As the holiday season kicks into high gear, retail stocks are seeing a surge in momentum, driven by increased consumer spending and festive shopping trends. With consumer spending on the rise, retail companies are well-poised to capitalize on the festive rush.
Therefore, for investors, it could be wise to look into the shares of fundamentally sound retail stocks like Costco Wholesale Corporation (COST), Target Corporation (TGT), and Walmart Inc. (WMT), which are poised for growth opportunities with seasonal boosts.
Retail sales increased in November on top of a strong October. As per the Retail Monitor, total retail sales (excluding automobiles and gasoline) rose 2.4% year-over-year. For the first 11 months of 2024, the total sales were up 2.15% year-over-year, and core sales were up 2.33%.
Moreover, the retailers are ready and have improved their supply chain strategies to avoid inventory shortages. According to Dankert, companies have decided to bring in goods ahead of the strike, which might force them to start selling holiday inventory earlier than usual, effectively lengthening the season. This readiness has enabled them to meet heightened holiday demand and maintain customer satisfaction, driving stock performance upward.
The global food and grocery retail market is anticipated to reach $14.78 trillion by 2030, growing at a CAGR of 3.2%. According to Statista, retail sales are projected to reach $32.8 trillion by 2026. For investors, these stocks represent a promising sector to watch this season.
Considering these conducive trends, let’s examine the Grocery/Big Box Retailers industry stocks in detail, beginning with the third choice:
Stock #3: Costco Wholesale Corporation (COST)
COST, along with its subsidiaries, engages in the operation of membership warehouses internationally. The company offers branded and private-label products in a range of merchandise categories, warehouse ancillary, and other businesses. It operates through three segments: United States Operations; Canadian Operations; and Other International Operations.
On November 15, 2024, buoyed by strong financial performance, the company paid a quarterly cash dividend of $1.16 per share, payable in 2024. COST pays an annual dividend of $4.64, which translates to a dividend yield of 0.47% at the prevailing price level. Also, its four-year average dividend yield is 1.71%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 13.6% over the past three years.
COST's total revenue for the fourth quarter of 2024, which ended on September 1, increased marginally year-over-year to $79.69 billion, while its operating income stood at $3.04 billion, up 9.4% year-over-year. Its net income for the quarter amounted to $2.35 billion or $5.29 per share, representing an increase of 9% and 8.8% from the same quarter last year. Also, the company’s net cash flow from operating activities grew 2.4% from the year-ago value to $11.34 billion.
Analysts expect COST’s revenue for the first quarter (ended November 2024) to increase 7.3% year-over-year to $62 billion, while its EPS for the same period is expected to grow 5.8% from the prior year to $3.79. Moreover, it topped Street EPS estimates in each of the trailing four quarters, which is promising.
Over the past year, the stock has surged 59.7%, closing the last trading session at $995.33. The stock is currently trading above its 50-day and 100-day moving averages of $920.75 and $895.95, respectively, indicating an uptrend.
COST’s stance is apparent in its POWR Ratings. The stock has a B grade for Momentum, Stability, and Sentiment. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 36 stocks in the A-rated Grocery/Big Box Retailers industry, it is ranked #31. Click here to see the additional COST ratings (Growth, Value, and Quality).
Stock #2: Target Corporation (TGT)
TGT is a general merchandise retailer selling products through physical stores and digital platforms. The company offers a broad range of everyday essentials and stylish, unique items at competitive prices. Most stores feature diverse merchandise, including apparel, beauty and household essentials, food and beverages, hardlines, and home furnishings.
On December 10, the company paid a quarterly dividend of $1.12 per common share. TGT pays an annual dividend of $4.48, which translates to a dividend yield of 3.29% at the prevailing price levels. TGT has raised its dividends for 56 consecutive years. Also, its four-year average dividend yield is 2.33%.
On October 22, TGT announced it would reduce regular prices on more than 2,000 products across owned and national brands this holiday season. This move should drive sales growth and will help customers save on items.
For the nine-month period (ended November 2, 2024), TGT’s total revenue amounted to $75.65 billion, up marginally year-over-year. Its operating income rose 6.7% from the year-ago value to $4.09 billion. The company’s net earnings for the quarter amounted to $2.99 billion, and its EPS came in at $6.45 per share, representing an increase of 8.4% from the same period last year. In addition, its EBITDA increased to $6.39 billion from $5.98 billion recorded in the same period last year.
Street expects TGT’s revenue for the fiscal first quarter (ending April 2025) to increase 2.4% year-over-year to $25.12 billion. Its EPS for the same period is expected to register a marginal growth from the prior year, settling at $2.06.
TGT shares have surged marginally intraday to close the last trading session at $136.02. Moreover, the stock is currently trading above its 10-day moving average of $132.25.
TGT’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Value, Momentum, and Quality. It is ranked #29 out of the 36 stocks in the same A-rated industry.
Beyond what is stated above, we’ve also rated TGT for Growth, Stability, and Sentiment. Get all TGT’s ratings here.
Stock #1: Walmart Inc. (WMT)
WMT is a technology-powered omnichannel retailer that engages in the operation of retail, wholesale, other units, and e-commerce worldwide. The company functions as supercenters, supermarkets, hypermarkets, warehouse clubs, and cash and carry stores. It operates through three segments: Walmart U.S.; Walmart International; and Sam's Club.
On December 3, WMT completed the acquisition of VIZIO. This acquisition will allow WMT to use VIZIO’s SmartCast Operating System, which will enhance customers' shopping journeys and serve them in new ways. It should help connect customers at scale and boost product discovery.
In the fiscal third quarter that ended on October 31, 2024, WMT’s total revenue increased 5.5% year-over-year to $169.59 billion. The company reported an operating income of $6.71 billion, indicating 8.2% growth from the prior year’s quarter. WMT’s attributable net income stood at $4.58 billion, up 910.4% year-over-year, while its EPS grew 850% from the year-ago value to $0.57.
The consensus revenue estimate of $178.74 billion for the fiscal first quarter (ending January 2025) represents a 3.9% increase year-over-year. The consensus EPS estimate of $0.64 for the same quarter indicates a 6.8% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 88.1% over the past year and 56.4% over the past nine months to close the last trading session at $94.86. WMT’s stock is trading above its 50-day and 200-day moving averages of $85.32 and $71.72, respectively.
WMT’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
WMT has an A grade for Stability and Sentiment and a B for Momentum. It is ranked #14 in the Grocery/Big Box Retailers industry. Click here to see the additional ratings for WMT (Growth, Value, and Quality).
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WMT shares were trading at $94.69 per share on Thursday afternoon, down $0.27 (-0.28%). Year-to-date, WMT has gained 81.94%, versus a 28.54% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
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