With the potential for a recession, labor shortages, supply chain constraints and inflation pushing prices higher, some consumers have started to cut back on unnecessary spending to prioritize the essentials, which has continued to contribute to the crippling of specialty retailers like Bed Bath & Beyond Inc. (BBBY, Financial) and others.
Further, a study by Deloitte indicates the slowing economy will likely keep retail sales growth in check this year. The financial advisory service projects, at the baseline, that gross domestic product growth will slow to 0.9% in 2023, down from around 2% last year and 5.9% in 2021.
While the consumer cyclical sector is up year to date, the retail-cyclical industry is down 2.92% over the same period.
Despite the bleak outlook for the traditional retail space, some stocks are still outperforming the S&P 500. As of April 20, the GuruFocus All-in-One Screener, a Premium feature, found several stocks with a market cap greater than $5 billion that had a higher return relative to the index for the period. It also looked at stocks with price-earnings ratios below 25, predictability ranks of at least one out of five stars and are held by at least five gurus.
Based on these criteria, retail stocks that have outperformed the S&P 500 by at least 5% year to date are Ulta Beauty Inc. (ULTA, Financial), Dick’s Sporting Goods Inc. (DKS, Financial) and Tapestry Inc. (TPR, Financial). In comparison, the benchmark index has risen nearly 8%.
Ulta Beauty
Topping the index by approximately 6.86% since the start of the year, Ulta Beauty (ULTA, Financial) has a $27.48 billion market cap; its shares were trading around $547.42 on Thursdaywith a price-earnings ratio of 22.79, a price-book ratio of 14.07 and a price-sales ratio of 2.77.
The Bolingbrook, Illinois-based company operates a chain of beauty stores that sell everything from shampoo and hair tools to makeup and perfume. It also offers beauty services like haircuts and facial waxing.
The GF Value Line suggests the stock is fairly valued currently based on historical ratios, past performance and analysts’ future earnings projections.
At 92 out of 100, the GF Score indicates the company has high outperformance potential. While it received high ratings for profitability, growth and financial strength, the momentum rank was more moderate and the GF Value was low.
Ulta Beauty also has a four-star predictability rank. According to GuruFocus research, companies with this rank return an average of 9.8% annually over a 10-year period.
Of the gurus invested in Ulta Beauty, Jim Simon’s Renaissance Technologies has the largest holding with 0.91% of its outstanding shares. The Harbor Capital Appreciation Fund (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), John Hussman (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Jefferies Group (Trades, Portfolio) also have notable positions in the stock.
Dick’s Sporting Goods
Beating the benchmark by around 11.91% so far this year, Dick’s Sporting Goods (DKS, Financial) has a market cap of $12.61 billion; its shares were trading around $147.32 on Thursday with a price-earnings ratio of 13.68, a price-book ratio of 4.79 and a price-sales ratio of 1.15.
The company, which is headquartered in Coraopolis, Pennsylvania, sells sporting goods through its namesake chain as well as under specialty banners like Golf Galaxy, Field & Stream and Moosejaw, among others.
According to the GF Value Line, the stock is modestly overvalued currently.
The GF Score of 81 suggests the company has good outperformance potential, driven by high ratings for profitability and growth, middling marks for financial strength and momentum and a low GF Value rank.
Dick’s Sporting Goods also has a 3.5-star predictability rank. GuruFocus data shows companies with this rank return, on average, 9.3% annually.
With a 6.01% stake, Steve Mandel (Trades, Portfolio) is the company’s largest guru shareholder. Other gurus invested in Dick’s Sporting Goods are Simons’ firm, Ron Baron (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Hussman, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Paul Tudor Jones (Trades, Portfolio) and Greenblatt.
Tapestry
Eclipsing the benchmark index by around 5.25% over the past several months, Tapestry (TPR, Financial) has a $10.15 billion market cap; its shares were trading around $43 on Thursday with a price-earnings ratio of 12.80, a price-book ratio of 4.39 and a price-sales ratio of 1.65.
The New York-based luxury retailer owns the Coach, Kate Spade and Stuart Weitzman fashion brands.
Based on the GF Value Line, the stock appears to be fairly valued currently.
On the back of a high profitability rating, more moderate momentum and financial strength ranks and low points for growth and GF Value, Tapestry is likely to have average performance going forward due to its GF Score of 73.
The company also has a one-star predictability rank. GuruFocus found companies with this rank return an average of 1.1% annually.
John Rogers (Trades, Portfolio) is Tapestry’s largest guru shareholder with 0.16% of its outstanding shares. The stock is also being held by Robert Olstein (Trades, Portfolio), Greenblatt, Grantham, Chuck Royce (Trades, Portfolio), Ainslie, Jeff Auxier (Trades, Portfolio), Dalio’s firm and David Rolfe (Trades, Portfolio).
