 million
Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ:SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.
Why Do We Pass on SNBR?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales decline of 4.6% for the next 12 months implies an even more challenging demand environment
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Sleep Number’s stock price of $7.98 implies a valuation ratio of 1.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SNBR doesn’t pass our bar.
National Vision (EYE)
Market Cap: $1.69 billion
Operating under multiple brands, National Vision (NYSE:EYE) sells optical products such as eyeglasses and provides optical services such as eye exams.
Why Do We Think EYE Will Underperform?
- Reduction in its number of stores signals a focus on profitability through targeted consolidation
- Poor expense management has led to an operating margin of 0.3% that is below the industry average
- ROIC of 3% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
At $21.34 per share, National Vision trades at 35.4x forward P/E. To fully understand why you should be careful with EYE, check out our full research report (it’s free).
One Consumer Retail Stock to Buy:
AutoZone (AZO)
Market Cap: $61.62 billion
Aiming to be a one-stop shop for the DIY customer, AutoZone (NYSE:AZO) is an auto parts and accessories retailer that sells everything from car batteries to windshield wiper fluid to brake pads.
Why Should You Buy AZO?
- Store expansion strategy is justified by its healthy same-store sales
- Collection of products is difficult to replicate at scale and results in a best-in-class gross margin of 51.8%
- Robust free cash flow margin of 10.6% gives it many options for capital deployment
AutoZone is trading at $3,683 per share, or 22.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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. Find your next big winner with StockStory today. Find your next big winner with StockStory today.