Amid cooling inflation and robust job growth, retail sales are projected to increase this year. Given the industry’s robust demand, investors could look into quality retail stocks Casey's General Stores, Inc. (CASY), Marks and Spencer Group plc (MAKSY), and Weis Markets, Inc. (WMK) this month.
According to Coresight Research, the U.S. grocery retail market stands to see moderate growth this year, marked by lower inflation, an ongoing consumer shift toward foodservice, and share gains by nontraditional grocery retailers.
In its latest “Market Navigator: U.S. Grocery Retailing” report, released in late June, Coresight projects total U.S. grocery retail sales to rise 5.6% to $1.5 trillion this year.
Moreover, the pandemic resulted in the emergence of consumer polarization, where some consumers scaled up to purchase expensive products, which should bode well for the retail industry. Furthermore, the pandemic-induced increased cooking at home has been a major growth driver for the retail market.
In addition, the supermarket and hypermarket segment are expected to hold the largest market share in the grocery retail market due to several factors, including their established presence, wide product range, and ability to offer competitive prices.
The global grocery retail market is projected to witness lucrative growth by reaching up to $14.77 trillion by 2030, growing at a CAGR of 6.9%.
Let’s discuss the stocks mentioned above in detail:
Casey's General Stores, Inc. (CASY)
CASY operates convenience stores under the Casey's and Casey's General Store names. Its stores offer pizza, donuts, breakfast items, sandwiches, and tobacco and nicotine products.
On June 6, 2023, CASY declared a quarterly dividend of $0.43 payable on August 15, 2023. The company pays an annual dividend of $1.72, which translates to a yield of 0.68% at the current price level. It has a four-year average dividend yield of 0.70%.
CASY’s trailing-12-month ROTC of 9.40% is 45.9% higher than the 6.44% industry average. Its trailing-12-month asset turnover ratio of 2.64x is 198.4% higher than the 0.88x industry average.
CASY’s total revenue came in at $3.33 billion in the fiscal fourth quarter, which ended April 30, 2023. Its net income came in at $56.09 million and EPS came in at $1.49. Also, adjusted EBITDA increased marginally year-over-year to $166.92 million.
CASY’s revenue is expected to come in at $3.88 billion for the fiscal first quarter ending July 2023. The company’s EPS for the same quarter is expected to be $3.41. Moreover, CASY topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 20.7% over the past year to close the last trading session at $248.14.
CASY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CASY also has a B grade for Value and Quality. It is ranked #19 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry.
To access additional ratings for CASY’s Growth, Momentum, Stability, and Sentiment, click here.
Marks and Spencer Group plc (MAKSY)
MAKSY operates various retail stores. It operates through five segments, UK Clothing & Home; UK Food; International; Ocado; and All Other.
MAKSY’s trailing-12-month gross profit margin of 33.81% is 7.8% higher than the 31.36% industry average. Its trailing-12-month asset turnover ratio of 1.29x is 45.7% higher than the 0.88x industry average.
During the fiscal year that ended April 30, 2023, MAKSY’s revenue increased marginally year-over-year to £11.93 billion ($15.26 billion). Profit for the year increased 1.8% year-over-year to £364.50 million ($466.37 million), while its non-GAAP EPS came to 17.5 pence.
Analysts expect MAKSY’s revenue to increase 9.5% year-over-year to $16.14 billion for the fiscal year ending March 2024. Its EPS is expected to be $0.39 for the same year.
Shares of MAKSY have gained 109.8% over the past nine months to close the last trading session at $5.33.
MAKSY’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Stability and Quality. It is ranked #21 in the same industry.
Beyond what is stated above, we’ve also rated for Growth, Value, Sentiment, and Momentum. Get all MAKSY ratings here.
Weis Markets, Inc. (WMK)
WMK engages in the retail sale of food through a chain of supermarkets in Pennsylvania and surrounding states.
On July 27, 2023, WMK declared a quarterly dividend of $0.34 payable on August 21.
The company pays an annual dividend of $1.36, which translates to a yield of 2.05% at the current price level. It has a four-year average dividend yield of 2.26%.
Its trailing-12-month return on total assets of 6.15% is 50.2% higher than the 4.10% industry average. Its trailing-12-month asset turnover ratio of 2.47x is 179.1% higher than the 0.88x industry average.
WMK's net sales rose 3.7% year-over-year to $1.14 billion in the fiscal first quarter ended April 1, 2023. Income from operation came in at $32.62 million. Its net income came in at $25.81 million and EPS came in at $0.96.
The stock has gained 1.6% over the past month to close the last trading session at $65.26.
WMK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
WMK has a B grade for Value, Stability, and Quality. It is ranked #20 in the same industry.
Click here to see the additional POWR Ratings for WMK (Growth, Momentum, and Sentiment).
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CASY shares were trading at $247.54 per share on Wednesday morning, down $0.60 (-0.24%). Year-to-date, CASY has gained 10.89%, versus a 18.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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