Retail Stocks Stumble: One Bright Spot Amid Industry Woes

The retail industry is struggling to adapt to changing consumer habits, with many companies underperforming compared to the broader market. Over the past six months, retail stocks have lagged behind the S&P 500's 13.6% gain, while their own returns came in at just 6.8%. However, not all retailers are created equal, and a few high-quality businesses continue to deliver earnings growth even in challenging times.

Two companies that face significant challenges are Home Depot (HD) and Camping World (CWH). Home Depot's sales growth has been sluggish over the past three years, with an annual rate of just 3%. The company has also struggled with same-store sales performance, indicating difficulties in attracting new customers to its brick-and-mortar locations. Furthermore, Home Depot's gross margin is below that of its peers, leaving less room for marketing and promotions.

Camping World, meanwhile, faces a number of headwinds, including lagging same-store sales over the past two years. The company has also issued new shares in recent years, which has led to a significant decline in earnings per share. Additionally, Camping World's high debt levels increase its risk profile.

In contrast, Ulta Beauty (ULTA) stands out as a resilient consumer stock. With an aggressive strategy of rolling out new stores and a strong track record of same-store sales growth, the company has demonstrated its ability to drive increased spending at existing locations. Ulta's market-beating returns on capital also suggest that management is skilled at investing in profitable ventures.