Retailers are adapting their business models as technology changes how people shop. But many seem to be moving too slowly as their demand is lagging, causing the industry to underperform the market - over the past six months, retail stocks' 2.2% return has fallen short of the S&P 500’s 7.3% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one consumer stock boasting a durable advantage and two we’re steering clear of.
Two Consumer Retail Stocks to Sell:
Gap (GAP)
Market Cap: $10.11 billion
Operating under the Gap, Old Navy, Banana Republic, and Athleta brands, Gap (NYSE:GAP) is an apparel and accessories retailer selling casual clothing to men, women, and children.
Why Are We Hesitant About GAP?
- Products have few die-hard fans as sales have declined by 1.3% annually over the last three years
- 2.2 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
- Underwhelming 7.7% return on capital reflects management’s difficulties in finding profitable growth opportunities
Gap’s stock price of $27.11 implies a valuation ratio of 12.3x forward P/E. Dive into our free research report to see why there are better opportunities than GAP.
National Vision (EYE)
Market Cap: $2.22 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 Pass on EYE?
- Annual sales declines of 1.6% for the past three years show its products struggled to connect with the market
- Recent store closures reflect a shift toward streamlining existing locations to maximize efficiency
- ROIC of 3.1% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
National Vision is trading at $27.99 per share, or 31.3x forward P/E. Read our free research report to see why you should think twice about including EYE in your portfolio.
One Consumer Retail Stock to Watch:
Boot Barn (BOOT)
Market Cap: $5.66 billion
With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE:BOOT) is a western-inspired apparel and footwear retailer.
Why Are We Fans of BOOT?
- Fast expansion of new stores to reach markets with few or no locations is justified by its same-store sales growth
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 4.8% over the past two years
- Demand for the next 12 months is expected to accelerate above its three-year trend as Wall Street forecasts robust revenue growth of 14.4%
At $186.05 per share, Boot Barn trades at 23.2x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.