Consumer spending has been growing steadily, boosting retail sales and creating an optimistic outlook for continued growth in the sector. Thus, investing in fundamentally stable specialty retailers, Driven Brands Holdings Inc. (DRVN), Sally Beauty Holdings, Inc. (SBH), and Upbound Group, Inc. (UPBD) could be a wise move.
Consumer spending accelerated to an annual rate of 4.2% in the fourth quarter of 2024, up from the prior quarter’s 3.7%, mainly driven by spending both on goods and services, especially purchases of durable goods. This rise resulted in a 2.5% growth in the U.S. economy from the past year, signaling a steady road for future growth.
Plus, in January, retail sales surged 4.8% year-over-year to $668 billion, paving the way for unexpectedly strong retail growth in 2025. Mainly driven by the increased sales for auto vehicle and parts dealers and nonstore retailers, these numbers boost retailers’ confidence in consumer spending after a slightly better-than-expected holiday season.
The sector seems to be holding strong, driven by overall optimism of a stable inflation expectation by consumers. With overall rising sales figures and a positive outlook, there is plenty of room for growth. Additionally, with a lower expectancy for uncertainty for the three-year horizon, consumer spending is likely not to be thwarted.
Now, let us dive deep into the fundamentals of three Specialty Retailer stocks, starting with #3.
Stock #3: Driven Brands Holdings Inc. (DRVN)
DRVN provides automotive services to retail and commercial customers. The company offers paint, collision, glass, repair, car wash, oil change, and maintenance services. It also distributes automotive parts, including radiators, air conditioning components, and exhaust products.
On September 3, 2024, DRVN announced the sale of its Canadian distribution business, PH Vitres d’Auto brand, to PGW Auto Glass, a leading North American glass distributor. The sale showcases the company’s active portfolio management strategy and reduces debt.
For the fiscal 2024 third quarter that ended September 28, 2024, DRVN’s total net revenue increased 1.8% year-over-year to $591.68 million. Its operating income came in at $39.51 million, compared to an operating loss of $906.86 million in the previous year’s quarter.
Additionally, the company’s adjusted net income and adjusted EPS rose 39.8% and 44.4% from the prior year’s quarter to $41.76 million and $0.26, respectively.
Analysts expect DRVN’s revenue for the fiscal 2024 fourth quarter, which ended in December 2024, to increase 3.5% year-over-year to $572.95 million. The company has surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
DRVN’s revenue for the fiscal 2025 first quarter (ending in March) is expected to increase 7.1% year-over-year to $613.03 million.
The stock has surged 18.5% over the past six months and 34.8% over the past nine months, closing the last trading session at $15.54.
DRVN’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DRVN has a B grade for Growth and Stability. Within the Specialty Retailers industry, it is ranked #10 out of 37 stocks.
In addition to the POWR Ratings highlighted above, you can check DRVN’s ratings for Value, Momentum, Quality, and Sentiment here.
Stock #2: Sally Beauty Holdings, Inc. (SBH)
SBH is a specialty retailer and distributor of professional beauty supplies. The company offers hair color and care products, skin and nail care products, and styling tools under Wella, Paul Mitchell, and L’Oreal brands. It has two segments: Sally Beauty Supply and Beauty Systems Group.
On February 6, 2025, SBH’s Beauty Systems Group segment announced the signing of a distribution agreement with K18, a hair care brand. Delivering cutting-edge technology and being an admired brand among stylists, the company’s launch of K18 in all Beauty Systems Group stores in the United States and Canada on April 1 could enhance customer growth and boost the company’s revenue.
For the fiscal 2025 first quarter that ended December 31, 2024, SBH’s net sales increased marginally year-over-year to $937.90 million. Its operating earnings rose marginally from the year-ago value to $17.44 million. The company’s net earnings and EPS grew 58.9% and 65.7% from the prior year’s quarter to $61.01 million and $0.58, respectively.
Street expects SBH’s EPS for the fiscal 2025 second quarter (ending in March) to increase 11.4% year-over-year to $0.39. In addition, its revenue for the fiscal 2025 third quarter (ending in June) is expected to increase 3.3% year-over-year to $0.47.
SBH’s stock has surged marginally intraday to close the last trading session at $9.36.
SBH’s stable prospects are apparent in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
SBH has an A grade for Value and a B for Quality and Growth. Within the Specialty Retailers industry, it is ranked #7 out of 37 stocks.
Click here to access SBH’s ratings for Stability, Sentiment, and Momentum.
Stock #1: Upbound Group, Inc. (UPBD)
UPBD leases household durable goods to customers on a lease-to-own basis. The company’s offerings include furniture comprising mattresses, tires, consumer electronics, appliances, tools, handbags, computers, smartphones, and accessories. It has four segments: Rent-A-Center; Acima; Mexico; and Franchising.
On December 12, 2024, UPBD announced a definitive agreement to acquire Brigit, a leading financial health technology company, for a total transaction cost of up to $460 million, consisting of cash and shares of UPBD common stock. The acquisition expands UPBD’s innovative and flexible financial solutions offerings.
On November 21, 2024, UPBD announced an agreement with Google Cloud to deliver advanced AI solutions to improve the experience for customers across its Acima Leasing® and Rent-A-Center® lines of business. The AI-integration into its platform could aid the company in meeting the evolving needs and expectations of its customers.
For the fiscal 2024 third quarter that ended September 30, 2024, UPBD’s total revenues increased 9.2% year-over-year to $1.07 billion. Its non-GAAP adjusted operating profit grew 12.7% from the prior year’s quarter to $98.21 million. Additionally, non-GAAP adjusted net earnings and non-GAAP adjusted EPS rose 18.4% and 20.3% from the prior year’s quarter to $53.34 million and $0.95, respectively.
The consensus revenue and EPS estimates of $1.06 billion and $1.02 for the fiscal 2024 fourth quarter, which ended in December 2024, reflect a year-over-year increase of 3.8% and 26.3%, respectively. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.
UPBD’s stock has surged 2.6% over the past month, ending the last trading session at $29.77.
UPBD’s strong fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
UPBD has an A grade for Growth and a B for Stability and Quality. The stock has topped the 37-stock Specialty Retailers industry.
To access UPBD’s Value, Sentiment, and Momentum ratings, click here.
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DRVN shares were unchanged in premarket trading Wednesday. Year-to-date, DRVN has declined -3.72%, versus a 4.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
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