Solid consumer spending, rapid technological adoption, and e-commerce expansion are key factors driving the retail industry’s growth. Thus, fundamentally sound retail stocks Woolworths Holdings Limited (WLWHY), Mr Price Group Limited (MRPLY), and Carrefour SA (CRRFY) could be bargain buys under $10.
Despite inflationary pressures and other economic challenges, Americans remained positive with the strong jobs market and rising wage levels, which is reflected in robust consumer spending. According to Commerce Department data, retail sales grew 0.7% in March from the previous month, beating economists’ projection of 0.4%.
As per National Retail Federation (NRF) forecasts, retail sales are likely to grow between 2.5% and 3.5% to reach a volume of $5.23 trillion and $5.28 trillion for the current year. The 2024 forecast also confirms the 10-year pre-pandemic average annual sales growth of 3.6%.
The retail industry is anticipated to grow from $32.68 trillion in 2024 to $47.24 trillion by 2029, exhibiting a CAGR of 7.6% during the forecast period (2024-2029). The retail industry’s growth is driven by the adoption of digital technologies, e-commerce expansion, and changing consumer preferences.
Further, North America’s 79 companies were listed in the top 250 retailers, reflecting a 47.9% share of global retail revenue and 8.9% year-on-year composite retail growth. In-store sales and apparel and accessories retailers lead the market demand.
Evolving retail industry dynamics are propelling the integration of cutting-edge technologies like AI, Radio Frequency Identification (RFID), and Internet of Things (IoT) technologies for enhanced personalized customer experiences. The global smart retail market is poised to reach $299.74 billion by 2031, expanding at a CAGR of 29%.
Given these favorable market trends, let’s look at the fundamentals of the top three Grocery/Big Box Retailers stocks, beginning with the third choice.
Stock #3: Woolworths Holdings Limited (WLWHY)
Headquartered in Cape Town, South Africa, WLWHY operates a chain of retail stores in sub-Saharan Africa, Australia, and New Zealand. The company operates through Woolworths Fashion; Beauty and Home; Woolworths Food; Woolworths Financial Services; David Jones; Country Road Group; and Treasury segments.
On April 3, 2024, WLWHY announced the approval of the acquisition of Absolute Pets by the competition tribunal. The acquisition was announced in October 2023 when WLWHY expressed its intention to acquire 93.45% of the shares in privately-owned pet retailer Absolute Pets (Pty) Ltd.
The acquisition will open new opportunities for WLWHY and accelerate its pet strategy to bring together two strategically aligned businesses, placing the company as a leader in the end-to-end pet care segment in South Africa.
In terms of forward EV/Sales, WLWHY is trading at 0.86x, 26% lower than the industry average of 1.16x. Likewise, the stock’s forward EV/EBITDA multiple of 6.62 is 27.8% lower than the industry average of 9.16. Also, its forward Price/Sales of 0.66x is 21.7% lower than the industry average of 0.85x.
For the first half that ended on December 24, 2023, WLWHY’s revenue increased 5.8% year-over-year to R37.93 billion ($1.99 billion). Its gross profit rose 4% from the prior year’s period to R13.76 billion ($721.06 million). The company’s profit for the period and EPS were R1.82 billion ($95.42 million) and R2.00, respectively.
In addition, the company’s cash and cash equivalents and total assets were R2.91 billion ($152.27 million) and R39.94 billion ($2.09 billion) as of December 24, 2023, respectively.
Analysts expect WLWHY’s revenue for the fiscal year (ending June 2024) to increase 5.1% year-over-year to $4.06 billion. For the fiscal year 2025, the company’s revenue is expected to grow 7.1% year-over-year to $4.35 billion.
WLWHY’s stock has declined 2.5% over the past month to close the last trading session at $3.
WLWHY’s solid outlook is reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has an A grade for Quality. Within the A-rated Grocery/Big Box Retailers industry, WLWHY is ranked #25 among 36 stocks.
Click here to access additional ratings of WLWHY (Growth, Stability, Momentum, Value, and Sentiment.
Stock #2: Mr Price Group Limited (MRPLY)
Based in Durban, South Africa, MRPLY operates as a fashion retailer offering women, men, and children worldwide. It operates through Apparel; Home; Financial Services; and Telecoms segments. The company provides clothing, underwear, footwear, cosmetics, babywear, schoolwear, furniture, and kids' merchandise.
MRPLY’s trailing-12-month gross profit margin and net income margin of 40.66% and 8.23% are 12.2% and 77.8% higher than the respective industry averages of 36.24% and 4.63%. Also, the stock’s trailing-12-month EBIT margin of 13.55% is 78% higher than the industry average of 7.61%.
