The specialty retailer industry is expanding significantly due to rapid urbanization, rising disposable incomes, and continued technological innovation. Also, there is an increasing demand for niche products and personalized shopping experiences among consumers, boosting the sector’s growth.

Considering these factors, investors eyeing April gains may consider investing in fundamentally sound specialty retailer stocks SK Murphy USA Inc. (MUSA), Torrid Holdings Inc. (CURV), and The ODP Corporation (ODP).

Investments in e-commerce platforms, digital marketing, and omnichannel integration enable specialty retailers to reach a broader customer base, offer seamless shopping experiences, and capitalize on the increasing trend of online shopping worldwide. Last year, global retail e-commerce sales reached $5.80 trillion.

Further, projections suggest a 39% growth in this figure, with expectations to exceed $8 trillion by 2027. In 2024, retail e-commerce sales are estimated to surpass $6.30 trillion, continuing the upward trend.

Besides, U.S. retail sales bounced back in February amid higher gas prices. The Commerce Department reported a 0.6% increase in retail sales, following January’s 1.1% decline. While slightly below economists’ expectations, these figures indicate a positive trend in consumer spending.

Moreover, the specialty retailer sector in the U.S. is poised for continued growth as retailers adapt to changing consumer preferences, embrace e-commerce opportunities, prioritize experiential retail, and respond to sustainability trends. The global specialty retailers market is projected to reach $42.70 billion by 2031, expanding at a CAGR of 4%.

Considering these conducive trends, let’s assess the fundamentals of the three Specialty Retailers industry stock picks, beginning with the third choice.

Stock #3: Murphy USA Inc. (MUSA)

MUSA specializes in retailing motor fuel and convenience items through its Murphy USA, Murphy Express, and QuickChek brands. The company’s extensive network of retail gasoline stores spans the Southeast, Southwest, and Midwest regions of the United States.

On March 7, 2024, MUSA paid a quarterly cash dividend of $0.42 per common share. The company pays $1.68 annually, which translates to a yield of 0.40% on the prevailing price level, higher than its four-year average dividend yield of 0.39%. The company’s dividend payouts have grown at a CAGR of 47.4% over the past three years.

On February 7, the company announced that it repurchased approximately 442.20 thousand common shares for $162 million at an average price of $366.42 per share during the fourth quarter of 2023. For the fiscal year 2023, the company repurchased slightly more than 1 million shares for a total of $336.20 million at an average of $327.55 per share.

MUSA’s trailing-12-month ROTA of 12.83% is 205.1% higher than the industry average of 4.20%. Likewise, the stock’s trailing-12-month asset turnover ratio of 4.55x is 355.1% higher than the 1x industry average.

During the fourth quarter, which ended December 31, 2023, MUSA reported total operating revenues of $5.07 billion. The company’s income from operations and net income grew 25.2% and 27.4% year-over-year to $217.20 million and $150 million, respectively. Moreover, its adjusted EBITDA rose 19.5% from the prior-year quarter to $275.20 million.

Further, MUSA’s total fuel contribution increased 6.2% from the previous year’s quarter to 32.5 cpg.

Analysts expect MUSA’s revenue to be $21.34 billion for the fiscal year ending December 2024. Its EPS for the same period is estimated to grow 7.6% year-over-year to $27.57. Moreover, the company surpassed consensus EPS estimates in three of the trailing four quarters, which is promising.

MUSA’s shares have surged 63.9% over the past year and 33% over the past nine months to close the last trading session at $413.22.

MUSA’s POWR Ratings reflect this strong outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.

The stock has a B grade for Quality. In the Specialty Retailers industry, MUSA is ranked #9 among 43 stocks.

To access additional ratings for MUSA’s Growth, Value, Momentum, Stability, and Sentiment, click here.

Stock #2: Torrid Holdings Inc. (CURV)

CURV specializes in women’s plus-size apparel and intimates in the North American market, offering products under the Torrid and Torrid Curve brand names. Its diverse range includes tops, bottoms, dresses, activewear, intimates, accessories, footwear, and beauty products, available both online and in physical stores.

CURV’s trailing-12-month levered FCF margin of 6.67% is 19.3% higher than the industry average of 5.59%. Also, the stock’s trailing-12-month asset turnover ratio of 2.29x is 129.7% higher than the 1x industry average.

CURV reported net sales of $293.54 million in the fourth quarter that ended February 3, 2024. The company’s gross profit and income from operations rose 5.2% and 59.6% from the year-ago quarter to $101.16 million and $4.02 million, respectively. As of February 3, 2024, its total liabilities reduced to $688.66 million, compared to its total liabilities of $757.49 million as of January 28, 2023.

For the fiscal year ending January 2025, analysts expect CURV’s revenue to be $1.14 billion. Its EPS for the same period is estimated to grow 56.1% year-over-year to $0.17. Additionally, the company surpassed consensus revenue estimates in three of the trailing four quarters.

Shares of CURV have soared 132.3% over the past six months to close the last trading session at $4.60.

CURV’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

CURV has a B grade for Sentiment and Quality. Within the same industry, it is ranked #8.

Click here for CURV’s additional ratings for Growth, Value, Momentum, and Stability.

Stock #1: The ODP Corporation (ODP)

ODP provides business services, supplies, and digital workplace solutions to a diverse range of businesses. The company offers office essentials, technology products, and procurement services through business segments, including ODP Business Solutions and Office Depot.

On March 4, 2024, ODP teamed up with Matthews South to optimize its $1 billion share repurchase program, focusing on capital allocation strategy and shareholder value. They aim to leverage data-driven analytics for efficient execution while remaining flexible to market conditions.

Also, on February 28, the company reported that it had repurchased 672 thousand shares for $32 million during the fourth quarter of 2023, totaling 6 million shares at $298 million for the full fiscal year.

ODP’s trailing-12-month asset turnover ratio of 1.95x is 95.1% higher than the industry average of 1x. Similarly, the stock’s trailing-12-month cash per share of $10.61 is 285.5% higher than the $2.75 industry average.

In the fourth quarter that ended December 30, 2023, ODP reported sales of $1.81 billion. The company posted adjusted EBITDA and free cash flow of $73 million and $43 million, respectively. Moreover, its adjusted EPS from continuing operations grew 8.2% year-over-year to $0.92.

For the fiscal year 2024, the company anticipates adjusted EBITDA of $410 million to $430 million and adjusted operating income of $280 million to $300 million, with adjusted EPS expected to range between $5.60 and $5.80. In addition, adjusted free cash flow is projected to exceed $200 million for the year.

Street anticipates ODP to report revenue of $7.57 billion for the fiscal year ending December 2024. Its EPS for the same fiscal year is expected to grow 2.3% year-over-year to $5.73. Also, the company topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 8.6% over the past six months and 16% over the past year to close the last trading session at $50.88.

ODP’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

ODP has a B grade for Value and Quality. Within the same industry, ODP is ranked #6.

In addition to the POWR Ratings stated above, access ODP’s Growth, Momentum, Stability, and Sentiment ratings here.

What To Do Next?

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MUSA shares were trading at $413.74 per share on Friday morning, up $0.52 (+0.13%). Year-to-date, MUSA has gained 16.16%, versus a 8.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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