Retailers are adapting their business models as technology changes how people shop. Still, demand can be volatile as the industry is exposed to the ups and downs of consumer spending. This has stirred some uncertainty lately as retail stocks have tumbled by 15.3% over the past six months. This performance was noticeably worse than the S&P 500’s 1.5% decline.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here is one consumer stock boasting a durable advantage and two we’re passing on.

Two Consumer Retail Stocks to Sell:

Tilly's (TLYS)

Market Cap: $72.97 million

With an emphasis on skate and surf culture, Tilly’s (NYSE:TLYS) is a specialty retailer that sells clothing, footwear, and accessories geared towards fashion-forward teens and young adults.

Why Do We Steer Clear of TLYS?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience

2. Sales were less profitable over the last five years as its earnings per share fell by 32.2% annually, worse than its revenue declines

3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Tilly’s stock price of $2.50 implies a valuation ratio of 0.1x forward price-to-sales. If you’re considering TLYS for your portfolio, see our FREE research report to learn more .

Arhaus (ARHS)

Market Cap: $1.26 billion

With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ:ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.

Why Are We Hesitant About ARHS?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand

2. Revenue base of $1.27 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale

3. Efficiency has decreased over the last year as its operating margin fell by 5.9 percentage points

At $8.93 per share, Arhaus trades at 17.1x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than ARHS .

One Consumer Retail Stock to Buy:

Lululemon (LULU)

Market Cap: $39.22 billion

Originally serving yogis and hockey players, Lululemon (NASDAQ:LULU) is a designer, distributor, and retailer of athletic apparel for men and women.

Why Should You Buy LULU?

1. Locations open for at least a year are seeing increased demand as same-store sales have averaged 11.2% growth over the past two years

2. Unique assortment of products and pricing power lead to a best-in-class gross margin of 58%

3. Robust free cash flow margin of 15% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute