Retailers are adapting their business models as technology changes how people shop. Still, demand can be volatile as the industry is exposed to the ups and downs of consumer spending. This has stirred some uncertainty lately as retail stocks have lagged the market over the past six months, posting a return of 11.1% compared to 16.8% for the S&P 500.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one consumer stock boasting a durable advantage and two best left ignored.

Two Consumer Retail Stocks to Sell:

Bath and Body Works (BBWI)

Market Cap: $8.39 billion

Spun off from L Brands in 2020, Bath & Body Works (NYSE:BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.

Why Are We Wary of BBWI?

1. Muted 7.5% annual revenue growth over the last five years shows its demand lagged behind its consumer retail peers
2. Weak same-store sales trends suggest there may be few opportunities in its core markets to open new locations
3. Demand will likely fall over the next 12 months as Wall Street expects flat revenue

At $38.75 per share, Bath and Body Works trades at 11.5x forward price-to-earnings. Read our free research report to see why you should think twice about including BBWI in your portfolio, it’s free.

GameStop (GME)

Market Cap: $11.14 billion

Drawing gaming fans with demo units set up with the latest releases, GameStop (NYSE:GME) sells new and used video games, consoles, and accessories, as well as pop culture merchandise.

Why Should You Sell GME?

1. Lagging same-store sales suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Subpar operating margin of -0.5% constrains its ability to invest in process improvements or effectively respond to new competitive threats
3. Negative returns on capital show management lost money while trying to expand the business

GameStop is trading at $24.80 per share, or 2.1x forward price-to-sales. To fully understand why you should be careful with GME, check out our full research report (it’s free).

One Consumer Retail Stock to Watch:

Warby Parker (WRBY)

Market Cap: $3.24 billion

Founded in 2010, Warby Parker (NYSE:WRBY) designs, manufactures, and sells eyewear, including prescription glasses, sunglasses, and contact lenses, through its e-commerce platform and physical retail locations.

Why Does WRBY Stand Out?

1. Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
2. Differentiated product catalog results in a best-in-class gross margin of 55.1%
3. Free cash flow margin jumped by 1.8 percentage points over the last year, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

Warby Parker’s stock price of $26.91 implies a valuation ratio of 89.1x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking 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 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.