Top Retail Stocks

The retail industry provides a variety of finished goods, both durable and nondurable, to individual consumers and households. The industry also sells services. Products sold by retail companies include apparel, electronics, furniture, kitchenware, sporting goods, books, and toys. Some even sell groceries, pharmaceutical products, auto parts, and gardening supplies.

The industry includes traditional brick-and-mortar retailers as well as emerging ecommerce companies. Some of the biggest retail companies include Walmart Inc., Amazon.com Inc., and Costco Wholesale Corp.

Retail sales in the U.S. increased 0.3% in August 2022 despite high inflation, recession fears, and rising interest rates. Spending was supported by declining prices in gasoline, as sales of vehicles, groceries, and clothing grew predominantly.

Retail stocks, as represented by an exchange-traded fund—the SPDR S&P Retail ETF (XRT)—have significantly underperformed the broader market. XRT has provided a total return of -30.3% over the past 12 months, below the S&P 500's total return of -10.7%.

Here are the top three retail stocks with the best value, the fastest growth, and the most momentum. The market performance numbers above and all statistics in the tables below are as of Sept. 13, 2022.

Best Value Retail Stocks

These are the retail stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you’re paying less for each dollar of profit generated.

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• Companhia Brasileira de Distribuição: Companhia Brasileira de Distribuição is a Brazil-based retail company. It operates supermarkets, hypermarkets, electronics and household appliance stores, ecommerce sites, and a distribution network.
• Macy's Inc.: Macy's is an omnichannel retailer selling products primarily in department stores and online under the brands Macy's, Bloomingdale's, and bluemercury. It offers apparel, accessories, home furnishings, cosmetics, and other consumer goods. On Aug. 26, Macy's announced a quarterly dividend of $0.1575 per common share. The dividend is payable Oct. 3 to shareholders as of Sept. 15, 2022.
• MarineMax Inc.: MarineMax is a retailer of recreational boats and yachts, as well as related equipment and services. The company also provides boat financing, insurance, and extended service contracts. On Aug. 9, MarineMax announced it would acquire Island Global Yachting LLC, an owner and operator of marina assets and a yacht management platform. MarineMax will pay $480 million in cash, with an additional potential payment of up to $100 million two years after closing depending upon reaching specified performance targets.

Fastest Growing Retail Stocks

These are the top retail stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Sales and earnings are both critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

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• RumbleON Inc.: RumbleON is a retailer selling powersports vehicles and equipment, including all-terrain vehicles, scooters, and more. The company announced Q2 2022 earnings on Aug. 9. It reported net income of $14.0 million for the quarter compared with net loss for the prior-year quarter, as well as total revenue that more than tripled year-over-year (YOY). Revenue growth was driven primarily by strong performance in the company's Powersports segment. Note that RumbleON does not have an EPS growth figure in the table above because EPS went from negative to positive over the period in question.
• Uxin Ltd.: Uxin is a China-based online used car dealer. The company's platform provides users across China with access to used cars and services, and services. Uxin reported earnings on July 28 for its FY 2022, ended March 31. Uxin saw net income for the quarter compared to a net loss for the prior-year quarter, and revenue more than doubled YOY. Strong growth in both retail vehicle sales and wholesale vehicle sales fueled performance. Note that Uxin does not have an EPS growth figure in the table above because EPS went from negative to positive over the period in question.
• Volta Inc.: Volta is an electric vehicle charging and media company. It provides a network of charging stations located close to popular commercial locations nationwide. Note that Volta does not have an EPS growth figure in the table above because EPS was negative both in latest quarter and in prior-year quarter.

Retail Stocks with the Most Momentum

These are the retail stocks that had the highest total return over the last 12 months.

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• Murphy USA Inc.: Murphy USA is an independent retailer of gasoline products and convenience store merchandise. It also operates a network of terminals for distributing fuel. It serves millions of customers across the U.S.
• Dollar Tree Inc.: Dollar Tree operates a chain of discount variety stores under the names Dollar Tree and Family Dollar. The company sells hardware, consumer goods, batteries, pet food and supplies, and a variety of other goods.
• Dillard’s Inc.: Dillard’s is a retailer of fashion apparel, cosmetics, home furnishing, and other consumer goods. Its merchandise is available in hundreds of locations across the U.S. as well as online. Dillard's reported earnings results for its fiscal Q2, ended July 30, on Aug. 11. Net income declined YOY on a small increase in net sales. The company said that men’s apparel and accessories and cosmetics were among the strongest-selling categories for the period.

Analyzing Retail Stocks

While retail companies can be challenging to analyze as investment opportunities, there are several key metrics that can make the process easier. To analyze retail stocks, investors need to be aware of the most common metrics used, as well as the company-specific and macroeconomic factors that can have an impact on the underlying stock prices.

For example, investors can visit the physical and online store locations, analyze promotional activities, examine gross margin trends, and review sales-per-square-foot data. Other good metrics an investor can review include inventory/receivable trends, same-store sales, P/E ratios, and tangible book values.

The Impact of the Pandemic on Retail Stocks

When economic shutdowns and social-distancing measures caused by the global pandemic first took effect in early 2020, retail companies quickly had to adjust their marketing strategies to meet customers' new wants and needs. The crisis and months of isolation were a boon for retail businesses like hardware stores, grocers and food delivery services, streaming entertainment companies, social media platforms, and ecommerce merchants. Many of these companies' stock prices jumped in the early days of the pandemic.

Since that time, several retailers that benefited from increased time spent at home have shown staying power. Businesses that see these changes in consumer behavior as an opportunity rather than a disadvantage are likely to be the ones that come out on top.

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