Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. This includes developing an online presence to fend off e-commerce competitors, a strategy that has helped the industry maintain steady demand by giving it more sales channels. In turn, retail stocks were up 20% over the past six months compared to 13.4% for the S&P 500.
Although these companies have produced results lately, investors must be mindful as many companies in this space face structural headwinds. On that note, here is one resilient consumer stock at the top of our shopping list and two we’re steering clear of.
Two Consumer Retail Stocks to Sell:
Gap (GAP)
Market Cap: $10.1 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 Cautious About GAP?
- Annual sales declines of 1.3% for the past three years show its products struggled to connect with the market
- 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
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Gap’s stock price of $27.21 implies a valuation ratio of 12.7x forward P/E. Check out our free in-depth research report to learn more about why GAP doesn’t pass our bar.
Sleep Number (SNBR)
Market Cap: $192.3 million
Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ: SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.
Why Are We Out on SNBR?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
Sleep Number is trading at $8.45 per share, or 15x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SNBR.
One Consumer Retail Stock to Watch:
Ollie's (OLLI)
Market Cap: $6.77 billion
Often located in suburban or semi-rural shopping centers, Ollie’s Bargain Outlet (NASDAQ: OLLI) is a discount retailer that acquires excess inventory then sells at meaningful discounts.
Why Are We Fans of OLLI?
- Rapid rollout of new stores to capitalize on market opportunities makes sense given its strong same-store sales performance
- Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 3.2% 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 14.8%
At $110.50 per share, Ollie's trades at 25.2x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
