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The Retail – Miscellaneous industry finds itself at a pivotal juncture. Underlying inflationary pressure is prompting consumers to be more judicious with their disposable income, leading to soft demand across various merchandise categories. The ripple effect of inflation has also led to increased operational costs for retailers, from higher wages to elevated prices for goods and services. Passing these increased costs on to consumers exacerbates the issue of reduced demand. The ability of the industry to rebound heavily depends on the restoration of consumer purchasing power and confidence.
Nonetheless, the industry participants are proactively addressing the changing consumer environment by emphasizing a superior product strategy, enhancing their omnichannel capabilities and making prudent capital investments. Backed by these initiatives, companies such as DICK'S Sporting Goods, Inc., MarineMax, Inc., Build-A-Bear Workshop, Inc. and BARK, Inc. are well-positioned to seize opportunities that may arise in this changed marketplace.
About the Industry
The Zacks Retail – Miscellaneous industry encompasses a diverse array of retailers, including those specializing in sporting goods, office supplies, specialty products and domestic merchandise. It also features beauty product retailers offering cosmetics, fragrances, skincare, haircare and salon styling tools.
The industry also includes rural lifestyle stores, art and craft specialty outlets and suppliers catering to farmers, ranchers, tradesmen and small businesses. Recreational boat and yacht retailers, along with specialty value retailers targeting tween and teen customers, are also key players. Profitability within this sector hinges on a balanced pricing strategy, efficient supply chain management, effective merchandising tactics and continuous innovation to meet consumer demands and maintain competitive positioning in a dynamic market.
4 Key Industry Trends
Soft Demand May Hit Revenues: Underlying inflationary pressures and geopolitical concerns continue to threaten consumer spending activity, which is crucial for the retail sector. The industry's outlook heavily relies on consumer purchasing power, now strained by higher prices that are putting pressure on family budgets and dampening demand. This situation is further compounded by a decline in U.S. consumer confidence.
According to the latest data from the Conference Board, the index plummeted to 98.7, a sharp drop from August's upwardly revised figure of 105.6. This marks the steepest decline since August 2021. The Present Situation Index, which evaluates consumer views on current business and labor market conditions, also fell by 10.3 points to 124.3.
Pressure on Margins to Linger: Companies in the industry are competing on price, product variety and speed to market. To gain a competitive edge, they have been accelerating investments to strengthen the digital ecosystem and enhance shipping and delivery capabilities. While these efforts drive sales, they also incur high costs.
Any deleverage in the SG&A rate, higher labor and occupancy costs, and increased marketing and store-related expenses may continue to pressure margins. Nonetheless, companies are focused on initiatives to mitigate cost-related challenges, such as streamlining operational structures, optimizing supply networks and adopting effective pricing policies.
Focus on Boosting Portfolio & Market Reach: Most companies in the sector are focused on expanding their product assortment, enhancing the online shopping experience and adopting favorable pricing strategies to boost sales. Key initiatives include building robust omnichannel operations, introducing reward programs, and developing innovative products and services.
There's a noticeable increase in demand for personal care items, domestic merchandise and fitness-related products. To capitalize on these trends, companies are leveraging targeted marketing efforts to fuel sales and broaden their market reach.
Digitization, Key to Growth: With the shift in consumer shopping patterns and behavior, industry participants have been balancing both in-store and online roles. Companies are increasingly directing resources toward digital platforms, accelerating fleet optimization and enhancing their supply chains. Initiatives to expand delivery options, such as curbside pickup and ship-to-home orders, along with contactless payment solutions, have proven beneficial.
Retailers are also investing in store renovations, improved checkouts and mobile point-of-sale capabilities to keep physical stores relevant. By focusing on consumers' product preferences and their inclination toward online shopping, retailers are replenishing shelves with in-demand merchandise and ramping up investments in digitization to drive growth.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Retail – Miscellaneous industry is housed within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #193, which places it in the bottom 23% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates drab near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since the beginning of January 2024, the industry’s earnings estimate has declined by 9.4%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
The Zacks Retail – Miscellaneous industry has underperformed the broader Retail – Wholesale sector and the Zacks S&P 500 composite over the past year.
The industry has advanced 17.9% over this period. Meanwhile, the S&P 500 has risen 33.7%, and the broader sector has increased 34.2% in the said time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing retail stocks, the industry is currently trading at 16.87X compared with the S&P 500’s 21.92X and the sector’s 23.93X.
Over the last five years, the industry has traded as high as 22.26X, as low as 10.97X and at the median of 16.27X.
4 Stocks to Watch
Build-A-Bear Workshop: Build-A-Bear has successfully diversified its consumer base beyond children, tapping into the teen and adult segments. The company's focus on enhancing customer engagement through digital platforms and personalized experiences has strengthened brand loyalty, contributing to increased foot traffic and repeat purchases. Build-A-Bear's diverse product range, including themed and seasonal merchandise, resonates with consumers and helps capitalize on trending market demands. Strategic partnerships and collaborations, as well as a growing global presence through new store locations, amplify its revenue potential.
The Zacks Consensus Estimate for Build-A-Bear’s current financial-year revenues and EPS suggests growth of 1.2% and 8.8%, respectively, from the year-ago reported figure. Shares of this Zacks Rank #2 (Buy) company have jumped 17.1% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DICK'S Sporting Goods: DICK'S Sporting Goods demonstrates strong fundamental health through its successful implementation of an omnichannel strategy that integrates online and in-store experiences, enhancing customer engagement and loyalty. The company’s focus on expanding its House of Sport and Field House concepts is attracting more foot traffic and increasing average transaction values. Robust investments in digital capabilities, particularly through the GameChanger digital platform, position DICK'S to capitalize on the growing youth sports market.
DICK'S Sporting Goods has a trailing four-quarter earnings surprise of 15%, on average. The Zacks Consensus Estimate for current financial-year revenues and EPS suggests growth of 2.1% and 7.7%, respectively, from the year-ago reported figure. Shares of this Zacks Rank #3 (Hold) company have surged 92% in the past year.
MarineMax: The company has showcased impressive resilience despite challenging retail conditions, emphasizing its effective value-creation strategy focused on expanding high-margin, less cyclical revenue streams. The recent formation of the SuperYacht Division illustrates MarineMax's commitment to enhancing operational synergies across its diverse portfolio, enabling it to meet the specialized needs of customers in the growing superyacht segment. Proactive realignment and strategic cost-cutting measures have strengthened cash flow generation and reinforced the resilience of its balance sheet.
MarineMax reported a positive earnings surprise of 11.9% in the last reported quarter. The Zacks Consensus Estimate for current financial-year revenues suggests growth of 3.1% from the year-ago reported figure. Shares of this Zacks Rank #3 company have risen 4.7% in the past year.
BARK: The company is poised for robust growth and improved profitability, driven by a multi-faceted approach to its business model that includes the expansion of product offerings and deepening market penetration. The notable growth in its commerce segment, particularly through strategic partnerships with leading retailers like Amazon and Chewy, underscores strong consumer demand for its innovative products. BARK's recent initiative, BARK Air, has introduced a unique service aimed at dog owners, allowing them to travel with their pets.
The Zacks Consensus Estimate for the current financial year's top and bottom lines implies growth of 2% and 72.7%, respectively, from the year-ago reported figure. Shares of this Zacks Rank #3 company have rallied 36.7% in the past year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights DICK'S Sporting Goods, MarineMax, Build-A-Bear Workshop and BARK
For Immediate Release
Chicago, IL – October 2, 2024 – Today, Zacks Equity Research discusses DICK'S Sporting Goods, Inc. (DKS - Free Report) , MarineMax, Inc. (HZO - Free Report) , Build-A-Bear Workshop, Inc. (BBW - Free Report) and BARK, Inc. (BARK - Free Report) .
