In this piece, I evaluated two discount retail stocks, Walmart Inc. (WMT – Get Rating) and PriceSmart, Inc. (PSMT – Get Rating), to determine which one is worth buying now. A comparison of their fundamentals reveals that both could be solid investments now.
Inflation cooled in May to its lowest annual rate over two years. The Consumer Price Index (CPI) rose 0.4% sequentially and 4% year-over-year. The higher cost of living had led customers to be more selective and sensitive to prices earlier this year. However, consumer spending remained strong thanks to the better wage gains from the strong labor market.
Moreover, with inflation easing considerably from last year’s peak, consumers’ purchasing power erosion has slowed down. Cooling inflation is good news for discount retailers like WMT and PSMT.
Despite the challenging macroeconomic conditions, retail sales continue to rise. Retail sales in May rose 0.3% sequentially. According to the National Retail Federation, retail sales will grow between 4% and 6% in 2023 to reach between $5.13 trillion and $5.23 trillion.
WMT surpassed the consensus EPS and revenue estimates in the first quarter. Its EPS was 11.6% above the consensus estimate, while its revenue beat analyst estimates by 2.9%. Similarly, PSMT’s EPS topped the consensus estimate by 14.6%, while its revenue was 1.5% above analyst estimates.
WMT’s President and CEO Doug McMillon said…
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