Consumer prices rose 9.1% from a year ago in June, marking the highest inflation rate since November 1981. However, retail data shows that consumers have been mostly resilient in the face of multi-decade high inflation.
Retail sales rose more than expected last month. The 1% increase in retail sales compared with the Dow Jones estimate of 0.9% reflects a significant improvement from the 0.1% decline in May.
“People are certainly very frustrated with the prices at the checkout stand, but it looks like they have jobs and they’re spending their paychecks despite being so disgruntled with the prices,” said Beth Ann Bovino, chief U.S. economist at S&P Global.
Given this backdrop, we think retail stocks Build-A-Bear Workshop, Inc. (BBW), Ulta Beauty, Inc. (ULTA), and Sally Beauty Holdings, Inc. (SBH) could be wise additions to one’s portfolio.
Build-A-Bear Workshop, Inc. (BBW)
BBW operates as a multi-channel retailer of plush animals and related products. The company operates through three segments Direct-to-Consumer, Commercial, and International Franchising.
BBW’s total revenues increased 28.3% year-over-year to $117.66 million in the fiscal first quarter ended April 2022. Its net income grew 36.7% from the year-ago value to $14.19 million, while its net income per share increased 34.8% year-over-year to $0.89. Also, its EBITDA came in at $21.46 million, up 31.5% from the prior-year quarter.
Analysts expect BBW’s revenue for the fiscal quarter ending July 2022 to come in at $96.67 million, indicating an increase of 2.1% year-over-year. Also, the company’s revenue is expected to grow 10.4% year-over-year to $454.50 million in the ongoing fiscal year. It surpassed the consensus EPS estimates in each of the trailing four quarters.
BBW gained 12% over the past year to close the last trading session at $17.17.
BBW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BBW has an A grade in Quality and a B in Growth and Sentiment. It is ranked #10 of 46 stocks in the Specialty Retailers industry.
Beyond what is stated above, we’ve also rated BBW for Momentum, Value, and Stability. Get all the BBW ratings here.
Ulta Beauty, Inc. (ULTA)
ULTA, a retailer of beauty products in the United States, operates specialty retail stores engaged in selling cosmetics, fragrance, haircare and skincare products, and related accessories and services.
On May 19, the company announced the launch of its retail media network, UB Media, to build on its digital marketing partner program and leverage its Ultamate Rewards members, the biggest community of beauty enthusiasts in the industry. This new capability should deliver a winning digital strategy for ULTA’s brand partners to personalize customer engagement, drive growth, and fuel profits.
For the fiscal quarter ended April 30, 2022, ULTA’s net sales increased 21% year-over-year to $2.35 billion. Its gross profit grew 24.8% from the year-ago value to $941.02 million.
Operating income for the quarter stood at $437.71 million, reflecting a 43.4% increase year-over-year. Moreover, its net income per share was $6.30, up 53.7% from the prior-year quarter.
Street expects ULTA’s revenue in the quarter ending July 2022 to come in at $2.19 billion, indicating an increase of 11.3% year-over-year. Its EPS is expected to improve 7.4% year-over-year to $4.90. ULTA also beat the consensus EPS estimates in each of the trailing four quarters.
ULTA’s shares have gained 22.1% over the past year and 14% over the past nine months to close the last trading session at $408.36.
ULTA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our POWR Ratings system.
The company has an A grade in Quality and a B in Sentiment. The stock is ranked #11 in the same industry. Click here to get ULTA’s Momentum, Value, Stability, and Growth ratings.
Sally Beauty Holdings, Inc. (SBH)
SBH operates as a specialty retailer and distributor of professional beauty supplies through two segments, Sally Beauty Supply and Beauty Systems Group.
On May 31, SBH announced the full repayment of its outstanding balance of $300 million on 8.75% senior secured notes due 2025. “We have made great progress on our balance sheet and leverage ratio over the last two years. Including this debt repayment, we have paid down over $1 billion in debt since September 2020,” said Marlo Cormier, CFO. This demonstrates the company’s robust capital structure.
SBH’s net earnings increased 22.2% year-over-year to $46.81 million in the fiscal second quarter ended March 31, 2022, while its operating earnings improved by 14.5% year-over-year to $86.46 million. Its EPS increased 23.5% from the year-ago value to $0.42 in the same period.
SBH’s EPS for the fiscal quarter ending December 2022 is expected to improve 3.7% year-over-year to $0.65. Also, the consensus EPS estimate of $2.47 for the fiscal year ending September 2023 indicates an increase of 8% year-over-year.
The company has an impressive earnings surprise history as it beat Street EPS estimates in three of the trailing four quarters. SBH has gained 10.5% over the past month to close the last trading session at $13.52.
According to the POWR Ratings, SBH has a B rating in Value and Quality. Within the Specialty Retailers industry, it is ranked #13. Click here to see additional POWR Ratings for Stability, Growth, Momentum, and Sentiment for SBH.
BBW shares were trading at $16.95 per share on Thursday morning, down $0.22 (-1.28%). Year-to-date, BBW has declined -13.17%, versus a -16.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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