3 main retail stocks to buy and hold for the long term
The retail industry had to undergo several revamps to stay operational last year. However, with most of the population being vaccinated with at least one dose, physical stores have seen foot traffic increase. The US Census Bureau reported a 15.1% year-over-year increase in retail sales in August.
Additionally, the National Retail Federation (NRF) has raised its forecast for retail sales growth to between 10.5% and 13.5% for this year. The strong return of the retail sector in 2021 is evident as the SPDR S&P Retail (XRT) ETF has a 40.4% year-to-date gain from the broader return of 14.8 % of the SPDR S&P 500 ETF (SPY).
In addition to the short-term support for the upcoming holiday season and increased foot traffic, the fundamental strength of leading retail stocks such as Costco Wholesale Corporation (COST), BJ’s Wholesale Club Holdings, Inc. ( BJ) and Casey’s General Stores, Inc. (CASY) are making strong long-term bets.
Wholesale company Costco (COST)
This multinational retail giant needs no introduction. COST generally sells dry and packaged foods, groceries, appliances and electronics. The company also operates through its e-commerce site in several countries.
In July, COST entered into a collaboration with Uber Technologies, Inc. (UBER) to deliver door-to-door groceries. With door-to-door orders and lockdowns imposed over the past year, the demand for door-to-door deliveries has increased dramatically. In this context, COST’s on-demand delivery facility could prove profitable.
For the fiscal fourth quarter which ended Aug. 29, COST’s total revenue grew 17.4 percent year-on-year to $ 62.68 billion. This can be attributed to a 17.5% year-over-year increase in net sales to $ 61.44 billion. Net income attributable to COST was $ 1.67 billion, up 20.2% from the same period last year, while net income per common share increased by 20.1 % over the previous fiscal quarter at $ 3.76.
The consensus estimate of EPS for the current year (FY2022) of $ 12.07 indicates an 8.8% year-over-year increase. Likewise, a consensus estimate of revenue of $ 212.33 billion for the current year reflects an 8.4% improvement over the previous year. Additionally, COST has an impressive track record of earnings surprises, as it has beaten consensus EPS estimates in three of the past four quarters.
The stock has gained 26.6% in the past year and 19.3% year-to-date to close yesterday’s trading session at $ 449.35.
COST’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to a buy rating in our proprietary rating system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
COST has a Stability, Feeling, and Quality rating of B. In the 41 Grocery / Big Box industry, it is ranked # 14. This industry is classified A.
Click here to see additional notes for COST (Growth, Value and Momentum).
Click here to view our 2021 Retail Industry Report
BJ’s Wholesale Club Holdings, Inc. (BJ)
BJ operates as a warehouse club operator on the east coast of the United States. The company provides an assortment of perishable goods, general merchandise and gas services as well as other ancillary services.
On September 8, the company unveiled its list of new children’s toys for 2021. As the holiday season approaches, the company expects these new additions to contribute significantly to the company’s revenue. business.
BJ further expanded its presence in New Hampshire with the opening of its 22sd club in Seabrook on July 2, welcoming the Seabrook community with offers and lucrative experiences.
On June 3, BJ launched Citizen Pay, its Buy It Now option for purchases over $ 99. The facility allows customers to pay for their purchases in installments. Andrew Rostami, President of BJ Citizens Pay, said: “BJ members will now have access to modern monthly installment plans that are right for them so they can responsibly make large purchases.
In the fiscal second quarter which ended on July 3, BJ’s total revenue grew 5.6% year-on-year to $ 4.18 billion. Adjusted EBITDA increased 1.5% from the prior year quarter to $ 220.14 million. Adjusted net income and Adjusted EPS were $ 113.32 million and $ 0.82, up 5.4% and 6.5% year-over-year, respectively.
The street EPS estimate of $ 3.11 for the next year (fiscal 2023) reflects a 6.5% increase over the current year. Likewise, Street’s revenue estimate of $ 16.86 billion for next year indicates a 6.2% year-over-year increase. Additionally, BJ has beaten the consensus EPS estimate in each of the past four quarters, which is impressive.
BJ’s stock has gained 47.3% year-to-date to close yesterday’s trading session at $ 54.92. It has also gained 32.2% over the past year.
It’s no surprise that BJ has an overall rating of B, which translates into a buy rating in our POWR rating system. The stock also has a B rating for value. In the grocery / retail industry it is ranked # 20.
To see additional growth, momentum, stability, sentiment and quality ratings for BJ, click here.
General Stores Casey’s, Inc. (CASY)
CASY operates as a chain of convenience stores providing freshly prepared food, tobacco and nicotine products and other items. It also offers self-service fuel.
On September 28, CASY announced it would buy 40 Pilot convenience stores for $ 220 million in cash from fuel supplier and travel center operator Pilot Company. The stores are expected to integrate with CASY’s fresh produce services and strengthen the growth potential of the company.
Earlier in September, CASY unveiled its new breakfast menu. Fast and efficient breakfast services are becoming more and more important in this rapidly changing society. The company expects this new line of breakfasts to attract more customers.
In the three months ended July 31, CASY’s total revenue increased 51.2% year-on-year to $ 3.18 billion. Adjusted EBITDA increased 2.3% from the prior year quarter to $ 243.19 million. Net cash flow from financing activities was $ 265.16 million, up substantially from its negative value a year ago.
Analysts expect EPS to increase 5.5% year-on-year to $ 8.84 in the current year (fiscal 2022). Likewise, the consensus estimate of revenues of $ 11.90 billion for the current year indicates an increase of 36.7% from the previous year. CASY has beaten consensus EPS estimates in each of the past four quarters.
The stock has gained 8.2% over the past year and 7.4% year-to-date to close yesterday’s trading session at $ 188.45.
CASY’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which is equivalent to a buy rating in our proprietary rating system. CASY has a Momentum and Sentiment rating of B. It is ranked # 21 in the same industry.
In addition to the ratings we have given above, the rest of CASY’s ratings for growth, value, stability and quality can be seen here.
COST shares were trading at $ 447.75 per share on Friday afternoon, down $ 1.60 (-0.36%). Since the start of the year, COST has gained 19.55%, compared to a 16.94% increase in the benchmark S&P 500 over the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. Following…