The grocery retail industry is expected to remain resilient despite economic uncertainties due to inelastic demand for essential items and adapting to changing consumer preferences through online shopping and delivery services.
Given the industry’s growth prospects, investors could consider buying fundamentally sound grocery stocks Wal-Mart de México, S.A.B. de C.V. (WMMVY), Ingles Markets, Incorporated (IMKTA) and Casey’s General Stores, Inc. (CASY) for solid returns.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the grocery industry.
Retail sales in the US rose 0.3% month-over-month in November 2023, following an upwardly revised 0.2% increase in October. This increase in retail sales suggests consumer spending remained strong over the holiday season.
The global online grocery market is expected to reach $2.83 trillion by 2032, growing at a CAGR of 22.7%. The global online grocery market is driven by convenience, providing a handy alternative to traditional retailers.
Also, according to a market report, global retail sales in 2024 are expected to come in at $31.10 trillion. This marks a 4.9% annual increase. This is also the first time retail sales are anticipated to cross the $30 trillion mark.
The projected growth in global retail sales can be attributed to various factors such as increasing consumer spending power, expanding e-commerce platforms, and emerging markets. As technology continues to advance and online shopping becomes more convenient, it is likely that the trend of steady growth in retail sales will continue beyond 2024.
In light of such encouraging trends and prospects, let us dive deeper into the fundamentals of the featured Grocery/Big Box Retailers stocks, beginning with number three:
Stock #3: Wal-Mart de México, S.A.B. de C.V. (WMMVY)
Headquartered in Mexico City, Mexico, WMMVY owns and operates self-service stores in Mexico and Central America. The company operates discount warehouses and stores, hypermarkets, supermarkets, and membership self-service wholesale stores.
WMMVY’s trailing-12-month ROTA of 11.66% is 152.3% higher than the industry average of 4.62%. Its trailing-12-month ROTC of 17.51% is 169.4% higher than the industry average of 6.50%.
For the fiscal third quarter, which ended on September 30, 2023, WMMVY’s total revenue increased 7.7% year-over-year to MXN$213.07 billion ($12.30 billion), while its gross profit rose 10.8% from the prior-year quarter to MXN$51.96 billion ($3 billion).
Moreover, the company’s operating income and net income amounted to MXN$17.75 billion ($1.02 billion) and MXN$13.63 billion ($786.97 million), up 8.8% and 12.2% from the year-ago value, respectively. Also, its EBITDA rose 8.5% year-over-year to MXN$22.97 billion ($1.33 billion).
Analysts expect WMMVY’s revenue to increase 8.7% year-over-year to $55.51 billion for the year ending December 2024. Its EPS is expected to grow 12.4% year-over-year to $1.88 for the same period. The stock has gained 16% over the past three months to close the last trading session at $41.26.
WMMVY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
WMMVY also has a B grade for Stability, Momentum and Quality. It is ranked #18 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry. Click here for the additional POWR Ratings for Growth, Value and Sentiment for WMMVY.
Stock #2: Ingles Markets, Incorporated (IMKTA)
IMKTA operates a chain of supermarkets that offers food products, including grocery, meat, and dairy products, produce, frozen foods, and other perishables, and non-food products, including fuel centers, pharmacies, health and beauty care products, general merchandise, and private label items.
IMKTA’s trailing-12-month asset turnover ratio of 2.47x is 195.9% higher than the industry average of 0.84x. Its trailing-12-month ROTA of 8.52% is 84.5% higher than the industry average of 4.62%.
In the fiscal fourth quarter that ended September 30, 2023, IMKTA’s net sales stood at $1.58 billion, up 9.2% year-over-year. Its gross profit rose 1.4% from the previous-year quarter to $369.72 million. The company’s net income stood at $52.64 million and $2.77 per class A common share.
Shares of IMKTA has gained 10.5% over the past three months to close the last trading session at $58.65.
IMKTA’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
IMKTA has a B grade for Value, Stability and Quality. It ranks #11 in the same industry. Click here to access additional IMKTA ratings (Growth, Sentiment and Momentum).
Stock #1: 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. The company’s stores provide soft drinks, energy, water, sports drinks, juices, coffee, tea and dairy products, beer, wine, and spirits, snacks, candy, packaged bakery, ice cream, meals, and appetizers, health and beauty aids, automotive products, etc.
CASY’s trailing-12-month asset turnover ratio of 2.43x is 190.8% higher than the industry average of 0.84x. Its trailing-12-month ROTA of 7.78% is 68.3% higher than the industry average of 4.62%.
For the fiscal second quarter, which ended October 31, 2023, CASY’s total revenue came in at $4.06 billion, up 2.2% year-over-year. The company’s adjusted EBITDA increased 11.1% over the prior-year quarter to $307.07 million. In addition, its net income increased 15.4% year-over-year to $158.78 million. Also, its EPS came in at $4.24, representing an increase of 15.5% year-over-year.
Street expects CASY’s revenue to increase marginally year-over-year to $15.21 billion for the fiscal year ending April 2024. Its EPS is expected to grow 7.8% year-over-year to $12.84 for the same period. It surpassed EPS estimates in three of four trailing quarters. Shares of CASY has gained 30.7% over the past year to close the last trading session at $284.34.
CASY has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Sentiment and Quality. It is ranked #6 stocks in the same industry.
Beyond what is stated above, we’ve also rated CASY for Growth, Value, Momentum and Stability. Get all CASY ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CASY shares were trading at $286.19 per share on Monday afternoon, up $1.85 (+0.65%). Year-to-date, CASY has gained 4.17%, versus a -0.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
3 Grocery Stocks to Buy for January 2024 Success and Beyond StockNews.com
