Despite surging prices of commodities, consumer spending remained resilient during the holiday season in 2022. Holiday retail sales rose 7.6%, fueled by clothing and restaurants, surpassing the 7.1% estimates of Mastercard SpendingPulse.

Moreover, the retail industry is expected to stay buoyed in the coming years by expanding the resale goods market and evolving e-commerce.

On top of it, December’s consumer confidence index peaked at 108.3, up sharply from 101.4 in November. Returning consumer confidence could bode well for the retail sector. Alongside good consumer health, easing supply chain costs are expected to improve retailers’ margins.

Given this backdrop, fundamentally strong retail stocks Ulta Beauty, Inc. (ULTA), BJ’s Wholesale Club Holdings, Inc. (BJ), and J.Jill, Inc. (JILL) might be wise additions to your portfolio now.

Ulta Beauty, Inc. (ULTA)

ULTA operates as a retailer of beauty products. The company’s offerings include cosmetics, fragrances, skincare and haircare products, bath and body products, salon styling tools, professional hair products, salon services, and nail services.

ULTA’s trailing-12-month gross profit margin of 43.75% is 22.7% higher than the industry average of 35.65%. Also, its trailing-12-month EBIT margin of 16.09% is 102.2% higher than the industry average of 7.96%.

ULTA’s net sales increased 17.2% year-over-year to $2.34 billion for the third quarter ended October 29, 2022. The company’s gross profit increased 22% year-over-year to $962.82 million. Its net income increased 27.5% year-over-year to $274.59 million. Also, its EPS came in at $5.34, representing an increase of 35.5% year-over-year.

The company also raised its fiscal year 2022 outlook. The company expects its net sales to come in between $9.95 billion and $10 billion and EPS between $22.60 and $22.90.

Analysts expect ULTA’s EPS and revenue for the fiscal fourth quarter ending January 2023 to increase 1.3% and 8.9% year-over-year to $5.48 and $2.97 billion. ULTA surpassed EPS and revenue estimates in each of the trailing four quarters, which is impressive.

The stock has gained 29.2% over the past six months to close the last trading session at $488.94. It has gained 23.5% over the past three months.

It’s no surprise that ULTA has an overall rating of B, equating to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ULTA has an A grade for Quality and B for Sentiment. ULTA is ranked #12 out of 46 stocks in the Specialty Retailers industry.

Click here to access ULTA’s Growth, Value, Momentum, and Stability ratings.

BJ’s Wholesale Club Holdings, Inc. (BJ)

BJ operates warehouse clubs on the east coast of the United States. It provides perishable, general merchandise, gasoline, and other ancillary services through its websites and mobile app.

On December 7, BJ announced opening its newest club in Midlothian, Virginia, on December 9, 2022. This took its total number of U.S. clubs to 235. The new location should add to the company’s revenue stream.

On December 1, BJ announced the launch of its retail media program, BJ’s Media Edge, using Microsoft PromoteIQ. Rachael Vegas, Executive Vice President, Chief Merchandising Officer of BJ, said, “This program will continue to provide a tremendous opportunity for brands to drive growth, accelerate new product launches, and deliver on their business goals.”

BJ’s trailing-12-month return on total capital of 11.74% is 90.5% higher than the industry average of 6.17%. Also, its trailing-12-month return on common equity of 65.20% is 515.6% higher than the industry average of 10.59%.

BJ’s total revenues for the fiscal third quarter ended October 29, 2022, increased 12.2% year-over-year to $4.79 billion. Its adjusted EBITDA increased 19.2% year-over-year to $272.31 million. The company’s adjusted net income and adjusted EPS increased 7.9% and 8.8% year-over-year to $135.83 million and $0.99, respectively.

Street expects BJ’s EPS and revenue for the fiscal fourth quarter ending January 2023 to increase 7.1% and 9.7% year-over-year to $0.86 and $4.78 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 4.4% over the past six months to close the last trading session at $66.54. Moreover, it has gained marginally over the past five days.

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

BJ has a B grade for Value. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #23 out of 39 stocks.

We have also given BJ grades for Growth, Momentum, Stability, Sentiment, and Quality. Get all BJ ratings here.

J.Jill, Inc. (JILL)

JILL operates as an omnichannel retailer of women’s apparel under the J. Jill brand in the United States. It offers two sub-brands extensions of its brand aesthetic: Pure Jill and Wearever.

JILL’s trailing-12-month return on total capital of 14.04% is 113.1% higher than the industry average of 6.59%. Also, its trailing-12-month levered FCF margin of 12.98% is 864.3% higher than the industry average of 1.35%.

JILL’s gross profit came in at $105.02 million for the third quarter that ended October 29, 2022, up marginally year-over-year. The company’s current assets came in at $184.68 million for the period ended October 29, 2022, compared to $123.25 million for the period ended January 29, 2022.

Adjusted net income per share attributable to common shareholders increased 18.5% year-over-year to $0.77 for the quarter ended October 29, 2022.

For fiscal 2022, JILL expects its revenues to grow between 4% and 5% compared to fiscal 2021. The company also expects its adjusted EBITDA to be in the range of $103 million-$105 million.

JILL’s revenue is expected to increase 4.4% year-over-year to $610.70 million in the fiscal year ending January 2023. Also, its EPS is estimated to increase 37.1% year-over-year to $2.92 for the same period. It surpassed consensus EPS estimates in all four trailing quarters.

Over the past three months, the stock has gained 54.1% to close the last trading session at $26.27. Over the past month, it has gained 10.3%.

This promising outlook is reflected in JILL’s POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system.

JILL has an A grade for Sentiment and Quality. It is ranked #3 out of 67 stocks in the Fashion & Luxury industry.

Click here to see the additional POWR Ratings for JILL (Stability, Growth, Value, and Momentum).

ULTA shares were trading at $481.25 per share on Friday afternoon, down $7.69 (-1.57%). Year-to-date, ULTA has gained 2.60%, versus a 0.83% rise in the benchmark S&P 500 index during the same period.

About the Author: Sristi Suman Jayaswal

The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...

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