The rapid ascent of e-commerce and shifting consumer shopping trends are fundamentally transforming the retail sector. As a result, brick-and-mortar stores are witnessing dwindling foot traffic, squeezed profits and fierce competition. Amid these challenges, choosing the correct brick-and-mortar retail stocks to sell is crucial for long-term portfolio protection.
Boston Consulting Group forecasts e-commerce to seize a substantial 41% share of global retail sales by 2027, up from 18% in 2017. However, despite projections of physical store closures due to sluggish sales and rising operational costs, surveys also show that in-store experiences remain popular among consumers. Thus, it is not all doom and gloom as those retail stocks can adapt and thrive to the changing environment.
Therefore, investors need to exercise due diligence when choosing between brick-and-mortar and e-commerce stocks. So let’s delve into three brick-and-mortar retail stocks to sell in this dynamic landscape.
National Vision Holdings (EYE)
Optical products and services retailer National Vision Holdings (NASDAQ:EYE) offers a compelling mix of brand recognition. It also has a foothold in the eye care landscape. However, negative earnings and competition from online giants dim its outlook. And this positions EYE as a potential brick-and-mortar retail stock to sell.
Management announced Q4 and fiscal 2023 results on Feb. 27. Despite net revenues reaching $506.4 million, up 8% from Q4 of 2022, net loss came in at $16 million. This figure included $4.9 million attributed to expenses related to the termination of their partnership with Walmart (NYSE:WMT).
While National Vision Holdings boasts a strong market presence and diverse product portfolio, it also faces substantial risks. Those include the impending end of its partnership with Walmart. A significant portion of its business still relies on physical stores. This dependence on brick-and-mortar locations renders EYE vulnerable to rising rents and shifting consumer shopping habits.
So far in 2024, EYE stock has declined by over 14% and currently trades around 30 times forward earnings. Thus, recent stock performance and relatively high valuation levels suggest more caution ahead for EYE stock.
Lands’ End (LE)
A longstanding fashion brand, Lands’ End (NASDAQ:LE) is renowned for high-quality apparel and accessories, primarily sold through traditional stores. However, as e-commerce reshapes retail, questions arise about the future of its store presence.
In late March, Lands’ End reported quarterly mixed earnings. It included a 2.8% net revenue decrease and a widened net loss year-over-year (YOY). For the fiscal year 2023, net revenue declined 5.3% as well.
Analysts have been concerned about the negative EPS over the past two fiscal years and prospects for future profitability. Despite positive earnings in the last quarter, management anticipates an adjusted diluted loss ranging from 30 cents to 24 cents per share for Q1 of fiscal 2024.
Yet, LE stock has surged 36% year-to-date (YTD). However, it exhibits high volatility with a beta 2.88. Retail sector dynamics as well as macroeconomic uncertainties suggest that investors should closely monitor LE for developments before hitting the buy button in May.
Zumiez (ZUMZ)
Finally, Zumiez (NASDAQ:ZUMZ) is a prominent specialty retailer focusing on action sports-related apparel, footwear and accessories. Targeting young adults aged 12 to 25, Zumiez offers popular brands synonymous with skateboarding, surfing, snowboarding and motocross lifestyles.
The company’s fourth quarter and full-year 2023 results, released in mid-March, presented a 0.6% increase in net sales to $281.8 million. However, Zumiez reported a net loss of $33.5 million, or $1.73 per share, compared to net income of $11.4 million, or $0.59 per diluted share, in the year-ago quarter.
Investors noted that Zumiez has been facing challenges in the retail sector. The cost of promotional activity and a more discerning consumer base is affecting its financial performance. To address these issues, management closed several underperforming stores stateside. Also, they decided to curtail store expansion in Europe. However, despite these adjustments, Zumiez’s first-quarter 2024 revenue and EPS guidance fell short of analysts’ expectations.
As a result, ZUMZ shares have dropped by 15% YTD, hitting a 52-week low in recent days. Despite the decline, analysts are still cautious, with a 12-month price target of $15 for ZUMZ stock, suggesting a potential downside of 13% from current levels.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines