Factors like rising disposable incomes, rapid digital transformation, and investments in cutting-edge technologies are driving the demand in the retail market. 

Given this backdrop, it could be wise to watch fast-growing retail stocks, Dollar General Corporation (DG - Get Rating), Costco Wholesale Corporation (COST - Get Rating), and Sprouts Farmers Market, Inc. (SFM - Get Rating).

The retail market in the United States is expected to be driven by growing awareness and concern for environmental sustainability, the impact of social media, and shifting consumer preferences. The retail industry is projected to grow at a CAGR of 2.5% by 2034.

Additionally, the rising population levels are catalyzing the U.S. retail demand. This demographic growth is interpreted as higher consumption levels across different retail categories, including food and beverages, clothing, electronics, and household items. 

Given these favorable industry trends, let’s look at the fundamentals of three Grocery/Big Box Retailers stocks, starting with number 3.

Stock #3: Dollar General Corporation (DG - Get Rating)

DG is a discount retailer that provides various merchandise products in the southern, southwestern, midwestern, and eastern United States.

In terms of the trailing-12-month Return on Common Equity, DG’s 19.37% is 76.4% higher than the 10.98% industry average. Likewise, its 1.29x trailing-12-month asset turnover ratio is 47.8% higher than the industry average of 0.88x.

During the third quarter that ended on November 1, 2024, DG’s net sales increased 5% year-over-year to $10.18 billion. The company’s net income came in at $196.53 million, and its EPS was reported at $0.89.

Analysts expect DG’s revenue for the fourth quarter (ending January 2025) to grow 4.1% year-over-year to $10.26 billion.  Its EPS is expected to be $1.50 in the same quarter. Moreover, the company topped the consensus revenue estimates in three of the four trailing quarters, which is impressive.

DG’s shares have plunged marginally intraday to close the last trading session at $72.49.

DG’s prospects are reflected in its POWR Ratings. The stock has a B grade for Value and Momentum. Within the  Grocery/Big Box Retailers industry, DG is ranked #34 out of 35 stocks. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Click here to access additional DG ratings for Sentiment, Quality, Growth, and Stability.

Stock #2: Costco Wholesale Corporation (COST - Get Rating)

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 17.44% are 172.7% and 143.4% higher than the industry average of 10.98% and 7.16%, respectively. Its trailing-12-month ROTA of 10.32% is 144.4% higher than the industry average of 4.22%.

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 7.6% and 9.9% year-over-year to $62.90 billion and $4.08, 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 28.8% over the past six months and 45% over the past year to close the last trading session at $1,043.81.

COST’s prospects are reflected in its POWR Ratings. COST has a B grade for Sentiment and Momentum. It is ranked #29 in the same industry.

In addition to the POWR Ratings we’ve stated above, we also have COST ratings for Value, Stability, Quality, and Growth. Get all COST ratings here.

Stock #1: Sprouts Farmers Market, Inc. (SFM - Get Rating)

SFM engages in the retailing of fresh, natural, and organic food products under the Sprouts brand in the United States.

SFM’s trailing-12-month ROCE and ROTC of 28.56% and 10.20% are 160.1% and 42.3% higher than the industry average of 10.98% and 7.16%, respectively. Its trailing-12-month ROTA of 9.79% is 131.8% higher than the industry average of 4.22%.

SFM’s net sales increased 14% year-over-year to $1.95 billion for the fiscal 2024 third quarter that ended September 29, 2024.  Its income from operations also increased 39.7% year-over-year to $122.45 million. In addition, its net income increased 40.3% and 42.2% year-over-year to $91.61 million and $0.91, respectively.

The consensus revenue estimate of $1.96 billion for the fiscal year quarter (ended December 2024) represents a 15.2% increase year-over-year. Its EPS is expected to grow 47.7% year-over-year to $0.72 in the same quarter. The company has an impressive earnings surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Over the past nine months, the stock has surged 124.7%, closing the last trading session at $167.97.

SFM’s POWR Ratings reflect its outlook. SFM has an A grade for Quality and a B for Growth. It is ranked #27 in the same industry. Click here to see the additional ratings for SFM (Momentum, Sentiment, Value, and Stability).

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COST shares closed at $1,043.81 on Friday, down $-6.02 (-0.57%). Year-to-date, COST has gained 14.05%, versus a 2.51% 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. More...

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