On July 16, the U.S. Census Bureau reported that retail sales were virtually unchanged in June. Flat retail sales numbers are generally not something to celebrate, but this report was better than Wall Street was expecting.
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The consensus among economists was that, after a slight gain in May, retail sales would fall by 0.3% for June. Instead, sluggish sales of new and used autos were offset by strength in most other areas of the economy. Not only did the June number come in unchanged, but the May number was also revised upward from 0.1% to 0.3%.
These encouraging numbers got Wall Street’s attention. The American consumer — undaunted by sticky inflation — appears to be strong. As a result, many individual and institutional investors are taking a renewed look at retail stocks, including discount retailers.
In addition to consumer strength, another reason to think about retail right now is the willingness of the retail sector to innovate in the face of a changing environment. In other words, retailers are open to the adaptation of new technologies. Retailers are no longer competing against digital transformation; they have wholeheartedly embraced it. Modern, digital technology, including cloud computing and artificial intelligence (AI), has increased efficiencies and allows retailers to provide customers with a personalized shopping experience. In that sense, retail stocks are quickly becoming high-tech stocks.
The appeal of discount retailers is their incredible resilience in good economic times and in bad. In a slow economy or when a recession is threatening, consumers of all stripes seek value for their dollar. And even when the economy is booming, there is always a market for high-quality, essential goods at lower prices.
If you are looking to take advantage of these promising trends and diversify your portfolio by adding retail stocks, here’s a list of seven retailers and discount retailers you should buy today:
— Walmart Inc. (ticker: WMT)
— Dollar General Corp. (DG)
— Amazon.com Inc. (AMZN)
— Lowe’s Cos. Inc. (LOW)
— Costco Wholesale Corp. (COST)
— Target Corp. (TGT)
— TJX Cos. Inc. (TJX)
Walmart Inc. (WMT)
It’s appropriate that this list of the seven best retailers for 2024 begins with the world’s largest. With 10,500 physical locations worldwide and a market cap of $563 billion, Walmart is at the top of the heap when it comes to retail stocks.
On the brick-and-mortar side of the business, the company operates full-service and limited-service department stores, large super-center stores, and big-box, members-only warehouse stores. But that’s not where the Walmart story ends. For more than a decade, the company has been investing in technology and building its e-commerce presence. Those efforts are paying off. On May 17, the company announced that U.S.-based online sales grew 22% in its fiscal first quarter ending April 30. Global e-commerce sales grew by 21% for the period.
The company’s massive global footprint and the incredible array of products it offers to its customers could allow Walmart to generate estimated revenue of $627 billion in fiscal 2025 and grow that figure to $704 billion in fiscal 2026.
Dollar General Corp. (DG)
Dollar General is an established leader in the discount retail space. The company markets and sells a wide range of merchandise through a large network of stores that cover the Southern, Midwestern and Eastern U.S.
The company shouldn’t be considered a typical department store, but it does offer items in almost all categories of retail. This includes packaged and canned food items, candy and snacks, household goods such as paper towels and laundry products, as well as apparel, personal hygiene items, gardening supplies and much more. Depending on licensing restrictions, some locations even offer beer, wine and tobacco products.
Wall Street analysts are expecting good revenue and earnings growth from Dollar General for the rest of 2024, which encompasses part of the firm’s 2025 fiscal year. Fiscal 2025 earnings per share are expected to come in at $7.20 on $41 billion in revenue. Wall Street is looking for EPS to grow by 14% to $8.20 on a 5% increase in revenue to $43 billion.
Amazon.com Inc. (AMZN)
While Walmart is the biggest retailer based on overall revenue, there can be no doubt that Amazon is the world’s largest and best-known e-commerce retailer. It should be no surprise that the company is a perennial revenue and EPS gainer.
The 53 Wall Street analysts who follow the stock have a consensus revenue estimate of $639 billion for 2025 and are looking for $709 billion in 2025. If they achieve those lofty numbers, it will represent 11% year-over-year revenue growth. That’s impressive for any company but much more so when you consider that Amazon has a market cap of $2 trillion.