Industry: Retail
Link: https://www.zacks.com/commentary/2344277/4-retail-miscellaneous-stocks-to-seize-opportunities-amid-industry-woes
The Retail – Miscellaneous industry finds itself at a pivotal juncture. Underlying inflationary pressure is prompting consumers to be more judicious with their disposable income, leading to soft demand across various merchandise categories. The ripple effect of inflation has also led to increased operational costs for retailers, from higher wages to elevated prices for goods and services. Passing these increased costs on to consumers exacerbates the issue of reduced demand. The ability of the industry to rebound heavily depends on the restoration of consumer purchasing power and confidence.
Nonetheless, the industry participants are proactively addressing the changing consumer environment by emphasizing a superior product strategy, enhancing their omnichannel capabilities and making prudent capital investments. Backed by these initiatives, companies such as DICK'S Sporting Goods, Inc., MarineMax, Inc., Build-A-Bear Workshop, Inc. and BARK, Inc. are well-positioned to seize opportunities that may arise in this changed marketplace.
About the Industry
The Zacks Retail – Miscellaneous industry encompasses a diverse array of retailers, including those specializing in sporting goods, office supplies, specialty products and domestic merchandise. It also features beauty product retailers offering cosmetics, fragrances, skincare, haircare and salon styling tools.
The industry also includes rural lifestyle stores, art and craft specialty outlets and suppliers catering to farmers, ranchers, tradesmen and small businesses. Recreational boat and yacht retailers, along with specialty value retailers targeting tween and teen customers, are also key players. Profitability within this sector hinges on a balanced pricing strategy, efficient supply chain management, effective merchandising tactics and continuous innovation to meet consumer demands and maintain competitive positioning in a dynamic market.
4 Key Industry Trends
Soft Demand May Hit Revenues: Underlying inflationary pressures and geopolitical concerns continue to threaten consumer spending activity, which is crucial for the retail sector. The industry's outlook heavily relies on consumer purchasing power, now strained by higher prices that are putting pressure on family budgets and dampening demand. This situation is further compounded by a decline in U.S. consumer confidence.
According to the latest data from the Conference Board, the index plummeted to 98.7, a sharp drop from August's upwardly revised figure of 105.6. This marks the steepest decline since August 2021. The Present Situation Index, which evaluates consumer views on current business and labor market conditions, also fell by 10.3 points to 124.3.
Pressure on Margins to Linger: Companies in the industry are competing on price, product variety and speed to market. To gain a competitive edge, they have been accelerating investments to strengthen the digital ecosystem and enhance shipping and delivery capabilities. While these efforts drive sales, they also incur high costs.
Any deleverage in the SG&A rate, higher labor and occupancy costs, and increased marketing and store-related expenses may continue to pressure margins. Nonetheless, companies are focused on initiatives to mitigate cost-related challenges, such as streamlining operational structures, optimizing supply networks and adopting effective pricing policies.
Focus on Boosting Portfolio & Market Reach: Most companies in the sector are focused on expanding their product assortment, enhancing the online shopping experience and adopting favorable pricing strategies to boost sales. Key initiatives include building robust omnichannel operations, introducing reward programs, and developing innovative products and services.
There's a noticeable increase in demand for personal care items, domestic merchandise and fitness-related products. To capitalize on these trends, companies are leveraging targeted marketing efforts to fuel sales and broaden their market reach.
Digitization, Key to Growth: With the shift in consumer shopping patterns and behavior, industry participants have been balancing both in-store and online roles. Companies are increasingly directing resources toward digital platforms, accelerating fleet optimization and enhancing their supply chains. Initiatives to expand delivery options, such as curbside pickup and ship-to-home orders, along with contactless payment solutions, have proven beneficial.
