In this article, we will look at the 13 Most Undervalued Retail Stocks to Invest In.
CNBC reported on September 19 that retail companies are employing a “tariff arbitrage strategy” in their supply chains as a means to keep costs down for consumers and reduce tariff bills. The trend is exhibiting in retail companies ranging from lower-value goods to the luxury sector through the B2B2C (business-to-business-to-consumer) business model.
With President Trump’s trade war affecting the retail sector, this adopted business model entails the rerouting of consumer purchases through a middle company acting as a merchant of record. The retail middlemen purchase the product from the retailer at a wholesale price, and ship and pay the US tariff on behalf of the retailer.
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CNBC reported that Antony Talbot, group trading director for U.K.-based accessible curve fashion retailer Yours Clothing, said that the B2B2C model managed to reduce the company’s tariff costs by half.
“The North American retail market is very important to us and we don’t want to upset our customers,” he stated. “If we increased our prices, our customers would not be able to afford it, and it would push us up into a different price category, which is very competitive. That is not what our business model is about. We are analyzing where we can cut to offset the increase in costs.”
With these trends in view, let’s look at the most undervalued retail stocks to invest in.
Our Methodology
We used stock screeners to make a list of the best retail stocks with a forward P/E below 20 and selected the top 13 with the highest number of hedge fund holders as of Q2 2025, sourcing the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund holders.
Note: All data was sourced on October 3.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
13 Most Undervalued Retail Stocks to Invest In
13. Caleres, Inc. (NYSE:CAL)
Forward P/E: 7.84
Number of Hedge Fund Holders: 21
Caleres, Inc. (NYSE:CAL) is one of the most undervalued retail stocks to invest in. Caleres, Inc. (NYSE:CAL) reported its fiscal Q2 2025 results on September 4, with reported consolidated sales of $658.5 million, down 3.6% versus the prior year. Brand Portfolio sales also dropped 3.5%.
However, the company experienced gains in women’s fashion footwear market share and strong performance from Lead Brands in total, with a tariff impact of around $10 million.
Management further reported that Famous Footwear sales declined 4.9%, with comparable sales down 3.4%.
Following the earnings release, KeyBanc analyst Ashley Owens maintained a Hold rating on Caleres, Inc. (NYSE:CAL) on September 5 without assigning a price target.
Caleres, Inc. (NYSE:CAL) is a global footwear retailer that operates shoe stores and e-commerce websites. It sources, designs, develops, manufactures, and distributes footwear for people of all ages, and operates through the Brand Portfolio and Famous Footwear segments.
12. Guess?, Inc. (NYSE:GES)
Forward P/E: 10.78
Number of Hedge Fund Holders: 24
Guess?, Inc. (NYSE:GES) is one of the most undervalued retail stocks to invest in. UBS raised the firm’s price target on Guess?, Inc. (NYSE:GES) to $16.75 from $13 on August 28, keeping a Neutral rating on the stock with the firm moving its target to the take-private transaction price.
Similarly, Telsey Advisory raised the firm’s price target on Guess?, Inc. (NYSE:GES) to $16.75 from $13 on August 21 while keeping a Market Perform rating on the shares.
The firm told investors that it is updating its price target after Guess?, Inc. (NYSE:GES) announced its go private agreement with Authentic Brands, valued at $1.4 billion.
Guess?, Inc. (NYSE:GES) is involved in the design, marketing, licensing, and distribution of contemporary apparel and accessories for women, men, and children.
The company’s operations are divided into the following segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing.
11. Carter’s, Inc. (NYSE:CRI)
Forward P/E: 9.51
Number of Hedge Fund Holders: 31
Carter’s, Inc. (NYSE:CRI) is one of the most undervalued retail stocks to invest in. Carter’s, Inc. (NYSE:CRI) reported net sales of $585 million in its fiscal Q2 2025 results as compared to $564 million in the prior year period, reflecting a growth of 4%. Adjusted EPS for the quarter reached $0.01 compared to $0.76 in fiscal Q2 2024.
