Last year’s holiday season was disappointing because people were confined to their homes amid the COVID-19 pandemic and travel was restricted. This year, however, consumer spending has picked up significantly in the months leading up to the holiday season and is expected to remain strong. According to the CNBC All-America Economic Survey, individuals on average are planning to spend $1,004 on gifts, which is 13% higher than they spent during the pandemic last year.
Investors remain worried about persistent supply chain issues and rising inflation. However, despite high inflation, retail sales rose faster than expected in October. Membership warehouse clubs are also likely to continue witnessing high foot traffic and increased sales as the holiday season approaches. Also, according to a Technavio report, the warehousing and storage market is expected to increase by $347.19 billion during 2021-2025, growing at a 6% CAGR.
Given this backdrop, we think it could be wise to bet on fundamentally sound warehouse club stocks Costco Wholesale Corporation (COST), BJ's Wholesale Club Holdings, Inc. (BJ), and PriceSmart, Inc. (PSMT).
Costco Wholesale Corporation (COST)
Famous membership warehouse operators COST, which is headquartered in Issaquah, Wash., offers branded and private-label products across a range of merchandise categories. It operates across the U.S., Canada, United Kingdom, Japan, and China. In addition, its broad product portfolio includes almost everything from dry groceries to automotive care products. It currently operates 824 warehouses.
On December 1, COST announced that its net sales for November increased 15.7% year-over-year to $18.13 billion. The company’s revenue for its fiscal fourth quarter, ended August 29, 2021, increased 17.4% year-over-year to $62.67 billion. And its net income increased 20.2% year-over-year to $1.67 billion, while its EPS increased 20.1% to $3.76.
Analysts expect COST’s EPS for the quarter ending February 28, 2022, to increase 22.4% year-over-year to $2.62. Its revenue for its fiscal year 2022 is expected to increase 9.9% year-over-year to $215.31 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. And over the past nine months, the stock has gained 70.2% in price to close yesterday’s trading session at $530.11.
COST’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Stability, Sentiment, and Quality. In the A-rated Grocery/Big Box Retailers industry, it is ranked #20 out of the 40 stocks. Click here to see the other COST ratings for Growth, Value, and Momentum.
BJ's Wholesale Club Holdings, Inc. (BJ)
BJ operates warehouse clubs in the Eastern United States along with its subsidiaries. The Westborough, Mass.-based company offers perishables, edible grocery products, general merchandise, non-edible grocery products, gasoline, and ancillary services. Also, it sells its products through its mobile app and websites such as BJs.com, Wellsleyfarms.com, berkleyjensen.com, and others.
On December 6, 2021, BJ announced that it would open its newest warehouse club in South Fayette Township on December 10, 2021, just in time for the start of the holiday season. This move could help boost the company’s revenue as it tries to attract more customers with attractive discounts and founding membership offers.
For its fiscal third quarter ended October 30, 2021, BJ’s revenue increased 14.4% year-over-year to $4.26 billion. The company’s net income increased 3% year-over-year to $126.51 million. Also, its membership fee income increased 7.7% year-over-year to $91.49 million.
For its fiscal year 2023, BJ’s EPS is expected to increase 5% year-over-year to $3.36. Its revenue for its fiscal year 2022 is expected to increase 8.4% year-over-year to $16.73 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 77% in price year-to-date to close yesterday’s trading session at $66.
BJ’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. It has a B grade for Value. It is ranked #18 in the Grocery/Big Box Retailers industry. To check the additional ratings for BJ (Growth, Momentum, Stability, Sentiment, and Quality), click here.
PriceSmart, Inc. (PSMT)
PSMT operates shopping warehouse clubs across the U.S., the Caribbean, and Colombia. The San Diego, Calif.-based concern sells brand name and private label consumer products, essential goods, fresh produce, prepared foods, fresh-baked goods, and provides optical services, tire centers, and other services.
On October 1, PSMT announced the sale of its legacy cross-border casillero and online marketplace businesses to Click to Collect Company Ltd. The sale of its non-core package forwarding business is expected to help PSMT focus on its core business by consolidating its resources and focusing on fundamental strategies.
PSMT’s revenues for its fiscal fourth quarter, ended August 31, 2021, increased 12.2% year-over-year to $909.60 million. The company’s net merchandise sales came in at $871.20 million, up 12.7% year-over-year. In addition, its operating income increased 12% year-over-year to $32.46 million.
Analysts expect PSMT’s EPS for the quarter ending November 30, 2021, to increase 43.1% year-over-year to $0.93. Its revenue for its fiscal year 2022 is expected to increase 8.9% year-over-year to $3.94 billion. And it surpassed the Street’s EPS estimates in three of the trailing four quarters. It closed yesterday’s trading session at $73.24.
PSMT’s strong fundamentals are reflected in its POWR Ratings. It has a B overall rating, which equates to a Buy in our proprietary rating system. It has a B grade for Value and Stability. It is ranked #21 in the Grocery/Big Box Retailers industry. Click here to see the other ratings of PSMT for Growth, Momentum, Sentiment, and Quality.
COST shares were trading at $527.34 per share on Thursday morning, down $2.77 (-0.52%). Year-to-date, COST has gained 41.03%, versus a 26.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.3 Membership Warehouse Club Stocks to Buy Before the Holiday Season appeared first on StockNews.com