Retail Winners: Build-A-Bear, Haverty, and Natural Grocers Shine

Anticipating Growth in the Retail Sector for 2025

As we look ahead, 2025 is shaping up to be a pivotal year for the retail industry. After a phase of recovering consumer confidence and increased spending fueled by a drop in inflation, retailers now find themselves at a crossroads. There is a golden opportunity to cultivate loyalty among current customers while also attracting new ones. Nevertheless, challenges loom large, including a crowded marketplace, potential supply chain disruptions, and the pressing need for the integration of AI technologies across various retail functions.

A critical factor for success lies in sustaining sales momentum beyond the bustling holiday season—a time when retail often sees a spike in consumer spending. For investors eager to get a foothold in retail stocks likely to outperform the market's post-holiday decline, following Wall Street analysts' insights can provide a clear advantage. Companies such as Build-A-Bear Workshop (NYSE: BBW) and Haverty Furniture Companies (NYSE: HVT) catch the eye of analysts. Another notable mention is Natural Grocers (NYSE: NGVC) backed by Vitamin Cottage, which has showcased strong stock performance heading into year-end.

1. Build-A-Bear: Navigating Challenges with Optimism

Renowned for its beloved range of plush toys, Build-A-Bear has successfully carved out a niche with both direct-to-consumer and franchised sales models. The company's strong brand presence is enhanced by its engaging workshop experiences. Additionally, efforts to expand its online marketplace are showing promise.

In its latest financial results, Build-A-Bear reported impressive third-quarter figures—$119 million in revenue and an earnings per share (EPS) of 73 cents—both exceeding analyst expectations. The unique workshop initiative has played a pivotal role in driving this growth. The company recently opened 17 new locations spanning diverse markets, including international venues, with sights set on expanding its footprint by approximately 25% as 2025 approaches. New product lines, such as the Mini Beans collection, have also stimulated the interest of both loyal and new customers.

Despite these successes, there are hurdles that Build-A-Bear must overcome. The inability to meet web sales expectations has led the company to revise its revenue forecasts for the year. Enhancing its online sales strategy will be crucial for sustaining and building upon its current growth trajectory.

For investors, Build-A-Bear is perceived positively, holding a Buy rating with an enticing price target of $52.50, suggesting a potential upside of nearly 22% by late December of this year.

2. Haverty: Resilience Amidst Challenges

While the trajectory of Build-A-Bear shares has been largely upward through 2024, Haverty Furniture finds itself navigating difficult waters, with a reported -37% total return over the past year as of late December. Much of this downturn can be traced to disappointing earnings reports highlighting declines in revenue, profits, and gross-margin metrics.

However, there is a silver lining as Haverty positions itself for a potential rebound. A major shift in leadership is on the horizon, with Steven Burdette stepping into the CEO role, having previously served as president. His leadership was instrumental in steering the company through the turbulent waters of the pandemic, which resulted in remarkable income growth of 158% since 2019.

The firm is also uniquely positioned to take advantage of its thriving segments. For example, its design sector has shown promising growth with increased ticket sizes and a substantial year-over-year increase of 19%. With a solid cash reserve exceeding $121 million and no debt burden, Haverty plans to aggressively expand, including the development of three additional stores in the fourth quarter. This strong financial position supports its appealing dividend yield of 5.78%.

3. Natural Grocers: A Steady Dividend Amid Market Fluctuations

The health-focused retailer Natural Grocers has experienced a remarkable uptick in its share price, driven partly by broader market trends and key personnel changes in the healthcare arena. Although the stock has cooled from its peak, its robust fiscal performance in the fourth quarter—with net sales growth of 37% and net income gains of 53%—keeps investor interest alive.

Despite facing a recent dip in stock prices, Natural Grocers remains a strong dividend stock. Over the past five years, the company has distributed nearly $5 in dividends per share, showcasing a three-year dividend growth rate approaching an impressive 13% annually.

Frequently Asked Questions

What opportunities do retailers have in 2025?

Retailers can capitalize on increased consumer confidence and a chance to strengthen customer loyalty post-holiday season.

How is Build-A-Bear performing in the current market?

Build-A-Bear has reported impressive quarterly earnings, showing resilience despite a challenging online sales environment.

What changes are happening at Haverty Furniture?

Steven Burdette is set to become the new CEO, aiming to reverse the company's recent performance downturn.

Is Natural Grocers a good investment?

Yes, Natural Grocers remains attractive due to steady dividend payouts and solid growth metrics.

What is the outlook for the retail industry in 2025?

The retail industry is expected to grow, but companies must adapt to challenges such as supply chain issues and competition.

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