Retailers are also investing in store renovations, improved checkouts and mobile point-of-sale capabilities to keep physical stores relevant. By focusing on consumers' product preferences and their inclination toward online shopping, retailers are replenishing shelves with in-demand merchandise and ramping up investments in digitization to drive growth.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Retail – Miscellaneous industry is housed within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #193, which places it in the bottom 23% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates drab near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. Since the beginning of January 2024, the industry’s earnings estimate has declined by 9.4%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
The Zacks Retail – Miscellaneous industry has underperformed the broader Retail – Wholesale sector and the Zacks S&P 500 composite over the past year.
The industry has advanced 17.9% over this period. Meanwhile, the S&P 500 has risen 33.7%, and the broader sector has increased 34.2% in the said time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing retail stocks, the industry is currently trading at 16.87X compared with the S&P 500’s 21.92X and the sector’s 23.93X.
Over the last five years, the industry has traded as high as 22.26X, as low as 10.97X and at the median of 16.27X.
4 Stocks to Watch
Build-A-Bear Workshop: Build-A-Bear has successfully diversified its consumer base beyond children, tapping into the teen and adult segments. The company's focus on enhancing customer engagement through digital platforms and personalized experiences has strengthened brand loyalty, contributing to increased foot traffic and repeat purchases. Build-A-Bear's diverse product range, including themed and seasonal merchandise, resonates with consumers and helps capitalize on trending market demands. Strategic partnerships and collaborations, as well as a growing global presence through new store locations, amplify its revenue potential.
The Zacks Consensus Estimate for Build-A-Bear’s current financial-year revenues and EPS suggests growth of 1.2% and 8.8%, respectively, from the year-ago reported figure. Shares of this Zacks Rank #2 (Buy) company have jumped 17.1% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DICK'S Sporting Goods: DICK'S Sporting Goods demonstrates strong fundamental health through its successful implementation of an omnichannel strategy that integrates online and in-store experiences, enhancing customer engagement and loyalty. The company’s focus on expanding its House of Sport and Field House concepts is attracting more foot traffic and increasing average transaction values. Robust investments in digital capabilities, particularly through the GameChanger digital platform, position DICK'S to capitalize on the growing youth sports market.
DICK'S Sporting Goods has a trailing four-quarter earnings surprise of 15%, on average. The Zacks Consensus Estimate for current financial-year revenues and EPS suggests growth of 2.1% and 7.7%, respectively, from the year-ago reported figure. Shares of this Zacks Rank #3 (Hold) company have surged 92% in the past year.
MarineMax: The company has showcased impressive resilience despite challenging retail conditions, emphasizing its effective value-creation strategy focused on expanding high-margin, less cyclical revenue streams. The recent formation of the SuperYacht Division illustrates MarineMax's commitment to enhancing operational synergies across its diverse portfolio, enabling it to meet the specialized needs of customers in the growing superyacht segment. Proactive realignment and strategic cost-cutting measures have strengthened cash flow generation and reinforced the resilience of its balance sheet.
MarineMax reported a positive earnings surprise of 11.9% in the last reported quarter. The Zacks Consensus Estimate for current financial-year revenues suggests growth of 3.1% from the year-ago reported figure. Shares of this Zacks Rank #3 company have risen 4.7% in the past year.
BARK: The company is poised for robust growth and improved profitability, driven by a multi-faceted approach to its business model that includes the expansion of product offerings and deepening market penetration. The notable growth in its commerce segment, particularly through strategic partnerships with leading retailers like Amazon and Chewy, underscores strong consumer demand for its innovative products. BARK's recent initiative, BARK Air, has introduced a unique service aimed at dog owners, allowing them to travel with their pets.
The Zacks Consensus Estimate for the current financial year's top and bottom lines implies growth of 2% and 72.7%, respectively, from the year-ago reported figure. Shares of this Zacks Rank #3 company have rallied 36.7% in the past year.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks Investment Research
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.