Retailers Optimistic: 10 Most Highly Profitable Retail Stocks

Retailers are feeling the holiday spirit after the shopping season started off better than expected, yet they are advised to remain cautious of still-fragile economic conditions.

Reuters reports that online sellers were feeling "very good" about their holiday sales performance. Many are also receiving fringe benefits for that performance: eBay's shares climbed over 4% on Monday after strong holiday sales led to an upgrade in analyst ratings.

Aaron Kessler, an analyst at Raymond James & Associates, put a 12-month price target of $39 on eBay's stock. In a note to investors he wrote, "data indicates solid marketplace growth has continued into the fourth quarter, and we believe continued enhancements should continue to drive improved performance."

Cautious optimism
But retailers are warned not to celebrate too soon, and perhaps investors are wise to do the same.

"It won't take a lot at all to throw things off-course," says Ken Chenault, CEO of American Express -- he sits on the President's Council on Jobs and Competitiveness and is co-chairman of the Business Roundtable. He cites an uncertain future of the eurozone, unemployment, and inaction from the government as top reasons retailers may see a turnaround.

Investing ideas
If you think retailers will continue to benefit through the holiday season, or even if you don't, we wanted to create a list of retailers that might be worth a closer look.

We created a list of retail companies that have proven themselves to be more profitable than their competitors, based on gross, operating, and pre-tax profit margins over the last 12 months.

Do you think there's more upside to these profitable retails stocks, despite the sales environment?

List sorted by gross margin difference. (Click here to access free, interactive tools to analyze these ideas.)

1. Jos. A Bank Clothiers (NAS: JOSB) : Design, retails, and direct-markets men's tailored and casual clothing and accessories. Market cap of $1.36B. TTM gross margin at 65.25% vs. industry gross margin at 37.80%. TTM operating margin at 16.34% vs. industry operating margin at 10.02%. TTM pre-tax margin at 16.35% vs. industry pre-tax margin at 9.33%.

2. Chico's FAS (NYS: CHS) : Operates as a specialty retailer of casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. Market cap of $1.78B. TTM gross margin at 60.80% vs. industry gross margin at 37.80%. TTM operating margin at 10.55% vs. industry operating margin at 10.02%. TTM pre-tax margin at 10.28% vs. industry pre-tax margin at 9.35%.

3. Sally Beauty Holdings (NYS: SBH) : Engages in the distribution and retail of professional beauty supplies. Market cap of $3.70B. TTM gross margin at 48.78% vs. industry gross margin at 37.80%. TTM operating margin at 13.07% vs. industry operating margin at 10.02%. TTM pre-tax margin at 10.28% vs. industry pre-tax margin at 9.35%.

4. Nordstrom (NYS: JWN) : Nordstrom,, a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. Market cap of $10.07B. TTM gross margin at 42.80% vs. industry gross margin at 35.14%. TTM operating margin at 11.78% vs. industry operating margin at 8.38%. TTM pre-tax margin at 10.57% vs. industry pre-tax margin at 7.03%.

5. True Religion Apparel (NAS: TRLG) : Designs, develops, manufactures, markets, distributes, and sells apparel in North America, Europe, Asia, Australia, Africa, and South America. Market cap of $929.62M. TTM gross margin at 64.45% vs. industry gross margin at 53.91%. TTM operating margin at 19.33% vs. industry operating margin at 16.36%. TTM pre-tax margin at 18.62% vs. industry pre-tax margin at 15.31%.

6. Guess' (NYS: GES) : Engages in the design, marketing, distribution, and licensing of apparel and accessories for men, women, and children. Market cap of $2.70B. TTM gross margin at 43.96% vs. industry gross margin at 37.80%. TTM operating margin at 11.97% vs. industry operating margin at 10.02%. TTM pre-tax margin at 16.02% vs. industry pre-tax margin at 9.35%.

7. 99 (NYS: NDN) : Engages in the retail sale of consumable general merchandise with focus on name-brand products. Market cap of $1.54B. TTM gross margin at 40.63% vs. industry gross margin at 35.14%. TTM operating margin at 8.48% vs. industry operating margin at 8.38%. TTM pre-tax margin at 8.35% vs. industry pre-tax margin at 7.03%.

8. Jarden (NYS: JAH) : Distributes consumer products worldwide. Market cap of $2.80B. TTM gross margin at 30.59% vs. industry gross margin at 27.12%. TTM operating margin at 9.38% vs. industry operating margin at 5.64%. TTM pre-tax margin at 5.79% vs. industry pre-tax margin at 3.21%.

9. Lululemon Athletica (NAS: LULU) : Engages in the design, manufacture, and distribution of athletic apparel and accessories for women, men, and female youth primarily in Canada, the United States, and Australia. Market cap of $6.53B. TTM gross margin at 60.68% vs. industry gross margin at 53.91%. TTM operating margin at 27.69% vs. industry operating margin at 16.36%. TTM pre-tax margin at 27.99% vs. industry pre-tax margin at 15.31%.

10. Limited Brands (NYS: LTD) : Operates as a retailer of women's intimate and other apparel, beauty and personal care products, and accessories in the United States and Canada. Market cap of $12.86B. TTM gross margin at 42.38% vs. industry gross margin at 37.80%. TTM operating margin at 14.36% vs. industry operating margin at 10.02%. TTM pre-tax margin at 13.24% vs. industry pre-tax margin at 9.35%.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Profitability data sourced from Fidelity.

At the time thisarticle was published The Motley Fool owns shares of Guess', lululemon athletica, and Limited Brands. Motley Fool newsletter services have recommended buying shares of lululemon athletica. Motley Fool newsletter services have recommended writing covered calls in Guess'. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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