In terms of forward EV/EBITDA, MRPLY is trading at 6.03x, 34.2% lower than the industry average of 9.16x. Also, the stock’s forward EV/EBIT multiple of 9.13 is 30.7% lower than the industry average of 13.16.
MRPLY’s revenue and EBITDA have grown at respective CAGRs of 19.7% and 12.2% over the past three years. The company’s EBIT has increased at a 12.6% CAGR over the same timeframe and its net income and EPS have improved at a CAGR of 8.9%.
According to the trading update for the third quarter that ended December 30, 2023, WLWHY recorded retail sales growth of 9.9% year-over-year to R13.20 billion ($691.17 million) and comparable store sales grew by 4.1%. Further, the company’s apparel segment’s retail sales growth was 11.7% compared to the previous year’s period.
For the first half that ended September 30, 2023, MRPLY’s revenues increased 26.4% year-over-year to R16.75 billion ($877.73 million). Its gross profit rose 22.5% from the year-ago value to R6.24 billion ($327.23 million). The company’s profit after taxation came in at R1.16 billion ($60.83 million).
Furthermore, the company’s EBITDA was R3.33 billion ($174.49 million), up 14.7% from the prior period. Its total assets were R29.12 billion ($1.52 billion) as of September 30, 2023, compared to R28.78 billion ($1.51 billion) as of March 31, 2023.
Analysts expect MRPLY’s revenue for the fiscal year (ended March 2024) to increase 9.9% year-over-year to $1.96 billion. For the fiscal year 2025, its revenue is expected to grow 6.8% year-over-year to $2.09 billion.
Over the past six months, the stock has gained 26.8% and 5.5% over the past year to close the last trading session at $8.62.
MRPLY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
MRPLY has a B grade for Value, Momentum and Stability. It is ranked #18 among the 36 stocks within the A-rated Grocery/Big Box Retailers industry.
To see the other ratings of MRPLY for Quality, Sentiment, and Growth, click here.
Stock #1: Carrefour SA (CRRFY)
Based in Massy, France, CRRFY operates stores in various formats and channels internationally. It operates hypermarkets, supermarkets, convenience stores, cash and carry stores, e-commerce sites, and service stations. The company is also engaged in banking, insurance, and franchise activities, as well as the provision of travel agency services.
On January 25, 2024, CRRFY acquired 31 stores from Intermarché. These stores represent 94,000 sqm or 0.3% of the total food retail space in France. CRRFY will purchase 26 stores from Casino, while the remaining five stores will be acquired directly from Intermarché.
The acquired stores will benefit the stores and expand CRRFY’s operations. It will significantly improve CRRFY’s sales momentum and the profitability of its activities.
On November 30, 2023, CRRFY and Nexity announced the launch of the “Villes et Commerces” property venture, under which Carrefour contributed with an initial portfolio of 69 sites. This embarked on a critical milestone in the implementation of the long-term partnership between the two groups, announced on 6 July 2023.
This long-term partnership will allow Carrefour and Nexity to develop mixed-used programmes meeting high environmental performance standards.
In terms of forward non-GAAP P/E, CRRFY is trading at 8.99x, 47.1% lower than the industry average of 17x. Further, the stock’s forward Price/Sales multiple of 0.12 is 89.3% lower than the industry average of 1.16. Likewise, its forward EV/EBIT of 10.21x is 27.4% lower than the industry average of 14.07x.
For the fiscal year that ended December 31, 2023, CRRFY’s net sales increased 2.3% year-over-year €83.27 billion ($88.79 billion). Its adjusted net income, group share and adjusted EPS of €1.30 billion ($1.39 billion) and €1.83 indicate growth of 7.6% and 12.3% year-over-year. Its net free cash flow rose 28.5% from the prior year to €1.62 billion ($1.73 billion).
For the fiscal year (ending December 2024), analysts expect CRRFY’s revenue to grow 3.1% year-over-year to $92.81 billion. Also, for the fiscal year 2025, the company’s revenue and EPS are expected to increase 3.6% and 36.7% year-over-year to $96.12 billion and $0.52, respectively.
CRRFY’s stock has gained 1.8% over the past six months to close the last trading session at $3.38.
CRRFY’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which equates to a buy in our proprietary rating system.
CRRFY has an A grade for Value and Stability. The stock also has a B grade for Momentum. It is ranked #13 among 36 stocks in the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see RM’s ratings for Growth, Quality and Sentiment here.
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CRRFY shares were unchanged in premarket trading Friday. Year-to-date, CRRFY has declined -9.38%, versus a 5.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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