The retail industry is undergoing a tremendous transition because of changing consumer tastes, technological improvements, and market trends shaping an ever-evolving landscape.
E-commerce has emerged as a dominant force, fueled by the widespread adoption of digital technologies, mobile commerce, and changing shopping behaviors. Therefore, investors might consider keeping track of retail stocks from Costco Wholesale Corporation (COST), Target Corporation (TGT), and Walmart Inc. (WMT).
The retail industry has significantly benefited from the eCommerce era by expanding market reach, offering 24/7 accessibility, and reducing operational costs through fewer physical store requirements. It has enhanced customer experiences with personalized shopping, seamless omnichannel integration, and convenient fulfillment options like home delivery and in-store pickup.
IMARC Group expects the global retail market to grow at a CAGR of 5.3% by 2033. Also, retail sales in the United States increased 0.7% in November 2024, following an upwardly revised 0.5% rise in October and above forecasts of 0.5%. The data continued to point to robust consumer spending during the holiday shopping season.
Considering these conducive trends, let’s examine the Grocery/Big Box Retailers stocks in detail, starting with the third one:
Stock #3: Costco Wholesale Corporation (COST)
COST engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories.
COST’s trailing-12-month ROCE and ROTC of 29.95% and 17.46% are 183.5% and 149.9% higher than the industry average of 10.56% and 6.99%, respectively. Its trailing-12-month ROTA of 10.32% is 171.6% higher than the industry average of 3.80%.
COST’s total revenue for the third quarter that ended November 24, 2024, increased 7.8% year-over-year to $62.15 billion. Its gross profit grew 10.7% from the year-ago quarter to $2.20 billion. Net income came in at $1.80 billion and $4.04 per share, up 13.2% and 12.8% from the prior year’s quarter, respectively.
Analysts expect COST’s revenue and EPS for the second quarter (ending February 2024) to increase 7% and 9.1% year-over-year to $62.52 billion and $4.05, respectively. Furthermore, the company has topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Shares of COST have surged 10.6% over the past six months and 44.3% over the past year to close the last trading session at $954.07.
COST’s POWR Ratings reflect its outlook. COST also has a B grade for Momentum and Sentiment. It is ranked #32 out of 37 stocks in the A-rated Grocery/Big Box Retailers industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
To see additional POWR Ratings for Growth, Value, Stability, and Quality, click here.
Stock #2: Target Corporation (TGT)
TGT operates as a major U.S. general merchandise retailer that offers a wide range of products, including apparel, beauty, groceries, electronics, and home goods. It sells its merchandise through physical stores, Target.com, and digital channels, and it enhances the customer experience with design partnerships and in-store amenities.
On October 22, TGT announced its intention to lower regular prices on more than 2,000 items across owned and national brands this holiday season, which should boost its sales.
TGT’s trailing-12-month asset turnover ratio of 1.87x is 118.3% higher than the 0.86x industry average. Its trailing-12-month ROCE of 32.37% is 206.4% higher than the industry average of 10.56%.
In the third quarter of 2024, which ended November 2, TGT’s sales increased marginally year-over-year to $25.23 billion. Its operating income came in at $1.17 billion. The company reported net earnings of $854 million and $1.85 per share.
Analysts expect TGT’s revenue and EPS for the fiscal first quarter (ending April 2024) to increase 2.3% and 1% year-over-year to $25.10 billion and $2.04, respectively.
The stock has gained 8% over the past month to close the last trading session at $131.48.
TGT’s POWR Ratings reflect robust prospects. TGT has a B grade for Value, Momentum, and Quality. It is ranked #31 in the same industry.
Beyond what is stated above, we’ve also rated TGT for Sentiment, Growth, and Stability. Get all TGT ratings here.
Stock #1: Walmart Inc. (WMT)
WMT engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club.
On October 8, 2024, WMT announced key expansions to its core pet care offerings, widening access to affordable in-person and virtual veterinary care, pet prescription delivery, grooming services, pet food, and supplies, all in one convenient experience for pet owners.
WMT’s trailing-12-month ROCE and ROTC of 23.48% and 11.49% are 122.3% and 64.5% higher than the industry average of 10.56% and 6.99%, respectively. Its trailing-12-month ROTA of 7.47% is 96.5% higher than the industry average of 3.80%.
For the third quarter ended October 31, 2024, WMT's total revenues increased 5.5% year-over-year to $169.59 billion. Its operating income grew 8.2% year-over-year to $6.71 billion. The company’s net earnings of $4.71 billion indicate growth of 633.1% year-over-year. Its net income per common share increased 850% year-over-year to $0.57.
Street expects WMT’s revenue for the fourth quarter (ending January 2025) to increase 4% year-over-year to $178.78 billion, while its EPS is expected to grow 6.8% year-over-year to $0.64 for the same period. Moreover, the company surpassed revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, WMT’s stock has gained 35.6% to close the last trading session at $92.24.
WMT’s POWR Ratings reflect its bright outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
WMT has an A grade for Stability and Sentiment and a B in Momentum. It is ranked #12 in the same industry.
For additional WMT’s Growth, Quality, and Value, click here.
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WMT shares closed at $92.24 on Friday, down $-1.16 (-1.24%). Year-to-date, WMT has gained 77.62%, versus a 25.54% 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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