As Inflation Rages, here are 5 Discount Store Stocks to Add to Your Watchlist The Russia-Ukraine war has exacerbated supply chain disruptions worldwide, causing many economists to forecast that inflationary pressure will persist longer than expected, irrespective of federal interest rate hikes. Amid rising...
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The Russia-Ukraine war has exacerbated supply chain disruptions worldwide, causing many economists to forecast that inflationary pressure will persist longer than expected, irrespective of federal interest rate hikes. Amid rising prices, discount store operators should witness significant demand because they sell products at prices lower than traditional retail stores. So, we think it could be wise to add quality discount store stocks Dollar Tree (DLTR), Target (TGT), BJ's (BJ), Costco (COST), and Walmart (WMT) to one's watchlist. Read on.
The Russia-Ukraine war has aggravated global logistical disruptions, pushing pandemic-induced inflation to sky-high levels. Ahead of new Consumer Price Index reports, inflation in March is slated to have spiked the most since December 1981, despite the recent interest rate increase. Therefore, discount retail store operators should witness strong demand because they offer a wide range of goods at prices lower than traditional retail outlets.
Many discount retailers have also strengthened their online presence to benefit from the online buying trend. While online sales are already helping many discount retailers, increasing physical store sales should help them thrive in the coming months. According to Research and Markets, the global retail market is expected to grow at a 7% CAGR through 2025.
Because many economists expect the inflationary pressure to persist longer than expected, we think it could be wise to add prominent discount store stocks Dollar Tree, Inc. (DLTR), Target Corporation (TGT), BJ's Wholesale Club Holdings, Inc. (BJ), Costco Wholesale Corporation (COST), and Walmart Inc. (WMT) to one's watchlist.
Click here to checkout our Retail Industry Report for 2022
Dollar Tree, Inc. (DLTR)
Chesapeake, Va.-based DLTR is a Fortune 200 company that operates a discount variety of retail stores. It operates in two segments–Dollar Tree and Family Dollar, which have approximately 8,061 stores and 8,016 stores, respectively.
On March 2, 2022, Michael Witynski, President and CEO, said, "Importantly, we recently completed a successful conversion to a $1.25 price point across all Dollar Tree stores in the U.S., more than two months ahead of schedule, which significantly enhances our ability to provide a meaningful assortment at extreme value to our shoppers."
DLTR's net sales increased 4.6% year-over-year to $7.08 billion in the fourth quarter, ended Jan. 29, 2022. Its total revenue increased 4.6% year-over-year to $7.08 billion. Its total current assets came in at $5.61 billion for the period ended Jan. 29, 2022, compared to $5.05 billion for the period ended Jan. 30, 2021.
Analysts expect DLTR's revenue to increase 6.1% year-over-year to $27.92 billion in its fiscal year 2023. Its EPS is estimated to grow 37.1% to $7.95 in 2023. Also, it surpassed EPS estimates in three of the trailing four quarters. Over the past year, the stock gained 40.8% in price to close yesterday's trading session at $165.49.
DLTR's strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
DLTR has a B grade for Sentiment. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #30 of 39 stocks. Click here to see the additional POWR Ratings for Growth, Value, Momentum, Stability, and Quality for DLTR.
Target Corporation (TGT)
TGT in Minneapolis, Minn., operates as a general merchandise retailer in the United States. The company operates approximately 2,000 stores. To help families discover the joy of everyday life, since 1946 TGT has donated 5% of its profit to communities.
On March 1, 2022, TGT's chairman and CEO Brian Cornell said, "As we look ahead, we'll keep investing and delivering on all that has earned the loyalty and trust of our guests; that starts with our outstanding team and includes continued differentiation through affordability, assortment, ease and convenience."
TGT's sales increased 9.4% year-over-year to $30.62 billion for the fourth quarter, ended Jan. 29, 2022. The company's total revenue came in at $31 billion, up 9.4% year-over-year. Its net earnings were $1.54 billion, up 11.9% year-over-year, while its EPS came in at $3.21, up 17.6% year-over-year.
For its fiscal year 2024, analysts expect TGT's revenue to be $114.83 billion, representing a 4.6% year-over-year rise. The company's EPS is expected to increase 14% per annum for the next five years. Over the past year, the stock has gained 11.7% in price to close yesterday's trading session at $229.31.