Following the earnings release, Citi analyst Paul Lejuez maintained a Hold rating on the stock on 29th July, bringing the price target down to $28 from $33.
The same day, Barclays maintained a Sell rating on Carter’s, Inc. (NYSE:CRI) and slashed the price target from $25 to $22.
Similarly, UBS analyst Jay Sole also reiterated a Hold rating on Carter’s, Inc. (NYSE:CRI) on July 28 while reducing the price target to $26 from $32.
Carter’s, Inc. (NYSE:CRI) manufactures and sells apparel and related accessories for babies and kids under its vast portfolio of brands, including Carter’s, OshKoshB’gosh, Precious Firsts, Just One You, Child of Mine, Simple Joys, and Skip Hop.
10. Macy’s Inc. (NYSE:M)
Forward P/E: 9.37
Number of Hedge Fund Holders: 36
Macy’s Inc. (NYSE:M) is one of the most undervalued retail stocks to invest in. On September 18, Morgan Stanley raised the firm’s price target on Macy’s Inc. (NYSE:M) to $16 from $12 while keeping an Equal Weight rating on the shares.
The firm told investors that it updated its models for the company and several other retailers after their Q2 earnings.
However, in a report released on September 4, Michael Binetti from Evercore ISI maintained a Hold rating on Macy’s Inc. (NYSE:M) and set a price target of $14.00.
The same day, Telsey Advisory analyst Dana Telsey raised the firm’s price target on the stock to $17 from $14 while maintaining a Market Perform rating on the shares.
Macy’s Inc. (NYSE:M) is an omnichannel retail store that manages three brands: Macy’s, Bloomingdale’s, and Bluemercury.
These brands sell a variety of merchandise, including accessories, apparel, consumer goods, home furnishings, and more. The company operates stores in 43 US states, the District of Columbia, Guam, and Puerto Rico.
9. Abercrombie & Fitch Co. (NYSE:ANF)
Forward P/E: 8.7
Number of Hedge Fund Holders: 39
Abercrombie & Fitch Co. (NYSE:ANF) is one of the most undervalued retail stocks to invest in. On September 22, Telsey Advisory analyst Jason Strominger maintained a Buy rating on Abercrombie & Fitch Co. (NYSE:ANF) and set a price target of $125.00.
Similarly, BTIG also initiated coverage of Abercrombie & Fitch Co. (NYSE:ANF) with a Buy rating and a $120.00 price target.
The analyst consensus rating for Abercrombie & Fitch Co. (NYSE:ANF) is a Moderate Buy, and the stock’s median price target of $85.76 implies an upside of 39.93% from current levels.
Abercrombie & Fitch Co. (NYSE:ANF) is a global omnichannel retailer that offers an assortment of apparel, personal care products, and accessories for women, men, and kids.
Its brand portfolio includes Abercrombie brands, which includes Abercrombie & Fitch and abercrombie kids, and Hollister brands, including Hollister and Gilly Hicks.
8. Urban Outfitters, Inc. (NASDAQ:URBN)
Forward P/E: 13.99
Number of Hedge Fund Holders: 39
Urban Outfitters, Inc. (NASDAQ:URBN) is one of the most undervalued retail stocks to invest in. In a report released on September 18, Ike Boruchow from Wells Fargo maintained a Hold rating on Urban Outfitters, Inc. (NASDAQ:URBN) and set a price target of $75.00.
However, while UBS maintained a Neutral rating on the stock on September 2, it raised its price target on Urban Outfitters, Inc. (NASDAQ:URBN) to $79 from $78, telling investors in a research note that the company had a solid Q2 print and Q3 guidance.
Currently, Urban Outfitters, Inc. (NASDAQ:URBN) has an analyst consensus of Moderate Buy, and its median price target of $73.19 implies an upside of 12.04% from current levels.
