Despite the inflationary pressure and uncertain macroeconomic environment, grocery/big box retailers have benefited from the inelastic demand for their products. Although high inflation is…
a major concern for the retail industry, rising prices usually do not deter consumers from spending on essentials. As a result, grocery/big box retailers benefit by passing on the rising costs to consumers.
U.S. retail sales were flat sequentially in July but increased from a year ago. Grocery stores witnessed a similar trend. Given its defensive nature, the Grocery/Big Box Retailers industry is currently positioned at the top of the industry list in our proprietary rating system.
Therefore, fundamentally sound stocks from this hottest industry Walmart Inc. (WMT), The Kroger Co. (KR), Albertsons Companies, Inc. (ACI), and Casey’s General Stores, Inc. (CASY), could be solid investments now.
Walmart Inc. (WMT)
The retail giant WMT operates supercentres, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, membership-only warehouse clubs, and e-commerce websites, including walmart.com and Walmart.com.mx flipkart.com, and others. The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club.
On August 5, 2022, WMT announced the acquisition of Volt Systems to fortify store insights and decisions on customer demand. Such investments in technology and innovation will enable the company to offer a seamless omni-shopping experience to its customers with reduced friction due to out-of-stocks.
For the fiscal second quarter that ended July 31, 2022, WMT’s total revenues increased 8.4% year-over-year to $152.86 billion. Its consolidated net income grew 20.4% from the year-ago value to $5.15 billion, while its EPS came in at $1.88, representing an increase of 23.7% year-over-year. Also, the company’s total assets increased 3.6% from the prior-year value to $247.20 billion.
Analysts expect WMT’s revenue for the third quarter (ending October 31, 2022) to increase 4.6% year-over-year to $145.62 billion. For fiscal 2023, its EPS is expected to increase 13.1% year-over-year to $6.61. It has surpassed the Street EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 3.4% to close the last trading session at $132.88.
WMT’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of A, translating to a Strong Buy. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Stability, Sentiment, and Quality. Among 38 stocks in the A-rated Grocery/Big Box Retailers industry, it is ranked #8. Click here to see the other ratings of WMT for Value and Momentum.
The Kroger Co. (KR)
KR is a food retailer that owns and operates combination food and drug stores, supermarkets, multi-department stores, and fulfillment centers. It sells its products under seven brand names: Private Selection, The Kroger, Big K, Check This Out, Heritage Farm, Simple Truth, and Simple Truth Organic.
In August, the company announced opening a new spoke location in Louisville, Kentucky. It expanded its footprint in Greater Nashville and the Chicago Metro Area by adding new facilities. Such expansions should…
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