The retail industry is experiencing increased demand as a result of altering consumer preferences, digital transformation, and the rise of e-commerce. Therefore, investors could consider looking into retail stocks, Target Corporation (TGT - Get Rating), PriceSmart, Inc. (PSMT - Get Rating), and Weis Markets, Inc. (WMK - Get Rating), which look poised for a comeback.

The global food and grocery retail industry is thriving, driven by consumers’ growing demand for convenience and variety. The rapid rise of online grocery shopping, fueled by the increasing popularity of e-commerce platforms, is reshaping traditional retail practices and enhancing consumer accessibility. The rising demand for food and grocery retail is enabling the market to grow at a CAGR of 3.3% by 2031.

Additionally, the future of retail centers on omnichannel experiences that seamlessly integrate physical and digital interactions, creating a unified purchasing journey across multiple platforms. Artificial Intelligence (AI) and machine learning are expected to elevate personalization, offering tailored product recommendations, intelligent pricing strategies, and responsive customer support through chatbots and virtual assistants.

Considering these conducive trends, let’s examine the Grocery/Big Box Retailers stocks in detail, starting with the third one:

Stock #3: Target Corporation (TGT - Get Rating)

TGT operates as a major U.S. general merchandise retailer that offers a wide range of products, including apparel, beauty, groceries, electronics, and home goods. It sells its merchandise through physical stores, Target.com, and digital channels, and it enhances the customer experience with design partnerships and in-store amenities.

On October 22, TGT announced its intention to lower regular prices on more than 2,000 items across owned and national brands this holiday season, which should boost its sales.

In terms of forward non-GAAP P/E, TGT is trading at 15.41x, which is 8.6% lower than the industry average of 16.85x. Also, its forward EV/EBITDA multiple of 9.26 is 14.3% lower than the industry average of 10.81.

In the third quarter of 2024, which ended November 2, TGT’s sales increased marginally year-over-year to $25.23 billion. Its operating income came in at $1.17 billion. The company reported net earnings of $854 million and $1.85 per share.

Analysts expect TGT’s revenue and EPS for the fiscal first quarter (ending April 2024) to increase 2.3% and 1% year-over-year to $25.10 billion and $2.04, respectively.

Shares of TGT have surged 5.9% over the past month to close the last trading session at $132.40.

TGT’s POWR Ratings reflect its outlook. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.   TGT also has a B grade for Momentum, Value, and Quality. It is ranked #31 out of 37 stocks in the A-rated Grocery/Big Box Retailers industry. 

To see additional POWR Ratings for Growth, Stability, and Sentiment, click here.

Stock #2: PriceSmart, Inc. (PSMT - Get Rating)

PSMT owns and operates U.S.-style membership shopping warehouse clubs in the United States, Central America, the Caribbean, and Colombia. The company provides basic and private label consumable and non-consumable products under the Member’s Selection brand, including groceries, cleaning supplies, health and beauty aids, meat, produce, deli, seafood, and poultry.

In terms of forward non-GAAP EV/Sales, PSMT is trading at 0.54x, which is 66.9% lower than the industry average of 1.65x. Also, its forward EV/EBITDA multiple of 8.84 is 18.2% lower than the industry average of 10.81.

In the fourth quarter that ended on August 31, 2024, PSMT’s total revenue increased 9.8% year-over-year to $1.23 billion. Its operating income stood at $49.21 million. The company’s net income and net income per share grew 89% and 91.8% year-over-year to $29.07 million and $0.94.

Analysts expect PSMT’s revenue and EPS for the fiscal first quarter (ended November 2024) to increase 6.3% and 9.7% year-over-year to $1.24 billion and $1.36, respectively. Also, the company has topped the consensus revenue estimate in each of the four trailing quarters, which is remarkable.

The stock gained 16.9% over the past six months to close the last trading session at $94.57.   

PSMT’s POWR Ratings reflect robust prospects. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. PSMT has an A grade for Growth and a B for Value, Momentum, and Stability. It is ranked #24 in the same industry. 

Beyond what is stated above, we’ve also rated PSMT for Sentiment and Quality. Get all PSMT ratings here.

Stock #1: Weis Markets, Inc. (WMK - Get Rating)

WMK engages in the retail sale of food through a chain of supermarkets in Pennsylvania and surrounding states. The company’s retail food stores sell groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, and pharmacy services; deli products; prepared foods, bakery products, beer and wine, and fuel; and general merchandise items. 

In terms of trailing-12-month EV/Sales, WMK is trading at 0.34x, which is 79.6% lower than the industry average of 1.68x. Also, its trailing-12-months EV/EBITDA multiple of 7.13 is 35.8% lower than the industry average of 11.11.

For the third quarter ended September 28, 2024, WMK’s net sales increased 5.5% year-over-year to $1.19 billion. Its operating income came in at $29.56 million. The company’s net earnings were reported at $75.26 million and $2.80.

Over the past six months, WMK’s stock has gained 8.5% to close the last trading session at $68.50.

WMK’s POWR Ratings reflect its bright outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

WMK has a B grade for Stability and Sentiment and a B in Momentum. It is ranked #12 in the same industry.

For additional WMT’s Stability, Quality, and Value, click here.  

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TGT shares were trading at $136.29 per share on Thursday afternoon, up $3.89 (+2.94%). Year-to-date, TGT has declined -0.67%, versus a 28.08% 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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