TGT's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system.
Also, the stock has a B grade for Value, Sentiment, and Quality. Within the Grocery/Big Box Retailers industry, it is ranked #14. Click here to see the additional POWR Ratings for Growth, Momentum, and Stability for TGT.
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BJ's Wholesale Club Holdings, Inc. (BJ)
Together with its subsidiaries, BJ in Westborough, Mass., operates warehouse clubs on the East Coast of the United States. It provides perishable, general merchandise, gasoline, and other ancillary services. The company operates approximately 226 warehouse clubs and 157 gas locations in 17 states.
On March 3, 2022, BJ's President and CEO Bob Eddy said, "We remain focused on our strategic priorities to drive long-term growth: attracting and retaining high-quality members, delivering value, improving convenience through our digital offerings and expanding our footprint. The future of our company is bright."
For its fourth fiscal quarter, ended Jan. 29, 2022, BJ's net sales increased 10.4% year-over-year to $4.26 billion. Its total revenues came in at $4.36 billion, up 10.4% year-over-year. Also, its adjusted net income came in at $109.91 million, up 13.1% year-over-year, while its adjusted EPS was $0.80, up 14.3% year-over-year.
BJ's revenue is expected to be $19.04 billion in 2024, representing a 7.5% year-over-year rise. In addition, the company's EPS is expected to increase 12% year-over-year to $3.65 in 2024. Also, it surpassed the Street's EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 55.7% in price to close yesterday's trading session at $69.06.
It is no surprise that BJ has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth and Value.
BJ is ranked #17 in the Grocery/Big Box Retailers industry. Click here to see BJ's ratings for Momentum, Stability, Sentiment, and Quality.
Costco Wholesale Corporation (COST)
Together with its subsidiaries, COST operates membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. The Issaquah, Wash.-based concern offers branded and private-label products in a range of merchandise categories.
COST's net sales increased 16.1% year-over-year to $50.94 billion for its second fiscal quarter, ended Feb. 13, 2022. Its total revenue increased 15.9% year-over-year to $51.90 billion. Also, the company's net income came in at $1.30 billion, up 36.6% year-over-year, while its EPS was $2.92, up 36.4% year-over-year.
Analysts expect COST's revenue to grow 12.9% year-over-year to $221.28 billion in its fiscal year 2022. In addition, the company's EPS is expected to increase 17.9% to $13.08 in 2022. Also, it surpassed the Street's EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 61% in price to close yesterday's trading session at $584.67.
COST has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has a B grade for Stability and Sentiment. It is ranked #22 in the Grocery/Big Box Retailers industry. Click here to see the additional POWR Ratings for Growth, Value, Momentum, and Quality for COST.
Walmart Inc. (WMT)
WMT in Bentonville, Ark., operates retail, wholesale, and other units worldwide. The company has three segments: Walmart U.S.; Walmart International; and Sam's Club. It is a leader in sustainability, corporate philanthropy, and employment opportunities.
On March 7, 2022, WMT and British retailer Space NK announced a partnership to bring prestige beauty products to Walmart.com and nearly 250 Walmart stores nationwide. Laurie Tessier, merchandising director, Prestige Beauty, WMT, said, "We are thrilled to welcome Space NK to Walmart as the latest move in bringing our customers exciting new additions online and in the beauty aisle."
For its fiscal year 2022 fourth quarter, ended Jan. 31, 2022, WMT's total revenues came in at $152.87 billion, versus $152.08 billion in the previous period. Its net income came in at $3.56 billion, compared to a $2.09 billion loss in the year-ago period. Furthermore, its adjusted EPS came in at $1.53, up 10.1% year-over-year.
Analysts expect WMT's revenue to be $590.93 billion in fiscal 2023, representing a 3.2% year-over-year increase. The company's EPS is expected to rise 8.4% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 10.4% to close yesterday's trading session at $154.29.
WMT has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
In addition, it has a B grade for Growth, Stability, and Quality. WMT is ranked #11 in the Grocery/Big Box Retailers industry. Click here to see the additional POWR Ratings for WMT (Value, Momentum, and Sentiment).
Click here to checkout our Retail Industry Report for 2022
DLTR shares rose $0.51 (+0.31%) in premarket trading Tuesday. Year-to-date, DLTR has gained 17.77%, versus a -7.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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