It’s impossible to predict what the stock market will do next, but that doesn’t stop people from trying. Investors often trade way too much, hampering the potential for capitalization to work its magic in the pursuit of satisfactory returns over the long term. The best strategy, therefore, is to simply buy large companies and plan to weather the inevitable ups and downs.
There are two prosperous consumer-oriented companies that investors should consider owning today. In fact, you don’t even have to wait for a stock market crash before buying shares of these growth stocks.
Surf the comfort trend
With an acceleration in sales over the past four quarters, Crocs (NASDAQ: CROX) is experimenting unprecedented growth thanks to consumers’ emphasis on comfort. In the most recent quarter, revenue soared 93.3%, as Crocs posted record sales of $ 641 million in the three-month period ended June 30 . being other key product categories.
Crocs has really shown its ability to build brand relevance, leveraging social media and digital channels, as well as influencer campaigns and collaborations, to educate consumers.
“We were the first footwear brand to market an augmented reality experience on TikTok, with our hashtag challenge #GetCrocd, featuring sandals and trial clogs with Jibbitz. Globally, this has generated more of eight billion views and over a million uses of the hashtag, “CEO Andrew Rees said during the call for results. Crocs also recently worked on partnerships with Justin Bieber and Spanish luxury fashion house Balenciaga.
Direct-to-consumer revenue, consisting of items moved on the company’s website or in its own stores, accounted for more than 50% of sales for the quarter. And Crocs’ gross margin of 61.7%, greater than Nike‘s, is truly remarkable considering that the average sale price during the second quarter was only $ 21.84. The operating margin of 30.5% is also excellent.
Management believes that Asia, and in particular China, is the next major growth opportunity. Crocs will roll out the same branding and marketing strategy that works so well here in the United States, relying heavily on digital and social media to generate interest.
Crocs is certainly firing on all cylinders today, but investors are right to question whether this is just a short-lived pandemic wave or something more lasting. Based on the smart actions taken by the company, this $ 9 billion mid-cap stocks could win for a long time.
Beat its discount store peers
You wouldn’t expect a traditional retailer to participate in this discussion, but Five below (NASDAQ: FIVE), with 1,121 stores nationwide and sales growth of 51.7% year-over-year, justifies an investment today. The discount store chain’s stock, up 344% in the past five years, has grown much faster than that of its biggest rivals General dollar and Dollar tree.
Five Below focuses on teens and tweens, offering a wide assortment of items such as cosmetics, clothing, and home decor, all priced under $ 5. And the company has a Five Beyond section for merchandise over $ 5, using a scavenger hunt shopping atmosphere that encourages consumers to spend more time in the store. It’s no wonder that the average customer visits Five Below 10 times and buys 60 different items per year. Plus, the annual family income of these customers is $ 73,000, so the business doesn’t just appeal to the most budget-conscious consumers.
Over the past decade, Five Below has opened new stores at breakneck speed, more than quintuple its footprint since 2011. And management believes the United States can eventually manage 2,500 locations, which would be more than double. of the current number. It makes a lot of financial sense, however, given that each store generates over $ 2.1 million in annual sales volume. Additionally, when analyzing the initial cost of building a new store versus its one-year profitability, Five Below sees an exceptional return on investment of 150%.
Wall Street analysts expect profits to skyrocket 200% from fiscal 2020 to fiscal 2023, signaling a very bullish view of the company’s outlook. With all the negative talk about the demise of physical retail, Five Below is making a name for itself by carving out a niche in the industry. Adding this dominant company to your portfolio is a smart financial move.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.