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Top 3 Retail Brands Whose Success Rules the Stock Market
At the end of August, Nasdaq reported that though many companies are struggling, there are three retail stocks to consider that will hold or increase their value.
According to Nasdaq, “Retail stocks are not what they used to be with the rise of cheaper and much more streamlined shopping experiences that are provided by companies such as Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT).” These two e-commerce giants have caused nearly every other company in the retail industry to struggle with customer retention and competitive sale prices.
The three brands that have been able to survive the e-commerce aftermath with high returns on their stocks are Build-A-Bear Workshop (BBW), Abercrombie & Fitch Co. (ANF), and Marks and Spencer Group (MAKSY).
Build-A-Bear Workshop is a specialty retailer offering its customers the experience to build their own custom plush dolls or choose from a selection of premade plushes, primarily teddy bears. Recently, their collection has expanded to include collaborations with other franchises, such as Star Wars and Disney, along with more products and accessories than ever before.
In March, Sharon Price John, Build-A-Bear’s CEO, stated in a press release that the company is proud of its “continued leadership and innovation.” It has become a multigenerational brand that appeals to diverse customer demographics, from teenagers to adults. “With the growing popularity of brand enthusiasts and collectors, along with the trend of ‘kidulting’, where adults seek traditional childhood toys, the brand has put focus on appealing to a demographic that may have visited Build-A-Bear as a child and is now returning.”
Started in St. Louis in 1997, Build-A-Bear went public in 2004, and its success has led it to claim “over 500 retail locations that are corporate-owned, franchised or owned by a third party,” along with its own successful e-commerce business. Per Nasdaq’s report, “The CEO also stated that they’re on track to have a record-breaking year for total sales in 2023, following 2022, which was the best year in the company’s history for annual profits.”
Abercrombie & Fitch Co. is a fashion apparel retailer and parent company to five brands: Abercrombie & Fitch, abercrombie kids, Hollister, Gilly Hicks, and Social Tourist. Its HQ is stationed in New Albany, Ohio, and it currently has over 750 locations internationally, selling products in-store, wholesale, and through e-commerce.
According to CNN, “Abercrombie’s stores are lighter than they once were and its clothes are looser. The brand has become known for its (logoless) basics, loungewear and jackets. Instead of trying to dress high schoolers for class, Abercrombie tries to outfit adults for everything from the gym to happy hour.” Additionally, the company’s “second-quarter earnings, which beat expectations and sent the stock soaring by 24%,” are a huge win, and its share price increased by 157% over the past year.
Marks and Spencer Group is a U.K.-based retailer that’s primarily a grocery supermarket but also carries home products and apparel and offers financial services. Business looks good for the company, as its “share price over the last year has surged by 78% due to consistency and strong financial results.” Additionally, its “recent annual financial statement reported revenue growth of 10% and net income increased by 18% compared to last year.”
All three companies have been “performing substantially better than other retail stocks,” according to Nasdaq, and they show no signs of slowing down.
Discussion Questions
What can other retailers learn from these top three retail companies? Do you foresee any challenges these companies might face in the near future?
Poll
Loading …BrainTrust
Allison McCabe
Director Retail Technology, enVista
Ananda Chakravarty
Vice President, Research at IDC
Brands which are able to identify true growth categories with well crafted sales and inventory plans are those that will achieve strong sales and profit results, until the growth curve on those categories have matured. Then the challenge begins again. Build A Bear adding key collaborations with Disney in strong franchises created additional business. A&F in reinventing themselves have established a strong newer niche. Both will face challenges as those strategies mature but like all retailers know this is part of the ride.
Make the most of it while its happening but always keep eyes on the next new thing.
The lesson from Abercrombie & Fitch is simple. All a brand or retailer has to do is completely and totally reinvent themselves. That’s all…just a complete reinvention, from attitude and aesthetic to store architecture to marketing. It was a risky high-wire act, but they realized that they really had no other choice. ANF became a citizen of this century instead of living with their roots planted in the last century. That mindset worked well for Target and AEO also. There are several mall retailers that are fighting the evolutionary process with all their might. They make speeches but not changes. There is a saying about change that says change doesn’t happen until the pain of staying the same is greater than the pain of making changes. Lots of retailers are experiencing the pain of staying the same.
The returns appear high on these stocks because all three came out of the doldrums regarding stock performance. I can’t talk to BNW, but a history of poor management decisions plagued ANF and MKSY. Still, the P/E ratio of each company is in line with or below that of the retail sector. Amazon and Walmart truly lead the stock market with P/E ratios far exceeding the retail category averages.
The challenge is that retailers operate with their own baggage, business models, and capabilities. There is uniqueness to almost any successful retailer. Fellow Braintrust member Steve Dennis outlined how uniqueness in the market is critical for retailers to succeed. These firms have led with commonly know business advantages – their unique selling proposition and differentiation in the market. The big challenge is always maintaining the differentiation over time- as evidenced by pioneers such as Sears, Kmart, Blockbuster, ToysrUs, or Circuit City.
All three stock prices are recovering from big dips from previously high-flying levels, which accounts for a big part of their performance which is “better than other retailers.” They also are smartly recovering from previously bad decisions and management, which caused their stock prices to drop in the first place. Once consumers lose a measure of faith in a brand it is difficult to earn back. So all three deserve major kudos for accomplishing something that is rare and exceedingly hard to do — reinvention.