The Next Walmart? 7 Retail Stocks That Investors Shouldn’t Ignore
In the quest to discover the “next Walmart (NYSE:WMT),” investors are always looking for the top retail stocks. These stocks show the potential to dominate the market with their growing influence, substantial market share, and robust financial health.
Following the economic turbulence brought about by the pandemic, which initially fueled a surge in retail stocks, the landscape has since developed.
With the economy rebounding from inflation and high-interest rates and the Federal Reserve’s expected interest rate cuts later this year, retail stocks are on the cusp of a significant upturn.
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With that said, here are seven retail stocks that, much like Walmart, are at the forefront of innovation, scalability, and growth, promising long-term expansion ahead.
Etsy (ETSY)
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Etsy (NASDAQ:ETSY) has established a robust positioning in the online retail realm with its exclusive collection of handmade treasures.
Facing the colossal presence of Amazon, Etsy looks to stand out with its innovative features such as the ‘Gift Mode,’ a sleek, AI-powered tool revolutionizing personalized gifting. Etsy’s innovation prioritizes craftsmanship over mass-market appeal.
Despite the challenges of a competitive market, Etsy maintains its course despite the headwinds of marketing trials. While the dizzying sales growth of the pandemic may not be replicated again, Etsy’s Gross Merchandise Sales are on track for a measured climb.
Its profitability metrics indicate its robust progress. For instance, its gross profit margin, soaring at 70.56%, vastly surpasses the sector median at 35.5%.
Its net income margin, at an impressive 12.30%, and a levered free cash flow margin at an outstanding 20.61% are comfortably ahead of the sector median reflecting its exceptional profitability and fiscal prudence.
Lovesac (LOVE)
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Lovesac (NASDAQ:LOVE) is not just another player in the home furnishings arena; it’s a trailblazer. Its unique sectional offerings are redefining comfort, enabling consumers to shape their living spaces around their lives.
With each piece crafted from recycled materials, Lovesac stands at the epicenter of the circular economy, marrying sustainability with style. Its snappy approach is supported by a direct-to-consumer model and a growing network of showrooms.
Financially, Lovesac is turning heads and opening wallets, with a recent 14.3% year-over-year net sales surge to $154 million, which outstripped predictions.
The company’s earnings dance is even more impressive, where a two-cent loss per share beat estimates of 24 cents. Lovesac’s gross profit margin leap over its 5-year average heralds a robust trajectory of growing profitability.
This narrative is further enriched by the net income margin of 3%, which represents a significant rise from the 5-year average of 1.65%.
Jumia Technologies (JMIA)
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Jumia Technologies (NYSE:JMIA) often hailed as the “Amazon of Africa,” stands on the cusp of a potentially stellar year.
The company targets a vast and mostly untapped market of 1.4 billion people in the African region, and its strategic regional focus provides it with a significant advantage over its competition.
Having weathered the storm of the pandemic and the subsequent economic slowdown, Jumia hasn’t just survived but thrived in efficiently streamlining its operations while bolstering its liquidity and broadening its delivery infrastructure.
The path to profitability, once a distant goal for Jumia, now appears well within reach. Its most recent earnings report is a testament to this, showcasing the smallest loss since the company’s initial public offering five years prior.
Its recent operational improvements are noteworthy, achieving a 71% reduction in quarterly cash burn and a 67% decrease in adjusted EBITDA loss. The growth in gross merchandise value, geographic expansion, and increased customer repeat purchases all point to a company gaining traction.
Ulta Beauty (ULTA)
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Ulta Beauty (NASDAQ:ULTA) is poised for a striking performance this fiscal year, with projections pinning revenue sales between $11 billion and $12 billion. The forecast is supported by consumer demand for skincare and fragrance products.
The company reported heartening results in the fiscal third quarter, with earnings per share at $5.07, surpassing the analysts’ consensus of $4.96, while its sales bloomed to a handsome $2.49 billion, slightly outperforming the expected $2.47 billion.
Further sweetening the outlook, Ulta Beauty has lifted its full-year sales forecast to $11.10 billion to $11.15 billion, a nudge above its previously estimated ceiling.
Financially, Ulta Beauty stands tall with its enviable profitability metrics, which would make any investor blush with optimism. The net income margin has flourished to 11.4%, a leap over the sector’s median of 4.61% and marking a growth of 22.06% from its 5-year average.
Ulta’s return on common equity is perhaps even more dazzling. It’s a staggering 62.6%, which outshines the sector median by 447% and makes this one of the solid retail stocks to own.
Nike (NKE)
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In the shadow of recent turbulence, Nike (NYSE:NKE) emerges as a beacon for patient investors.
The sneaker giant’s stock tumbled by over 12.3% over the last 12 months on the back of a 12% drop in a single day last December following a downbeat sales forecast.
NKE stock trades at a discount across multiple price multiples, making it an attractive prospect for those who can tolerate the near-term volatility.
Analysts at Tipranks assign a ‘moderate buy’ rating to the stock, offering a 16% upside from current price levels.
Further bolstering the case for Nike is a blend of mixed yet optimistic recent earnings. The company’s gross margin witnessed its first bump in 18 months, climbing to a healthy 44.6%.
On top of that, sales in the crucial Chinese market grew by a healthy 10.1%, its fastest growth rate since May last year. Investors in NKE might find themselves in a more favorable position given the stock’s trading below its historical price levels with the likely recovery of the Chinese economy.
Simon Property Group (SPG)
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The tale of Simon Property Group (NYSE:SPG) reads like a phoenix rising from the ashes, emerging remarkably well from the Covid-19 crisis.
As a REIT specializing in high-traffic retail venues, SPG felt the full brunt of the pandemic-led slowdown. Consumer spending has re-surged, fueled by “retail revenge.”
SPG stock has seen its value surge by over 24% in the past six months.
SPG’s fortunes have received a snappy boost from whispers of potential interest rate cuts, which historically invigorate spending. SPG doesn’t just entice with its rebound story; it enthralls investors with a substantial 5.3% yield and a commendable streak of dividend growth.
With a Non-GAAP P/E ratio 30% below the sector median, SPG presents a value proposition as solid as its well-trafficked malls.
This analytical gaze reveals a company on a cautionary yet upward trajectory, evidenced by a stellar fourth quarter showing where it beat funds-from-operation expectations and recorded a significant revenue jump while maintaining an impressive 95.8% occupancy rate.
PDD (PDD)
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PDD (NASDAQ:PDD) has effectively emerged as a formidable contender in the global eCommerce arena, thanks to its platform Temu.
This Chinese online retail titan is effectively replicating its superior domestic strategy internationally, notably in the U.S., by offering stellar discounts and engaging in viral marketing campaigns.
This approach has helped build a solid following for Temu across developed markets, enabling PDD to utilize economies of scale for even more competitive pricing.
The company’s financial growth metrics are impressive, with a year-over-year revenue bump of 68.3%, surpassing the sector’s average of 4.6%.
Its forward-looking sales and EBITDA growth projections stand at 45.2% and 77.2%, respectively, dwarfing sector medians and highlighting PDD’s exceptional growth trajectory and market dominance.
This performance suggests a bright future for PDD, with Tiprank’s analysts assigning a strong buy rating to PDD stock with a 38% upside.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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