Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. Still, secular trends are working against their favor as e-commerce continues to take share from brick and mortars. This puts retail stocks in a tough spot, and over the past six months, the industry has pulled back by 13.4%. This drop was much worse than the S&P 500’s 2% fall.

Investors should tread carefully as many companies in this space can be value traps. With that said, here are three consumer stocks we’re passing on.

Boot Barn (BOOT)

Market Cap: $3.29 billion

With a strong store presence in Texas, California, Florida, and Oklahoma, Boot Barn (NYSE:BOOT) is a western-inspired apparel and footwear retailer.

Why Is BOOT Not Exciting?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations

2. Revenue base of $1.85 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale

3. Free cash flow margin dropped by 3.7 percentage points over the last year, implying the company became more capital intensive as competition picked up

At $107.21 per share, Boot Barn trades at 16.4x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than BOOT .

Bath and Body Works (BBWI)

Market Cap: $6.50 billion

Spun off from L Brands in 2020, Bath & Body Works (NYSE:BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.

Why Does BBWI Worry Us?

1. Annual revenue growth of 6.2% over the last five years was below our standards for the consumer retail sector

2. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations

3. Estimated sales growth of 2.8% for the next 12 months implies demand will slow from its five-year trend

Bath and Body Works’s stock price of $30.12 implies a valuation ratio of 8.3x forward price-to-earnings. To fully understand why you should be careful with BBWI, check out our full research report (it’s free) .

Leslie's (LESL)

Market Cap: $136.2 million

Named after founder Philip Leslie, who established the company in 1963, Leslie’s (NASDAQ:LESL) is a retailer that sells pool and spa supplies, equipment, and maintenance services.

Why Are We Hesitant About LESL?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations

2. Revenue base of $1.33 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale

3. High net-debt-to-EBITDA ratio of 10× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Leslie's is trading at $0.76 per share, or 11.6x forward price-to-earnings. If you’re considering LESL for your portfolio, see our FREE research report to learn more .

Stocks We Like More

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