The grocery industry is expected to grow as a result of increased consumer spending, urbanization, technological advancements, and a growing emphasis on health and wellness.
Given the industry’s growth prospects, investors could consider buying fundamentally sound grocery stocks Jerónimo Martins, SGPS, S.A. (JRONY), Ingles Markets, Incorporated (IMKTA) and Colruyt Group N.V. (CUYTY) 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 grocery retail industry is expected to increase significantly, reaching $14.77 trillion by 2030. The market is expanding at a CAGR of 6.9%. Population growth, urbanization, evolving consumer preferences, e-commerce, and technological advancements in the industry all contribute to the market's growth.
Despite labor shortages, shrinkage, theft, and data piracy, AI continues to dominate the supermarket industry. According to a poll of supermarket executives, 13% are eager to invest in AI solutions, with the most common use cases being inventory management, supply chain operations, and pricing and promotions.
As omnichannel shopping becomes more popular, merchants must speed AI implementation to improve the digital experience and retain customer loyalty.
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: Jerónimo Martins, SGPS, S.A. (JRONY)
Headquartered in Lisbon, Portugal, JRONY operates in the food distribution and specialized retail sectors in Portugal, Poland, and Colombia. The company operates through Portugal Retail, Portugal Cash & Carry, Poland Retail, Colombia Retail, and Others, Eliminations and Adjustments segments.
JRONY’s trailing-12-month ROCE of 31.13% is 175.5% higher than the industry average of 11.30%. Its trailing-12-month asset turnover ratio of 2.52x is 202.3% higher than the industry average of 0.84x.
For the third quarter, which ended September 30, 2023, JRONY’s net sales and services revenue rose 22% year-over-year to €7.94 billion ($8.59 billion). Its EBITDA increased 18.1% over the prior-year quarter to €586 million ($633.88 million). Its net profit attributable to JRONY rose 28.2% year-over-year to €202 million ($218.50 million).
Analysts expect JRONY’s revenue to increase 9.7% year-over-year to $36.79 billion for the year ending December 2024. Its EPS is expected to grow 19.5% year-over-year to $3.19 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 12.8% over the past three months to close the last trading session at $48.62.
JRONY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JRONY also has a B grade for Growth, Stability and Quality. It is ranked #10 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry. Click here for the additional POWR Ratings for Value, Momentum and Sentiment for JRONY.
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% over the past three months to close the last trading session at $86.52.
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 an A grade for Value and a B for Stability and Quality. It ranks #9 in the same industry. Click here to access additional IMKTA ratings (Growth, Sentiment and Momentum).
Stock #1: Colruyt Group N.V. (CUYTY)
Headquartered in Halle, Belgium, CUYTY together with its subsidiaries, engages in the retail, wholesale, food service, and other activities in Belgium, France, Luxembourg, and internationally. It operates through three segments: Retail; Wholesale and Foodservice; and Other Activities.
CUYTY’s trailing-12-month asset turnover ratio of 1.68x is 101.3% higher than the industry average of 0.84x. Its trailing-12-month ROTA of 15.08% is 226.5% higher than the industry average of 4.62%.
For the six months ended September 30, 2023, CUYTY’s revenue came in at €5.48 billion ($6 billion), up 16% year-over-year. The company’s adjusted EBITDA increased 54.5% over the prior-year quarter to €450 million ($492.51 million). In addition, its net result increased 908.9% year-over-year to €897 million ($981.74 million). Also, its EPS came in at €7.07, representing an increase of 923.5% year-over-year.
Street expects CUYTY’s revenue to increase marginally year-over-year to $11.83 billion for the fiscal year ending March 2024. Shares of CUYTY has gained 100.4% over the past year to close the last trading session at $11.40.
CUYTY has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and Stability and a B for Value and Quality. It is ranked #6 stocks in the same industry.
Beyond what is stated above, we’ve also rated CUYTY for Sentiment and Momentum. Get all CUYTY ratings here.
What To Do Next?
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JRONY shares were trading at $45.74 per share on Friday afternoon, down $2.88 (-5.92%). Year-to-date, JRONY has declined -9.85%, versus a 0.05% 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.
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