Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. Digitization has been one of the keys to staying competitive against e-commerce rivals, a move that has enabled the industry to grow same-store sales. Consequently, retail stocks have climbed 7.2% over the past six months, nearly mirroring the S&P 500.
Regardless of these results, a cautious approach is imperative as many companies in this space can be value traps. On that note, here is one resilient consumer stock at the top of our shopping list and two best left ignored.
Two Consumer Retail Stocks to Sell:
Designer Brands (DBI)
Market Cap: $334.5 million
Founded in 1969 as a shoe importer and distributor, Designer Brands (NYSE: DBI) is an American discount retailer focused on footwear and accessories.
Why Is DBI Risky?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
- 11× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $6.74 per share, Designer Brands trades at 22.7x forward P/E. If you’re considering DBI for your portfolio, see our FREE research report to learn more.
Petco (WOOF)
Market Cap: $697.5 million
Historically known for its window displays of pets for sale or adoption, Petco (NASDAQ: WOOF) is a specialty retailer of pet food and supplies as well as a provider of services such as wellness checks and grooming.
Why Do We Avoid WOOF?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Earnings per share fell by 42% annually over the last three years while its revenue was flat, partly because it diluted shareholders
- High net-debt-to-EBITDA ratio of 7× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Petco is trading at $2.49 per share, or 12.6x forward P/E. Read our free research report to see why you should think twice about including WOOF in your portfolio.
One Consumer Retail Stock to Watch:
Urban Outfitters (URBN)
Market Cap: $6.38 billion
Founded as a purveyor of vintage items, Urban Outfitters (NASDAQ: URBN) now largely sells new apparel and accessories to teens and young adults seeking on-trend fashion.
Why Are We Fans of URBN?
- Comparable store sales rose by 4.6% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Sales outlook for the upcoming 12 months implies the business will have more momentum than most peers
- Share repurchases over the last three years enabled its annual earnings per share growth of 41.8% to outpace its revenue gains
Urban Outfitters’s stock price of $71.16 implies a valuation ratio of 13.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
