4 Retail-Miscellaneous Stocks With Potential to Beat Industry Blues

Industry Overview - The Retail – Miscellaneous industry is at a critical point as stimulus-driven spending decreases and interest rates remain high, leading consumers to adopt more cautious spending habits [1][3] - The industry includes a variety of retailers, such as those selling sporting goods, beauty products, and specialty items, with profitability reliant on effective pricing, supply chain management, and merchandising strategies [2] Key Industry Trends - The industry faces challenges due to a cautious consumer environment influenced by high inflation, elevated interest rates, and geopolitical tensions, which are altering purchasing patterns [3] - Companies are under pressure to maintain margins as they compete on price, product quality, and speed to market, leading to increased costs in digital investments and operational expenses [4] - There is a focus on expanding product portfolios and market reach through enhanced online experiences, reward programs, and innovative product offerings, particularly in personal care and fitness-related items [5] Digitization and Growth Strategies - Industry participants are investing in digital platforms and optimizing supply chains to adapt to changing consumer shopping behaviors, including curbside pickup and contactless payment solutions [6] - Renovations and improvements in store experiences are being prioritized to keep physical locations relevant in a digital-first shopping environment [6] Market Performance - The Zacks Retail – Miscellaneous industry is currently ranked 197, placing it in the bottom 22% of over 250 Zacks industries, indicating a negative earnings outlook [7][8] - The industry has underperformed compared to the broader Retail – Wholesale sector and the S&P 500, declining 7.3% over the past year, while the S&P 500 rose 20.3% [9] Valuation Metrics - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 16.2X, lower than the S&P 500's 20.31X and the sector's 22.4X, with historical trading ranges between 11.14X and 23.93X over the past five years [10] Company Highlights - Sally Beauty: Focused on customer engagement and innovative concepts, with a trailing four-quarter earnings surprise of 2.1% and a projected EPS growth of 2.7% [11] - Ulta Beauty: Strengthening its omnichannel business and enhancing customer experience, with a trailing four-quarter earnings surprise of 5.8% and projected revenue growth of 9.9% [12] - Five Below: Improving product selection and digital capabilities, with a trailing four-quarter earnings surprise of 5.7% and projected revenue growth of 16% [14] - Arhaus: Benefiting from strong demand and successful product launches, with a trailing four-quarter earnings surprise of 33.5% and projected revenue growth of 4.2% [15]