Retailing is harder than ever. Success requires scale, attention to detail, and brand loyalty among customers who can always go to Walmart (NYSE:WMT), Costco Wholesale (NASDAQ:COST), or Amazon (NASDAQ:AMZN) for the same merchandise. With even big retailers going under, and the industry consolidating around a few leaders, there remain a few in the “sweet spot” between enormous size and collapse. In fact, I’ll share with you some of the top retail stocks to buy today.

What they have in common is that they clearly know their customers from the inside out, they know how to serve them, and they’re constantly looking for new ways to do that. When they make mistakes, they own them. Their message is consistent, based not on price, but on perceived value to their chosen niche.

This means they can deliver consistent returns to investors over time. All the companies in this gallery are averaging capital gains of over 20% per year for the last five years. All dominate their niches. They may look expensive, in terms of price earnings, but they pay off in the long run. Some even offer dividends. You can visualize the brands from a quick description. The sporting goods superstore. The yoga people. The beauty people. The home for young shoppers. The middle-class grocer.

All of these stores went through things during the pandemic, but they came out the other side stronger than ever. Placer.AI, which measures retailer foot traffic, sees positive trends for all these retailers, and that’s good enough for me. They’re listed in order of their five-year returns, and the leader may surprise you. Here’s that list of top retail stocks to buy.

Retail Stocks to Buy: Dick’s Sporting (DKS)

Dick’s Sporting Goods (NYSE:DKS) has become the dominant sporting goods retailer, thanks largely to athleisure merchandise and ties to the sports industry. The company was founded in 1948 around fishing and began acquiring other chains early this century under the founder’s son. The company is based outside Pittsburgh but has naming rights to a soccer stadium in Colorado. 

A new emphasis on branded apparel for sports teams is reflected in a recent deal with the NCAA and Warner Brothers Discovery (NASDAQ:WBD), making Dick’s “the official sporting goods retail partner of the NCAA.”

Dick’s has also been helped by its move into e-commerce, the collapse of rivals like Sports Authority, and Modell’s, and regional chains like Eastern Mountain and Olympia. It’s looking for growth from a concept called “House of Sport,” taking over former mall anchors with features like rock climbing walls and batting cages. Analysis of foot traffic indicates good reasons for optimism.

Over the last five years, DKS stock is up almost 300%. Its Christmas quarter smashed expectations, and it issued positive guidance for fiscal 2024. You even get a dividend yielding nearly 1.8%. Despite this, some analysts consider the stock a bargain. That’s thanks to a price-earnings ratio that’s still just 12.5.

Retail Stocks to Buy: Lululemon Athletica (LULU)

Lululemon Athletica (NASDAQ:LULU) proved it’s in the sweet spot for wellness by beating estimates on its fourth-quarter earnings on March 28. For the quarter ending January 29, the athleisure company earned $120 million, 94 cents a share, on revenue of $2.77 billion. Net income was lower than in 2021, but there was a reason for that. Revenue was 30% higher.

The company also hiked its revenue guidance for fiscal 2024.  That’s what investors focused on in sending the stock up 16% overnight, to a market cap of over $43 billion. Over the last five years, it’s now up nearly 300%.

Lululemon was founded in Vancouver, Canada, in 1998, by Chip Wilson.  A decade ago, in the wake of what now seems a silly scandal over yoga pants that cost Wilson his job, I suggested Under Armour (NYSE:UAA) (NYSE:UA) should buy Lululemon, then a small maker of yoga apparel.

Today LULU could buy UAA more than 10 times over. Lululemon succeeds with a tight focus on its target market and a business model that maximizes margins by sourcing production from Asia and selling at full retail. Where it was Under Armour for women, it’s now Nike (NYSE:NKE) for women. (Given Nike’s own success that’s a nice comparison.)

The company is less about yoga than healthy lifestyles, which let it expand into menswear and grow internationally. It does make mistakes. Its Mirror, a Peloton (NASDAQ:PTON) for yoga acquired for $500 million during the pandemic in 2020, created a $442 million charge against earnings this last quarter that analysts (with a few exceptions) barely noticed. Critics also say it resorted to more discounts than normal to hike revenue and hide the Mirror disaster. But it hid it well.

