U.S. retail sales remained robust in April, despite 40-year-high inflation. Apparel and accessories specialty store sales increased 8% from the prior year, while department store sales rose 2.9% from a year ago. Furthermore, non-store retail sales, or e-commerce, grew 12.7% year-over-year and 2.1% from March. “Despite the surge in prices weighing on their purchasing power, the U.S. consumer now appears to be single-handedly keeping the global economy afloat,” said Paul Ashworth, chief U.S. economist at Capital Economics, a consulting firm.

Although a reduction in discretionary purchases seems inevitable amid the inflationary environment, this summer travel season should boost sales. In addition, the global retail market is expected to grow at a 10.1% CAGR  from 2022 to 2026.

Given this backdrop, we think specialty retail stocks Ulta Beauty, Inc. (ULTA), The ODP Corporation (ODP), and Live Ventures Incorporated (LIVE), which have outperformed the benchmark S&P 500 index’s 12.5% year-to-date decline, could be ideal investments now.

Click here to checkout our Retail Industry Report for 2022

Ulta Beauty, Inc. (ULTA)

ULTA in Bolingbrook, Ill., operates as a retailer of beauty products in the United States. The company offers cosmetics, fragrances, skincare and haircare products, bath and body products, salon styling tools, professional hair products, and salon services. It operates 1,308 retail stores across 50 states.

On June 7, 2022, ULTA opened applications for its inaugural program, MUSE Accelerator, for early-stage BIPOC beauty brands to launch and thrive in retail. The company is expected to grab the spotlight in specialty retail with this one-of-a-kind program, which is a part of its new business ventures.

For the first quarter, ended April 30, 2022, ULTA’s net sales increased 21% year-over-year to $2.35 billion. Its net income came in at $331.39 million, up 43.9% year-over-year. Also, its EPS was  $6.30, up 53.7% year-over-year.

Analysts expect ULTA’s revenue to be $9.51 billion in 2023, representing a 10.2% year-over-year increase. The company’s EPS is expected to grow 12.2% year-over-year to $20.18 in 2023. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 2.1% in price year-to-date to close yesterday’s trading session at $421.02.

ULTA’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

ULTA has an A grade for Sentiment and Quality. It is ranked #13 of 45 stocks within the Specialty Retailers industry. Click here to see the additional POWR Ratings for ULTA (Growth, Value, Momentum, and Stability).

The ODP Corporation (ODP)

ODP in Boca Raton, Fla., provides business services and supplies, products, and digital workplace technology solutions for small, medium, and enterprise businesses. The company operates in two divisions–Business Solutions and Retail.

On May 4, 2022, Gerry Smith, ODP’s CEO, said, “As we move closer to concluding the strategic initiatives we previously outlined, we remain committed to maximizing the value of our consumer business and driving growth on our B2B platform. We also continue to expect our results this year to be generally in a range consistent with the prior year on a comparable basis.”

ODP’s sales came in at $2.18 billion for the first quarter ended March 26, 2022, compared to $2.17 billion in the year-ago period. Its net income was $55 million, up 3.8% year-over-year, while its EPS came in at $1.09, up 14.7% year-over-year.

Analysts expect ODP’s EPS to increase 12.3% per annum over the next five years. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 2.7% in price year-to-date to close yesterday’s trading session at $40.33.

ODP has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The stock has an A grade for Value and Quality and a B grade for Growth. It is ranked first in the Specialty Retailers industry. Click here to see the additional POWR Ratings for Momentum, Stability, and Sentiment for ODP.

Live Ventures Incorporated (LIVE)

LIVE and its subsidiaries are in the flooring and steel manufacturing and retail businesses in the United States. The Las Vegas, Nev.-based company’s segments are Flooring Manufacturing; Steel Manufacturing; and Retail.

On May 11, 2022, Jon Isaac, LIVE’s President and CEO, said, “We remain confident in our businesses’ long-term outlook and will continue executing our strategic plan to maximize stockholder value. Along those lines, we took the opportunity to repurchase 65,668 shares during the quarter, or approximately 2% of our diluted common shares.”

For its second quarter, ended March 31, 2022, LIVE’s steel manufacturing revenue increased marginally year-over-year to $14.03 million. Its net income came in at $15.36 million, up 75.8% year-over-year. Furthermore, its EPS came in at $4.84, up 82% year-over-year.

The stock has gained 23.7% in price year-to-date to close yesterday’s trading session at $38.99.

LIVE has an overall B rating, which translates to Buy in our proprietary rating system. It has a B grade for Value and Sentiment. Within the Specialty Retailers industry, it is ranked #8. Click here to see the additional POWR Ratings for Growth, Momentum, Stability, and Quality for LIVE.

Click here to checkout our Retail Industry Report for 2022

ULTA shares were trading at $421.00 per share on Wednesday morning, down $0.02 (0.00%). Year-to-date, ULTA has gained 2.10%, versus a -12.63% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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