Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. Still, secular trends are working against them as e-commerce continues to take share from brick-and-mortar stores. This puts retail stocks in a tough spot, and over the past six months, the industry’s returns were flat while the S&P 500 gained 13.5%.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one resilient consumer stock at the top of our shopping list and two we’re passing on.
Two Consumer Retail Stocks to Sell:
American Eagle (AEO)
Market Cap: $3.03 billion
With a heavy focus on denim, American Eagle Outfitters (NYSE:AEO) is a specialty retailer offering an assortment of apparel and accessories to young adults.
Why Are We Hesitant About AEO?
- Lackluster 4.3% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Lack of new stores puts a ceiling on its growth and reflects a focus on optimizing sales at existing locations
- Low returns on capital reflect management’s struggle to allocate funds effectively
American Eagle’s stock price of $17.92 implies a valuation ratio of 10.2x forward P/E. Dive into our free research report to see why there are better opportunities than AEO.
Arhaus (ARHS)
Market Cap: $1.35 billion
With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ:ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Why Does ARHS Give Us Pause?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Modest revenue base of $1.41 billion gives it less fixed cost leverage and fewer distribution channels than larger companies
- Earnings per share fell by 24.2% annually over the last three years while its revenue grew, showing its incremental sales were much less profitable
At $9.51 per share, Arhaus trades at 18.9x forward P/E. If you’re considering ARHS for your portfolio, see our FREE research report to learn more.
One Consumer Retail Stock to Buy:
O'Reilly (ORLY)
Market Cap: $70.1 billion
Serving both the DIY customer and professional mechanic, O’Reilly Automotive (NASDAQ:ORLY) is an auto parts and accessories retailer that sells everything from fuel pumps to car air fresheners to mufflers.
Why Will ORLY Beat the Market?
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 4.9% growth over the past two years
- Healthy operating margin of 19.4% shows it’s a well-run company with efficient processes
- ROIC punches in at 42.2%, illustrating management’s expertise in identifying profitable investments
O'Reilly is trading at $86.98 per share, or 24.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.