On the EPS front, Wall Street is looking for 26% growth from $4.60 EPS in 2024 to $5.80 EPS in 2024.
What do those numbers mean for shareholders? AMZN is trading for about $193 a share. The average analyst price target for the stock is over $227. If the stock hits that price, it would mean capital appreciation of almost 18% from here.
Lowe’s Cos. Inc. (LOW)
Lowe’s is a company that had humble beginnings. The firm began as a one-location feed and hardware store in a small town in North Carolina some 103 years ago. Today’s Lowe’s has more than 1,700 big-box locations. And that’s after scaling back operations in Canada and Mexico and concentrating its retail efforts on the U.S. market. Furthermore, the company has a market cap of $137 billion.
Lowe’s sells building supplies, tools, appliances, materials, household goods, gardening supplies and much more to builders, home-improvement professionals and DIY homeowners all over the country.
On May 21, Lowe’s reported net earnings of $1.8 billion for the quarter that ended on May 3. That worked out to a diluted EPS of $3.06. Wall Street is looking for the company to improve that figure by about 4% to an EPS of $3.18 when it reports its next quarterly results on Aug. 20.
Another reason to own Lowe’s is the company’s forward annual dividend of $4.60 a share, which equates to a current yield of 1.9%.
[READ: 8 Best Warren Buffett Stocks to Buy in 2024]
Costco Wholesale Corp. (COST)
When it comes to members-only wholesale clubs, Costco is the undisputed leader. Big-box retail is a very challenging business model, but this $377 billion company has consistently found a way to thrive.
Costco has close to 900 warehouse-style superstores spread across the U.S., Europe, Australia and Asia. They sell anything and everything you would expect from a retail outlet and more. They offer groceries in bulk as well as apparel, appliances, health and beauty supplies, outdoor furniture and more. In short, Costco offers almost anything a consumer could ask for in a one-stop shopping trip.
The consensus on Wall Street for 2025 is an EPS number of $16.30 on $255 billion in revenue. For 2026, analysts are looking for EPS to grow 9% to $17.80 and revenue to climb 7% to $273 billion.
Target Corp. (TGT)
People might not think of Target as a venerable old American company, but this $71 billion, Minnesota-based retailing giant can trace its roots back 122 years to 1902, when the company’s founder, George Denton, opened a small dry goods store in Minneapolis to serve his growing community.
In its modern form, Target is a general merchandise store with over 1,950 locations in the U.S. and Canada. It offers clothing, shoes, fashion accessories, costume jewelry, health and beauty products, and more. Some locations have full grocery sections with coffee shops, bakeries and deli services as well.
Target was quick to realize the potential of e-commerce and has developed its website and mobile application into a premier digital marketplace.
Target reported revenue of $107 billion in 2023. Wall Street is looking for comparable numbers in 2024 and expects that number to grow by close to 4% to $111 billion in 2026.
The stock pays a very respectable annual forward dividend of $4.48 a share, which works out to a current yield of 2.9%.
TJX Cos. Inc. (TJX)
TJX is the corporate parent of several well-known retail brands such as T.J. Maxx, Marshalls and Home Goods. The company has a market cap of $130 billion and generates revenues that regularly top $13 billion a quarter.
The Massachusetts-based company is a profitable mix of discount retailer and odd-lot closeout store. It offers shoes and apparel for families, gifts, accessories, furniture items, lighting and lamps, cookware and other merchandise, all at bargain prices.
If you include all locations and all store brands, TJX has a total of 4,900 stores in cities and towns in the U.S., Canada, Europe and Australia.
Though not considered an income stock, TJX does pay an annual forward dividend of $1.50, which, based on the current share price, means a nice little yield of 1.3%.
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7 Best Retail Stocks and Discount Retailers for 2024 originally appeared on usnews.com
