Food and grocery retail businesses have witnessed unprecedented changes over the past year, with a shift in consumer habits and lifestyle changes. While the economy’s reopening this year is driving a revival in foot traffic in physical stores, the convenience of buying essential food items online and having them delivered at home continues to foster a dependence by consumers on digital stores.
As food retailers leverage both online and physical stores to drive sales, they are well-positioned to keep growing. Rising disposable income and affordability and increasing urbanization worldwide should contribute to the industry’s continued growth. Indeed, the global food and grocery retail market is expected to hit $17.3 trillion by 2027, growing at a 5% CAGR.
Albertsons Company Inc. (ACI)
ACI is a grocery and drug retailer. The company offers a wide range of products and services through its stores, including groceries, general merchandise, health and beauty care products, pharmacy, fuel, and other services. In addition, it offers various digital services, home delivery, click-and-collect shop pickup, and online prescription renewals.
This month, ACI announced new, important offerings for its customers to help combat the COVID-19 pandemic. For example, the company will provide a free digital vaccine record that can be downloaded and saved to a digital device, over-the-counter rapid COVID-19 testing kits that do not require a prescription, and a COVID-19 vaccine map on Nextdoor, in collaboration with Moderna, to help users find nearby vaccine appointment locations.
ACI’s net sales increased 11.6% year-over-year to $69.69 billion in its fiscal year ended February 27, 2021. Its operating income grew 12.6% from its year-ago value to $1.62 billion, while its net income surged 82.3% year-over-year to $850.2 million over this period. The company’s EPS increased 83.8% year-over-year to $1.47.
The company’s EPS is expected to grow 3% year-over-year to $2.04 next year. Furthermore, ACI has an impressive earnings surprise history; it beat consensus EPS estimates in each of the trailing four quarters. Analysts expect ACI’s revenue to increase 2.2% year-over-year to $67.15 billion in its fiscal year 2023. ACI’s stock has gained 33.3% over the past year and 18.8% year-to-date.
ACI’s $0.30 annual dividend yields 1.4% on its current stock price. On July 13, the company approved a $0.10 quarterly dividend, payable on July 10. It has a 0.8% four-year average dividend yield.
ACI’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ACI is also rated an A grade for Value, and a B for Sentiment and Quality. In addition, , within the A-rated Grocery/Big Box Retailers industry, it is ranked #14 of 40 stocks.
To see additional POWR Ratings for Momentum, Growth, and Stability for ACI, click here.
Weis Markets Inc (WMK)
WMK is a grocery retailer in Pennsylvania and neighboring areas. It runs stores under the Weis Markets brand and trademarks for its product lines and promotions, including Weis, Weis 2 Go, Weis Great Meals Start Here, Weis Gas-n-Go, and Weis Nutri-Facts. The company operated 197 retail food shops as of December 31, 2020.
In April, WMK announced that it would invest $135 million in its operations in 2021. The company plans to invest in new stores, remodels, fuel centers, information technology improvements, and more than one thousand minor retail enhancement initiatives in the coming years.
During the first quarter, ended March 27, 2021, WMK’s net sales increased 2.1% year-over-year to $1.01 billion. Its gross profit increased 1.2% year-over-year to $267.39 million. The stock has gained 5.2% over the past year and 12.8% year-to-date.
WMK declared a $0.31 quarterly dividend, payable on August 9. Over the last three years, WMK’s dividend payout has grown at a 1.1% CAGR. While the four-year average dividend yield for WMK is 2.8%, the current dividend translates to a 2.3% yield.
It is no surprise that WMK has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Stability, Value, and Quality. In the Grocery/Big Box Retailers industry, it is ranked #12 of 40 stocks.
In addition to the POWR Ratings grades we have just highlighted, one can see the WMK ratings for Growth, Momentum, and Sentiment here.
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ACI shares were trading at $20.24 per share on Thursday morning, down $0.64 (-3.07%). Year-to-date, ACI has gained 16.40%, versus a 16.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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