The online shopping boom has significantly transformed the retail industry, with technology playing a significant role in the industry's evolution. Moreover, the smart retail market is projected to surge in the coming years, with AI, VR, AR, and IoT driving innovation across the sector.
Hence, I think it might be wise to invest in quality retail stocks Ulta Beauty, Inc. (ULTA), Murphy USA Inc. (MUSA), and Yatsen Holding Limited (YSG).
The growing use of cutting-edge technologies, such as Artificial Intelligence, Virtual Reality, Augmented Reality, and the Internet of Things, are expected to enhance the shopping experience for customers, streamline inventory management, and improve overall store operations is expected to expand the smart retail market.
The smart retail market is expected to grow at a CAGR of 24.4% to $82.68 billion in 2026.
Moreover, post-pandemic, e-commerce has shifted from a stand-alone sales phenomenon to being one part of consumers’ shopping experiences. According to the National Retail Federation (NRF), e-commerce sales are projected to rise 10 to 12%, increasing between $1.41 trillion and $1.43 trillion this year.
In addition, NRF predicted last month that retail sales would increase by 4-6% this year. Total retail sales for the year is estimated to reach between $5.13 trillion and $5.23 trillion.
As per Matthew Shay, President and CEO of NRF, “In just the last three years, the retail industry has experienced growth that would normally take almost a decade by pre-pandemic standards. While we expect growth to moderate in the year ahead, it will remain positive as retail sales stabilize to more historical levels.
Take a look at the stocks mentioned above:
Ulta Beauty, Inc. (ULTA)
ULTA operates specialty retail stores selling cosmetics, fragrances, haircare, skincare products, and related accessories and services in the United States.
ULTA’s trailing-12-month gross profit margin of 43.59% is 24.2% higher than the 35.11% industry average. Its trailing-12-month net income margin of 12.17% is 175% higher than the 4.43% industry average.
During the fourth quarter of fiscal 2022, the company repurchased 722,457 shares of its common stock at a cost of $328.1 million. As of January 28, 2023, $1.10 billion remained available under the company’s $2.0 billion share repurchase program announced in March 2022.
During the fiscal fourth quarter that ended January 28, 2023, ULTA’s net sales increased 18.2% year-over-year to $3.27 billion. Net income grew 17.8% year-over-year to $340.75 million, while its EPS increased 22.3% year-over-year to $6.68.
ULTA’s EPS is expected to increase 7.6% year-over-year to $6.78 for the fiscal first quarter ending April 2023. The company’s revenue for the same quarter is expected to increase 11.2% year-over-year to $2.61 billion. Additionally, it has topped consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of ULTA have gained 41.4% over the past six months to close the last trading session at $541.37.
ULTA’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality and a B in Growth and Sentiment. It is ranked #14 out of 44 stocks in the Specialty Retailers industry.
Beyond what is stated above, we’ve also rated ULTA for Value, Stability, and Momentum. Get all ULTA ratings here.
Murphy USA Inc. (MUSA)
MUSA engages in the marketing of retail motor fuel products and convenience merchandise. The company operates retail stores under the Murphy USA, Murphy Express, and QuickChek brands.
Its trailing-12-month asset turnover ratio of 5.20x is 401.3% higher than the 1.04x industry average. Its trailing-12-month return on total capital of 20.29% is 220.3% higher than the 6.34% industry average.
On February 29, 2023, MUSA declared a quarterly cash dividend of $0.37 per share, or $1.48 per share on an annualized basis, reflecting a 6% increase from the prior quarter. The dividend was paid on March 1, 2023,
The company pays an annual dividend of $1.48, which translates to a yield of 0.54% at the current price level. It has a four-year average dividend yield of 0.28%.
MUSA's total operating revenues rose 12.6% year-over-year to $5.37 billion in the fourth quarter that ended December 31, 2022. The company’s net income increased 8.2 year-over-year to $117.7 million, while its EPS increased 23.2% year-over-year to $5.21.
Street expects MUSA’s revenue for the fiscal first quarter ended March 2023 to be $4.92 billion. The company’s EPS is expected to be $4.28 for the same quarter. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters.
The stock has gained 10.5% over the past month to close the last trading session at $273.45.
MUSA’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
MUSA has a B grade for Quality and Value. It is ranked #13 in the same industry.
Click here to see the additional POWR Ratings for MUSA (Growth, Momentum, Sentiment, and Stability).
Yatsen Holding Limited (YSG)
Headquartered in Guangzhou, China, YSG develops and sells beauty products under the Perfect Diary, Little Ondine, Pink Bear, Abby's Choice, GalÃnic, DR.WU, Eve Lom, and EANTiM brands in the People's Republic of China.
Its trailing-12-month gross profit margin of 67.96% is 116% higher than the 31.46% industry average.
YSG’s total net revenues from skincare brands increased 42.4% year-over-year to RMB471.6 million ($68.4 million) in the fourth quarter, which ended December 31, 2022. Its non-GAAP net income came in at RMB34.68 million ($5.03 million), as compared with a non-GAAP net loss of RMB335.12 million in the prior-year quarter.
Also, its non-GAAP net income attributable to ordinary shareholders per class A and class B ordinary share came in at RMB0.02, compared to a loss per share of RMB0.13 in the prior-year quarter.
Analysts expect YSG’s revenue for the fiscal first quarter that ended March 2023 to be $96.12 million. Additionally, it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 68.6% over the past six months to close the last trading session at $1.03.
YSG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
YSG also has an A grade for Growth and a B in Value. It is ranked #11 within the same industry.
To access additional ratings for YSG’s Quality, Stability, Sentiment and Momentum, click here.
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ULTA shares were trading at $544.28 per share on Monday morning, up $2.91 (+0.54%). Year-to-date, ULTA has gained 16.03%, versus a 8.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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