4 Retail Stocks Holding Up Despite Sales Decline for Second Month

U.S. retail sales declined for the second straight month in May, signaling a more cautious behavior among American consumers. According to the Commerce Department, retail sales fell 0.9% month over month to $715.4 billion, following a revised reading of a 0.1% decrease in April. This was the steepest monthly fall witnessed since January. The weaker-than-expected results point to underlying pressures impacting consumer confidence and purchasing patterns.

The drop in retail activity was primarily due to reduced purchases of motor vehicles (down 3.5%), which had previously seen a surge as consumers rushed to buy ahead of potential tariff increases. Building materials and gasoline also posted notable declines of 2.7% and 2%, respectively, adding to the broader weakness. Out of 13 major retail categories tracked by the Commerce Department, more than half reported lower sales in May.

Tariff threats and geopolitical tensions appear to be taking a toll on consumer sentiment. The earlier spike in March sales now looks like a response to anticipated economic headwinds rather than the beginning of a sustained spending wave. With both global and domestic uncertainties mounting, it is prudent to invest in retail stocks — Sprouts Farmers Market, Inc. SFM, Urban Outfitters, Inc. URBN, BJ's Wholesale Club Holdings, Inc. BJ and Costco Wholesale Corporation COST — that are better positioned to navigate shifts in consumer behavior.

Past-Year Stock Price Performance of SFM, URBN, BJ & COST

4 Prominent Stocks

Sprouts Farmers: Product Innovation & Competitive Pricing

Sprouts Farmers, operating in a highly fragmented grocery industry, is a compelling option. The company has adopted a multifaceted approach to expand its customer base and cater to evolving consumer preferences. Through product innovation, targeted marketing and competitive pricing, Sprouts Farmers ensures that its offerings resonate with its diverse customer base. The company’s commitment to offering fresh, natural and organic products aligns with the growing consumer demand for healthier food options. Its store expansion and growing private label mix reflect solid momentum ahead. 

The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings per share (EPS) implies growth of 13.7% and 35.5%, respectively, from the year-ago reported figure. SFM, which sports a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 16.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Urban Outfitters: Multi-Brand Strength & Digital Reach

URBN’s major brands — Anthropologie, Free People and Urban Outfitters — are showing momentum across both digital and physical channels, driven by curated assortments, brand-right pricing and improved marketing execution. Growth in newer concepts like FP Movement and Nuuly adds to URBN’s multi-brand leverage, expanding its reach and deepening customer engagement. Across the board, a focus on customer acquisition, full-price selling and creative content is enhancing profitability. Strategic initiatives such as store optimization, supply-chain agility and international synergies further reinforce Urban Outfitters’ long-term growth potential.

The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 8.5% and 22.2%, respectively, from the year-ago reported figure. URBN, which sports a Zacks Rank #1, has a trailing four-quarter earnings surprise of 29%, on average. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

BJ's Wholesale: Membership & Digitization Drive Growth

BJ's Wholesale continues to demonstrate strong performance, fueled by its strategic focus on membership growth and digital innovations. The company remains committed to enhancing omnichannel capabilities and providing value to customers. These endeavors have contributed to growth in membership signups and renewals, resulting in higher membership fee income. Offering members convenient options such as same-day delivery, curbside pick-up, and buy online and pick up in-club, the company ensures an engaging and seamless digital shopping experience. BJ's Wholesale has been steadily increasing its footprint, targeting high-growth regions and underserved markets. 

The Zacks Consensus Estimate for BJ's Wholesale’s current financial-year sales and EPS suggests growth of 5.5% and 6.2%, respectively, from the year-ago reported figure. BJ, which carries a Zacks Rank #3 (Hold), has a trailing four-quarter earnings surprise of 17.7%, on average.

Costco: Leveraging Membership Model for Success

Costco has navigated market ups and downs effectively, driven by strategic investments, a customer-centric approach, merchandise initiatives and a strong emphasis on memberships. By identifying untapped markets and tailoring offerings to customer preferences, Costco has deepened its market presence. The company’s high membership renewal rates, efficient supply chain management and bulk purchasing power ensure competitive pricing and foster strong customer loyalty.

The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS calls for growth of 8% and 12%, respectively, from the year-ago reported figure. COST, which carries a Zacks Rank #3, has a trailing four-quarter earnings surprise of 0.4%, on average.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research