2 Big Retail Winners This Year and 1 Loser

According to the U.S. Department of Commerce, retail sales in the United States remained unchanged in July. Moreover, retail giant Target Corporation’s (TGT) quarterly profit plunged approximately 90% year-over-year in the quarter ended July 30, 2022. However, the company’s management is confident about the company’s near-term performance.

TGT’s Chief Financial Officer, Michael Fiddelke, said, “While our quarterly profit took a meaningful step down, our future path is brighter.”

Furthermore, according to Statista, total retail sales in the United States are projected to reach $7.90 trillion in 2026. Also, the online retail market in the U.S. is estimated to grow at a CAGR of 11.6% from 2021 to 2026.

Therefore, retail winners Ulta Beauty Inc. (ULTA) and Build-A-Bear Workshop, Inc. (BBW) could be ideal additions to your portfolio. However, fundamentally weak Party City Holdco Inc. (PRTY) might be best avoided now.

Stocks to Buy:

Ulta Beauty Inc. (ULTA)

ULTA operates as a retailer of beauty products. The company operates around 1,308 retail stores across 50 states and distributes its products through its website ulta.com and mobile applications.

On August 3, 2022, ULTA launched Prisma Ventures, a digital innovation to invest $20 million in emerging technology start-ups for improved online shopping experiences. This multi-million investment is expected to generate significant profit margins for the company.

ULTA’s net sales came in at $2.30 billion for the second quarter ended July 30, 2022, up 16.8% year-over-year. Its net income increased 17.8% year-over-year to $295.68 million. Moreover, the company’s EPS came in at $5.70, up 25% year-over-year.

Analysts expect ULTA’s revenue to increase 12.9% year-over-year to $9.74 billion in 2023. Its EPS is estimated to increase 17.7% year-over-year to $21.20 in 2023. It has surpassed EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 18.6% to close the last trading session at $442.90.

ULTA’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ULTA has an A grade in Quality and a B grade in Sentiment. Within the Specialty Retailers industry, it is ranked #14 out of 46 stocks. Click here to see ULTA’s additional POWR Ratings for Momentum, Value, Growth, and Stability.

Build-A-Bear Workshop, Inc. (BBW)

BBW operates as a multi-channel retailer of plush animals and related products. The company operates through three segments: Direct-to-Consumer; Commercial; and International Franchising. It runs around 346 stores in total.

On September 1, 2022, Sharon Price John, BBW’s President and CEO, said, “We continue to make progress on our strategic initiatives, including accelerating a broad-reaching and comprehensive digital transformation.”

BBW’s total revenues came in at $100.69 million for the second quarter ended July 30, 2022, up 6.3% year-over-year. Its net retail sales increased 5% year-over-year to $95.88 million. The company’s commercial revenue increased 37.6% year-over-year to $4.10 million.

Street expects BBW’s revenue to increase 11.4% year-over-year to $ 458.51 million in 2023. Its EPS is estimated to increase16.5% year-over-year to $2.76 in 2023. Also, it surpassed EPS estimates in three out of four trailing quarters. BBW’s stock has gained 7.8% intraday to close the last trading session at $14.20.

BBW’s strong fundamentals are reflected in its POWR Ratings. The stock has an A grade for Quality and a B grade for Value. BBW is ranked #17 in the same industry. Click here to see the additional POWR Ratings for BBW (Growth, Momentum, Stability, and Sentiment).

Stock to Avoid:

Party City Holdco Inc. (PRTY)

PRTY designs, manufactures, sources, and distributes party items worldwide. The business is divided into two segments: retail and wholesale.

PRTY’s net sales came in at $527.45 million for the second quarter ended June 30, 2022, down marginally year-over-year. Its gross profit decreased 18.1% year-over-year to $177.97 million. The company’s income from operations came in at $10.67 million, down 82.8% year-over-year.

PRTY’s revenue is expected to decrease marginally year-over-year to $2.16 billion in 2022. Its EPS is estimated to decline 88.2% year-over-year to $0.08 in 2022. Over the past year, the stock has lost 63.2% to close the last trading session at $2.56.

PRTY’s poor fundamentals are reflected in its POWR Ratings. It has an F grade for Growth and Stability and a D for Momentum.

PRTY is ranked #36 in the Specialty Retailers industry. Click here for the additional POWR Ratings for PRTY (Sentiment, Quality, and Value).

ULTA shares were trading at $446.82 per share on Monday afternoon, up $3.92 (+0.89%). Year-to-date, ULTA has gained 8.36%, versus a -12.92% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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