Urban Outfitters, Inc. (NASDAQ:URBN) is a lifestyle products and services company that operates through three segments: Retail, Wholesale, and Nuuly.
The Retail segment encompasses its store and digital channels and manages the Anthropologie, Free People, FP Movement, and Urban Outfitters brands.
The Nuuly segment comprises the Nuuly brand, which includes Nuuly Thrift and Nuuly Rent, a monthly women’s apparel subscription rental service.
7. American Eagle Outfitters, Inc. (NYSE:AEO)
Forward P/E: 15.09
Number of Hedge Fund Holders: 41
American Eagle Outfitters, Inc. (NYSE:AEO) is one of the most undervalued retail stocks to invest in. Morgan Stanley raised the firm’s price target on American Eagle Outfitters, Inc. (NYSE:AEO) to $17 from $10 on September 18 while keeping an Equal Weight rating on the shares.
The firm told investors in a research note that it updated its models for the company and a selection of other retailers following their Q2 earnings reports.
However, in a report released on September 18, Alexandra Straton from Morgan Stanley maintained a Hold rating on American Eagle Outfitters, Inc. (NYSE:AEO) and set a price target of $17.00.
In addition to Morgan Stanley, BTIG’s Janine Stichter also assigned a Hold rating to American Eagle Outfitters, Inc. (NYSE:AEO) in a report issued the same day.
American Eagle Outfitters, Inc. (NYSE:AEO) is a global specialty retailer that offers clothing, accessories, and personal care products. Its brand portfolio includes American Eagle and Aerie brands.
American Eagle operates as a jeans and apparel brand, while Aerie offers lifestyle items such as apparel, intimates, activewear, and swim collections.
6. Victoria’s Secret & Co. (NYSE:VSCO)
Forward P/E: 14.27
Number of Hedge Fund Holders: 44
Victoria’s Secret & Co. (NYSE:VSCO) is one of the most undervalued retail stocks to invest in. On October 1, Telsey Advisory raised the firm’s price target on Victoria’s Secret & Co. (NYSE:VSCO) to $29 from $24 while keeping a Market Perform rating on the shares.
The firm told investors that Victoria’s Secret & Co. (NYSE:VSCO) experienced strong momentum in H1 2025, exhibited by a solid Q2 earnings beat.
It added that Victoria’s Secret & Co. (NYSE:VSCO) is continually exhibiting early signs of progress under the new leadership and is seeing recent signs of stabilization under the Path to Potential strategy, factors that the firm considers encouraging.
Victoria’s Secret & Co. (NYSE:VSCO) is a women’s intimates, apparel, and beauty products retailer. It operates under the Victoria’s Secret, Victoria’s Secret PINK, and Adore Me brands. The company’s product offerings include sleepwear, loungewear, swimwear, athleisure, lingerie, prestige fragrances, and body care.
5. The Gap Inc. (NYSE:GAP)
Forward P/E: 10.48
Number of Hedge Fund Holders: 44
The Gap Inc. (NYSE:GAP) is one of the most undervalued retail stocks to invest in. On September 16, Morgan Stanley raised the firm’s price target on The Gap Inc. (NYSE:GAP) to $28 from $27 while keeping an Overweight rating on the shares.
The firm told investors that it updated its estimates on the stock after its Q2 earnings report.
Furthermore, Barclays analyst Adrienne Yih maintained a Hold rating on The Gap Inc. (NYSE:GAP) on September 2 and set a price target of $19.00.
On September 1, however, Goldman Sachs analyst Brooke Roach expressed bullish sentiments for The Gap Inc. (NYSE:GAP), assigning the stock a Buy rating with a $26 price target.
The Gap, Inc. (NYSE:GAP) is a specialty retailer in the US that offers apparel, accessories, and personal care products for women, men, and children. Its brand portfolio includes Old Navy, Gap, Banana Republic, and Athleta brands.
