As holiday sales pick up, retail stocks are set to benefit from the seasonal boost in consumer spending. Driven by rising disposable income and demand for both online and in-store shopping, these companies are strategically positioned to capture more market share.
Investors seeking opportunities within the retail landscape might invest in quality stocks like PriceSmart, Inc. (PSMT), Target Corporation (TGT), and Walmart Inc. (WMT), as these retail giants respond to seasonal surges and embrace transformative changes across digital and physical platforms.
U.S. retail sales increased by 0.4% in September, surpassing economists’ forecast of 0.3%. Lower gasoline prices likely contributed, giving consumers more disposable income to spend at restaurants, bars, clothing stores, and online.
Additionally, the rise of online shopping, coupled with trends toward sustainability, omnichannel engagement, and values-driven purchasing, underscores how major retailers are adapting to meet shifting consumer expectations. By prioritizing personalized shopping experiences, these companies are reshaping their retail strategies to attract and retain a larger, more loyal customer base.
As a result, the global food and grocery retail market, valued at $11.9 trillion in 2023, is projected to grow at a 3.2% CAGR from 2024 to 2030.
Further, personal income rose by $50.5 billion (0.2%) in August, while disposable income increased by $34.2 billion (0.2%), and personal consumption expenditures grew by $47.2 billion (0.2%), per the U.S. Bureau of Economic Analysis, indicating that consumers have more money to spend, boosting the retail sector.
Considering these conducive trends, let’s examine the Grocery/Big Box Retailers stocks in detail, starting with the third one:
Stock #3: PriceSmart, Inc. (PSMT)
PSMT operates U.S.-style membership warehouse clubs across the United States, Central America, the Caribbean, and Colombia. The company offers a variety of products, including groceries, electronics, home furnishings, and private label items under the Member's Selection brand, and provides additional services like e-commerce, curbside pickup, and health services.
PSMT’s total revenues rose 9.6% year over year to $1.23 billion in the fiscal fourth quarter ended August 31, 2024. Its export sales grew 15.9% from the year-ago quarter to $9.33 million. Operating income saw a rise of 53.1% from the previous-year quarter to $49.20 million, and adjusted net income per share improved 44.6% year over year to $0.94.
Street expects PSMT’s revenue for the fiscal first quarter (ending November 2024) to increase 8% year-over-year to $1.26 billion. Its EPS for the same quarter is expected to grow 15.3% from the prior year to $1.43. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters, which is promising.
Shares of PSMT have gained 33.4% over the past year and 12.8% year-to-date to close the last trading session at $85.45.
PSMT’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A for Growth and a B grade for Value and Stability. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #16 among 37 stocks.
Click here to see PSMT’s ratings for Momentum, Quality, and Sentiment.
Stock #2: Target Corporation (TGT)
TGT operates as a major U.S. general merchandise retailer that offers a wide range of products including apparel, beauty, groceries, electronics, and home goods. It sells its merchandise through physical stores, Target.com, and digital channels as well enhancing customer experience with design partnerships and in-store amenities.
On October 22, TGT announced its intention to lower regular prices on more than 2,000 items across owned and national brands this holiday season, which should boost its sales.
Moreover, on September 18, the company declared a quarterly dividend of $1.12 per common share, which is payable on December 10. This will be the company’s 229th consecutive dividend paid since October 1967, when the company became public. Its annual dividend of $4.48 yields 2.97% on the prevailing price level, higher than the four-year average of 2.29%.
In the second quarter of 2024, which ended August 3, TGT’s total revenue increased 2.7% year-over-year to $25.45 billion. Its operating income rose 36.6% to $1.64 billion, driven by higher sales and an improved gross margin rate. The company reported an EPS of $2.57, up 42.8% from the prior year quarter.
Street expects TGT’s revenue and EPS for the third quarter ending October 2024 to increase 2.2% and 9.5% year-over-year to $25.95 billion and $2.30, respectively. It surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
The stock climbed 5.9% year-to-date and has returned 37.7% over the past year, to close the last trading session at $150.84.
TGT’s POWR Ratings reflect strong prospects. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B for Value and Quality. It is ranked #10 in the same industry.
To access TGT’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: Walmart Inc. (WMT)
WMT operates a global network of retail, wholesale, and eCommerce businesses through its Walmart U.S., Walmart International, and Sam's Club segments. Its offerings include supercenters, supermarkets, warehouse clubs, and eCommerce sites, providing groceries, health products, home goods, apparel, and more.
On October 22, 2024, WMT announced an expansion of its delivery services to include both prescription medications and general merchandise in a single order. This new service, already available in six states (Arkansas, Missouri, New York, Nevada, South Carolina, and Wisconsin), is set to reach 49 states by January 2025.
Walmart’s vast network of nearly 4,600 stores enables delivery to over 86% of U.S. households, providing a significant convenience for busy families, seniors, and those with chronic conditions. The service responds to strong customer demand, with 55% requesting combined delivery of prescriptions and groceries.
On October 16, WMT announced a new partnership with Clover, a business management platform from Fiserv. This initiative supports Walmart Business's mission to help organizations save time and resources by offering essential tools to enhance operational efficiency.
During the fiscal second quarter that ended June 30, 2024, WMT's total revenues increased 4.8% year-over-year to $169.34 billion. Its operating income grew 8.5% from the year-ago value to $7.94 billion. In addition, its non-GAAP EPS reached $0.67, up 9.8% from the prior-year quarter.
Analysts expect WMT’s EPS and revenue for the quarter ended October 31, 2024, to increase 3.5% to 4.3% year-over-year to $0.53 and $166.23 billion, respectively. It surpassed the Street EPS and Revenue estimates in each of the trailing four quarters.
Over the past year, the stock has gained 49.6% to close the last trading session at $82.19. It soared 56.4% year-to-date.
WMT’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
WMT has an A grade in Stability and a B in Sentiment and Growth. It is ranked #7 in the same industry.
Beyond what we have stated above, we have also given WMT grades for Value, Momentum, and Quality. Get all the WMT’s ratings here.
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WMT shares rose $0.04 (+0.05%) in after-hours trading Monday. Year-to-date, WMT has gained 58.42%, versus a 21.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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