The retail sector encompasses diverse businesses catering to consumer needs, such as hypermarkets, e-commerce, and more. Its success stems from meeting evolving demands, offering various products, convenience, and personalized experiences, fueling demand and industry growth.
Given this backdrop, investors could consider buying robust retail stocks Carrefour SA (CRRFY), George Weston Limited (WNGRF), and Natural Grocers by Vitamin Cottage, Inc. (NGVC).
Despite challenges such as sticky inflation and high interest rates, retail sales in the U.S. climbed for the second straight month in March. Retail sales rose 0.7% in March sequentially, higher than the consensus estimate of 0.4%. Consumer spending has remained robust due to a growing job market and real gains in wages.
The NRF forecasts that retail sales will rise between 2.5% and 3.5% in 2024 to between $5.23 trillion and $5.28 trillion. Meanwhile, U.S. online retail sales jumped 7% from January to April, driven by groceries and cheap discretionary items. According to the CNBC/NRF Retail Monitor, retail sales grew modestly from the month before in April.
Retailers have increased their presence across multiple channels, such as online platforms. This has helped them expand their customer base and enhance accessibility. They are also harnessing the power of AI to elevate customer shopping experiences. The retail industry is expected to grow from $32.68 trillion in 2024 to $47.24 trillion by 2029, exhibiting a CAGR of 7.6%.
Moreover, despite the uncertain economic outlook, the demand for groceries will likely remain unaffected due to their inelastic demand. The online grocery delivery market is expected to grow at a CAGR of 26.8% to reach revenue of $305.13 billion by 2030. Investors’ interest in retail stocks is evident from the VanEck Retail ETF’s (RTH) 23.4% returns over the past year.
Considering these conducive trends, let’s examine the fundamentals of the three Grocery/Big Box Retailers stock picks mentioned above, beginning with the third choice.
Stock #3: Carrefour SA (CRRFY)
Based in Massy, France, CRRFY operates stores that offer food and non-food products in various formats and channels in France, Spain, Italy, Belgium, Poland, Romania, Brazil, and Argentina, as well as in the Middle East, Africa, and Asia. The company operates hypermarkets, supermarkets, convenience stores, club stores, cash-and-carry stores, e-commerce sites, and service stations.
On January 25, 2024, CRRFY announced the acquisition of 31 stores from Intermarché, representing 94,000 sqm of space and generating €400 million ($430.27 million) in sales in 2022. Pending regulatory approval, the acquisition is expected to close in Q2 2024.
This acquisition will significantly expand CRRFY's retail footprint and revenue stream, positioning the company for further growth in the competitive market.
CRRFY’s trailing-12-month asset turnover ratio of 1.50x is 83.40% higher than the 0.82x industry average.
For the fiscal year that ended December 31, 2023, CRRFY’s net sales increased 2.3% year-over-year €83.27 billion ($89.57 billion). Its adjusted net income, group share, and adjusted EPS of €1.30 billion ($1.40 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 previous year’s period to €1.62 billion ($1.74 billion).
Street expects CRRFY’s revenue for the fiscal 2024 to increase 2.4% year-over-year to $92.18 billion. Its EPS for fiscal 2025 is expected to grow 37.7% year-over-year to $37.7% year-over-year to $0.51. Over the past three months, the stock has gained 9.8% to close the last trading session at $3.60.
CRRFY’s POWR Ratings reflect its strong fundamentals. It 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.
It has an A grade for Value and Stability and a B for Momentum. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #16 out of 36 stocks. To see CRRFY’s ratings for Growth, Sentiment, and Quality, click here.
Stock #2: George Weston Limited (WNGRF)
Based in Toronto, Canada, WNGRF provides food and drug retailing and financial services in Canada. The company operates through two segments: Loblaw Companies Limited (Loblaw) and Choice Properties Real Estate Investment Trust (Choice Properties).
In terms of the trailing-12-month Return on Common Equity, WNGRF’s 22.19% is 94.3% higher than the 11.42% industry average. Its 8.06% trailing-12-month Return on Total Capital is 20.8% higher than the 6.67% industry average. Also, the stock’s 1.25x trailing-12-month asset turnover ratio is 52.4% higher than the 0.82x industry average.
WNGRF’s revenue for the first quarter that ended March 23, 2024, increased 4.6% year-over-year to $13.74 billion. Its adjusted EBITDA stood at $1.62 billion, up 7.7% year-over-year.
For the same quarter, the company's adjusted net earnings available to common shareholders of the company and adjusted net earnings per common share grew 10.6% and 15.6% over the prior-year quarter to $312 million and $2.30, respectively.
For the quarter ending June 30, 2024, WNGRF’s revenue is expected to increase marginally year-over-year to $10.52 billion. Over the past nine months, WNGRF’s stock has gained 21.8% to close the last trading session at $136.48.
WNGRF’s bright prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Stability and a B for Quality. It is ranked #12 in the same industry. To access the additional grades of WNGRF for Growth, Value, Momentum, and Sentiment, click here.
Stock #1: Natural Grocers by Vitamin Cottage, Inc. (NGVC)
NGVC and its subsidiaries retail natural and organic groceries and dietary supplements. The company's stores offer natural and organic grocery products, private label products, dry, frozen, and canned groceries, meat and seafood products, dairy products, prepared foods, beverages, and beer, wine, and hard cider products.
NGVC’s 1.76x trailing-12-month asset turnover ratio is 114.6% higher than the 0.82x industry average. Similarly, the stock’s 17.04% trailing-12-month Return on Common Equity is 49.2% higher than the 11.42% industry average.
NGVC’s net sales for the second quarter that ended March 31, 2024, rose 8.8% year-over-year to $308.09 million. Its gross profit rose 9.6% year-over-year to $90.36 million. Its net income increased 35.3% year-over-year to $7.96 million. The company’s net income per share of common stock increased 34.6% year-over-year to $0.35.
Analysts expect NGVC’s fiscal 2024 revenue to increase 4.2% year-over-year to $1.19 billion. Its EPS is expected to grow 5.1% per annum over the next five years. NGVC surpassed the consensus EPS estimate in three of the trailing four quarters. The stock has gained 73.2% over the past year to close the last trading session at $17.83.
It’s no surprise that NGVC has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Stability and Sentiment and a B for Growth and Quality. It is ranked #3 in the Grocery/Big Box Retailers industry. Beyond what we have stated above, we also have given NGVC grades for Value and Momentum. Get all the NGVC ratings here.
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WNGRF shares were trading at $136.48 per share on Friday afternoon, up $1.66 (+1.23%). Year-to-date, WNGRF has gained 11.76%, versus a 9.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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