1 Consumer Stock to Consider and 2 That Disappoint

Retail Industry Update: Navigating Challenges and Opportunities

Retailers are adapting to the demands of today's digitally-minded consumers. However, ongoing shifts toward online shopping continue to erode the market share of traditional stores. As a result, retail stocks have faced difficulties, with the sector declining by 1% over the past half-year, while the S&P 500 saw a 6.6% increase.

Spotting Standout Stocks Amid Industry Headwinds

Despite the sector's underperformance, certain companies manage to deliver earnings growth regardless of broader trends. StockStory was created to help investors identify these resilient businesses. Below, we highlight one consumer stock worth watching and two that investors may want to avoid.

Stocks to Consider Selling

GameStop (GME)

Market Cap: $10.84 billion

GameStop (NYSE:GME) attracts gaming enthusiasts with demo stations featuring the latest titles. The company offers new and pre-owned video games, consoles, accessories, and pop culture items.

Reasons to Avoid GameStop:

• GameStop's physical stores are losing relevance as gamers increasingly prefer digital downloads. The company continues to close locations, following hundreds of closures last year.
• The stock price is highly volatile, influenced by meme-stock dynamics and significant Bitcoin purchases, resulting in unpredictable swings.
• On the positive side, GameStop holds substantial cash reserves, giving CEO Ryan Cohen flexibility to invest in Bitcoin or expand into collectibles and trading cards.

Currently, GameStop trades at $24.12 per share, with a forward P/E of 28.3.

Sportsman's Warehouse (SPWH)

Market Cap: $44.25 million

Sportsman's Warehouse (NASDAQ:SPWH) is a specialty retailer catering to outdoor enthusiasts, offering a wide selection of gear and apparel for activities like hunting, fishing, camping, hiking, and shooting sports.

Reasons to Avoid Sportsman's Warehouse:

• Same-store sales have been weak for two years, indicating limited growth opportunities in its main markets.
• Issuing new shares over the past three years has caused earnings per share to drop by 32.6% annually, outpacing revenue declines.
• Declining cash reserves may necessitate fundraising, which could dilute shareholder value.

Sportsman's Warehouse is priced at $1.16 per share, with a forward EV-to-EBITDA ratio of 24.4.

Consumer Retail Stock Worth Watching

Ollie's Bargain Outlet (OLLI)

Market Cap: $6.22 billion

Ollie's Bargain Outlet (NASDAQ:OLLI) operates discount stores, often found in suburban and semi-rural shopping centers. The company purchases surplus inventory and offers it to customers at significant discounts.

Why Ollie's Stands Out:

• The company is rapidly expanding by opening new stores, capitalizing on growth opportunities as reflected in its same-store sales performance.
• Physical locations are seeing increased demand, with same-store sales rising by an average of 3.2% over the past two years.
• Revenue is projected to grow by 14.8% in the coming year, surpassing its three-year average and signaling accelerating momentum.

Ollie's shares are valued at $101.45, with a forward P/E ratio of 24.8. Wondering if now is the right time to invest?

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