Retail Stocks to Buy: Five Below (FIVE)

If you have a daughter, if you live in a suburb, and if she has even a little money of her own, you know Five Below (NASDAQ:FIVE). I like to call it the Dollar General (NYSE:DG) of Generation Z, a place young women can spend a lot of time without spending a lot of money.

Despite being valued like a 2021 tech stock, at 42 times earnings, Five Below continues to defy gravity. Shares are up 23% in the last year and 175% over the last five. Revenue has nearly doubled, just since 2020. For the most recent quarter, ending in January, the company reported a net income of $171 million, $3.07 per share, and net sales of $1.12 billion. 

Five Below was founded in Philadelphia 20 years ago by executives from Zany Brainy, a unit of FAO Schwarz. It specializes in products appealing to young women, most priced at $5 and less. It now has over 1,300 stores, opening 200 new ones this year alone, and believes there can be 2,500 in the U.S. Most are in suburban strip malls and typically measure 8,000 square feet.

Inflation is driving innovation, with a new store-within-the-store called Five Beyond, with higher-priced goods. That should boost same-store sales, which were up just 13% in the most recent quarter. Its guidance, to revenue of $723 million this quarter, was below estimates and sent the stock down after earnings.

Ulta Beauty (ULTA)

Ulta Beauty (NASDAQ:ULTA) is the country’s dominant beauty chain. It was founded in 1990, by a drug store executive, and came public in 2007. It now employs over 37,000 people.

Over the last five years, Ulta stock has risen 152%. Most of the gains have come since the start of the COVID pandemic, with men as well as women fixing their faces to face Zoom calls. As the country opened the trend accelerated, and people fixed their faces to return to work. Foot traffic is now well ahead of 2019 levels.

Most Ulta stores are in suburban strip malls, offering salons, try-on stations, and merchandise. The concentration is heaviest on the coasts, but you can also find them in places like Garden City, Kansas. The stores invite customers to come in for a day and build their look, then convert them into regular online shoppers to maintain it.

For its 2023 fiscal year Ulta sales grew 18% and net income gained 26%. Sales topped $10 billion for the first time. Its most recent quarter was a solid beat on both revenue and earnings, with net income of nearly $341 million, $6.68 per share fully diluted share, and comparable sales up 15.6%.  This has made it a favorite among analysts. The current market cap is $26.3 billion, about 2.6 times sales. CEO Dave Kimbell sees the company expanding the definition of beauty into wellness and self-care. Ulta has also created its own investment fund for start-ups.

Given its track record, the price-to-earnings ratio of 21.6 isn’t extreme. While many are reluctant to pay high for a stock going into a recession, it’s unlikely to get much cheaper.

Kroger (KR)

Kroger (NYSE:KR) is now the main competitor to Walmart in general groceries. While stores like Aldi, Trader Joe’s, Lidl, and Costco offer limited selections, Kroger and its associated chains fill your whole shopping list, often with multiple brands. If its merger with Albertson’s (NYSE:ACI) is approved, it will also have Walmart’s national footprint and half its market share.

Over the last five years Kroger stock has doubled, but it is well off its all-time high of $61 per share achieved last April. At its current price, it has a market cap of $35 billion. It had 2022 sales of $148 billion. The low market cap is thanks to tiny margins, just 1.5% of revenue making it to net income. (Walmart turns 1.9% of revenue into net income.) There was $4.3 billion of operating cash flow last year.

While Kroger is the chain’s main store brand, most regional chains are now owned by it. Ralph’s is Kroger. Dillon’s is Kroger. Mariano’s and King Soopers, Harris Teeter, and Fred Meyer are also all Kroger. I once wrote complaining about that, because marketing spend is wasted. The company has since launched a single national campaign for all its stores, using animated characters called “Krojis.”

There are advantages to decentralization. It can keep wages low. Kroger reportedly “left” the Raleigh market in 2018 but in fact, it closed unionized Kroger outlets in favor of non-union Harris Teeters. If Kroger can capitalize on its national footprint after Albertson’s merger is complete, the stock could fly.

On the date of publication, Dana Blankenhorn held long positions in AMZN, DG, and COST. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. His 10^th novel is The Time Tunnel, now available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.