The specialty retail sector is resilient due to robust consumer spending, easing inflation, low unemployment rates, increased disposable income, and retailers’ adaptation to changing consumer preferences. Therefore, it could be wise to own fundamentally strong retailer stocks MINISO Group Holding Limited (MNSO - Get Rating), Murphy USA Inc. (MUSA - Get Rating)  and Aeon Co., Ltd. (AONNY - Get Rating).

According to WalletHub’s consumer spending poll, Americans spent $1.57 trillion in October, a $4.04 billion increase from the previous month. Increased disposable income, a better employment market, and the holiday shopping season boost consumer spending.

The National Retail Federation and Prosper Insights & Analytics reported a record 200.4 million US consumers shopping during the five-day holiday weekend from Thanksgiving Day through Cyber Monday, surpassing last year’s 196.7 million. Online shopping and holiday season discounts have led to a surge in consumer participation, indicating strong consumer confidence and increasing retailer importance.

The global specialty retailers market is expected to be worth $42.7 billion by 2031, growing at a 4% CAGR. The retail market involves distributing products to customers through associations, sole dealers, and organizations, buying from wholesalers or producers, breaking stock, making it accessible for purchase, and delivering.

Considering these conducive trends, let’s take a look at the fundamentals of the three best Specialty Retailers stocks, starting with number 3.

Stock #3: MINISO Group Holding Limited (MNSO - Get Rating)

Guangzhou, China-based MNSO retails lifestyle products and pop toy products in China, Asia, the United States, and Europe. The company offers products in various categories, including home décor products, small electronics, textiles, accessories, beauty tools, toys, cosmetics, personal care products, snacks, fragrances and perfumes, and stationeries and gifts under the MINISO and WonderLife brand names.

MNSO’s trailing-12-month EBITDA margin of 19.94% is 80.6% higher than the 11.04% industry average. Its trailing-12-month levered FCF margin of 10.98% is 112% higher than the 5.18% industry average.

For the fiscal first quarter ended September 30, 2023, MNSO’s revenue rose 36.7% year-over-year to RMB3.79 billion ($519.62 million). Its gross profit increased 52.4% over the prior-year quarter to RMB1.58 billion ($217.06 million). The company’s profit for the period increased 34.6% year-over-year to RMB618.28 million ($84.74 million). Also, its EPS for ordinary shares came in at RMB0.49, representing an increase of 48.5% year-over-year.

Analysts expect MNSO’s revenue to increase 31.8% year-over-year to $2.07 billion for the year ending June 2024. Its EPS is expected to grow 36.1% year-over-year to $1.09 for the same period. It surpassed EPS estimates in all four trailing quarters. Shares of MNSO have gained 85.8% over the past year to close the last trading session at $20.70.

MNSO’s POWR Ratings reflect its solid prospects. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #14 out of 42 stocks in the Specialty Retailers industry. It has a B grade for Growth, Momentum, Sentiment, and Quality. Click here to see the other ratings of MNSO for Value and Stability.

Stock #2: Murphy USA Inc. (MUSA - Get Rating)

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.

MUSA’s trailing-12-month ROTA of 12.18% is 207% higher than the 3.97% industry average. Its trailing-12-month ROCE of 65.15% is 482.34% higher than the 11.19% industry average.

MUSA’s total operating revenue for the third quarter (ended September 30, 2023) amounted to $5.79 billion, while its net income and EPS amounted to $167.70 million and $7.69, respectively. During the same period, the company’s cash and cash equivalents came in at $124.80 million, increasing significantly compared to $60.50 million as of December 31, 2022.

Street expects MUSA’s revenue to increase 2.2% year-over-year to $22.60 billion for the year ending December 2024. Its EPS is expected to grow at 6.3% year-over-year to $26.14 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock gained 40.8% over the past nine months to close the last trading session at $365.11.

It’s no surprise that MUSA has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value and Quality. It is ranked #7 in the same industry.

Beyond what is stated above, we’ve also rated MUSA for Growth, Sentiment, Momentum and Stability. Get all MUSA ratings here.

Stock #1: Aeon Co., Ltd. (AONNY - Get Rating)

Headquartered in Chiba, Japan, AONNY operates in the retail industry through General Merchandise Store (GMS) Business; Discount Store Business; Supermarket (SM) Business; Health and Wellness Business; Financial Services Business; Shopping Center Development Business; Services and Specialty Store Business; International Business, and Other Business segments.

AONNY’s trailing-12-month gross profit margin of 36.90% is 8.9% higher than the industry average of 33.89%. Its trailing-12-month CAPEX / Sales of 4.31% is 34.5% higher than the industry average of 3.21%.

For the six-month period, which ended on August 31, 2023, AONNY’s operating revenue increased 4.9% year-over-year to ¥4.71 trillion ($31.19 billion), while its gross profit rose 6.6% from the year-ago value to ¥1.17 trillion ($7.75 billion). In addition, the company’s operating profit came in at ¥117.62 billion ($778.96 million), up 22.7% year-over-year.

The consensus revenue estimate of $63.37 billion for the year ending February 2024 represents a significant increase year-over-year. AONNY’s shares have gained 9.7% over the past nine month to close the last trading session at $20.67

AONNY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It is ranked #3 in the same industry. It has a B grade for Growth, Stability and Quality. To see additional AONNY’s ratings for Value, Momentum and Sentiment, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

MNSO shares were trading at $21.28 per share on Wednesday morning, up $0.58 (+2.80%). Year-to-date, MNSO has gained 101.29%, versus a 20.84% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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