4. Albertsons Companies, Inc. (NYSE:ACI)
Forward P/E: 8.22
Number of Hedge Fund Holders: 49
Albertsons Companies, Inc. (NYSE:ACI) is one of the most undervalued retail stocks to invest in. On October 3, RBC Capital analyst Steven Shemesh lowered the firm’s price target on Albertsons Companies, Inc. (NYSE:ACI) to $21 from $23 while keeping an Outperform rating on the shares.
The firm told investors in a research note that it is bringing its Q2 EBITDA view down to $821M from $844M, considering the state-weighted scanner data analysis, conversations, and peer read-throughs.
It added that investors may continue to be cautious due to concerns regarding a need for low visibility into margin tailwinds ramping and a need for ongoing price investment.
Albertsons Companies, Inc. (NYSE:ACI) is a US-based food and drug retailer. It has stores spread across several US states under 20 banners, including Star Market, Shaw’s, Albertsons, Kings Food Markets, United Supermarkets, Haggen, Kings Food Markets, Acme, Carrs, and more.
3. Target Corporation (NYSE:TGT)
Forward P/E: 12.2
Number of Hedge Fund Holders: 54
Target Corporation (NYSE:TGT) is one of the most undervalued retail stocks to invest in. On October 2, Truist lowered the firm’s price target on Target Corporation (NYSE:TGT) to $83 from $102 while keeping a Hold rating on the shares.
The firm told investors in a research note that Target Corporation’s (NYSE:TGT) several missteps in marketing, merchandising, and other domains hurt the company, negatively affecting consumer experiences and impressions.
Truist believes that Target Corporation (NYSE:TGT) needs to expedite its merchandise innovation while materially accelerating its investment spending.
The firm added that based on Truist Card Data, it is slashing its Q3 comps forecast to down 4% from down 1.3%, citing the drop in Target Corporation’s (NYSE:TGT) sales thus far in the quarter.
Target Corporation (NYSE:TGT) is a retail giant that operates discount department stores and hypermarkets across the US and Canada.
It serves its customers an array of items, including food, everyday essentials, differentiated merchandise at discounted prices, and general merchandise. Its merchandise categories span food and beverages, home furnishing and decor, and others.
2. Lululemon Athletica Inc. (NASDAQ:LULU)
Forward P/E: 13.66
Number of Hedge Fund Holders: 55
Lululemon Athletica Inc. (NASDAQ:LULU) is one of the most undervalued retail stocks to invest in. In a report released on October 1, Randal Konik from Jefferies reiterated a Sell rating on Lululemon Athletica Inc. (NASDAQ:LULU) and set a price target of $150.00.
Lululemon Athletica Inc. (NASDAQ:LULU) reported a 7% growth in revenue to $2.5 billion in fiscal Q2 2025, while comparable sales rose 1%. The company also reported a diluted EPS of $3.10.
Founded in 1988, Lululemon Athletica Inc. (NASDAQ:LULU) is a luxury athletic apparel, footwear, and accessories retailer. It sells leisure-athletic wear and accessories such as socks, bags, and yoga mats for fitness activities.
1. The Kroger Co. (NYSE:KR)
Forward P/E: 13.83
Number of Hedge Fund Holders: 68
The Kroger Co. (NYSE:KR) is one of the most undervalued retail stocks to invest in. On October 2, Evercore ISI analyst Michael Montani maintained a Buy rating on The Kroger Co. (NYSE:KR) and set a price target of $82.00.
The Kroger Co. (NYSE:KR) reported in its fiscal Q2 2025 results that identical sales without fuel rose 3.4%, eCommerce sales rose 16%, and operating profit for the quarter reached $863 million.
The company also reported an adjusted FIFO operating profit of $1.091 billion and adjusted EPS of $1.04.
The Kroger Co. (NYSE:KR) is a food and drug retailer that operates supermarkets, fulfillment centers, and multi-department stores. Its brand portfolio includes Smart Way, Big K, Heritage Farm, Simple Truth Organic, and Simple Truth.
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