Consumers have been firm in spending despite record-high inflation, rising interest rates, and recession fears. The U.S. Census Bureau reported that the overall retail sales in October grew 1.3% from September and 8.3% year-over-year.

Consumers’ propensity to spend has undoubtedly been influenced by inflation. However, job growth, rising income, and tapping into savings made during the pandemic have reinforced their ability to spend during these difficult times.

“October’s performance is a strong foothold as we go into the holiday season,” said NRF Chief Economist Jack Kleinhenz.

According to the NRF’s projection, holiday retail sales would reach between $942.60 billion and $960.40 billion during November and December, a 6-8% increase over the last year. “In the face of the recent challenges, many households will supplement spending with savings and credit to provide a cushion and result in a positive holiday season,” said NRF President and CEO Matthew Shay.

Given this backdrop, it could be wise to add quality stocks Walmart Inc. (WMT), The Hershey Company (HSY), and Dillard’s, Inc. (DDS) to your watchlist this holiday season.

Walmart Inc. (WMT)

WMT provides shopping alternatives in both retail outlets and through e-commerce. The business offers an assortment of merchandise and services at everyday low prices (EDLP). The company operates through three segments, Walmart U.S.; Walmart International; and Sam’s Club.

On October 28, WMT announced that The Netflix Hub, a digital storefront, would be expanding into 2,400+ Walmart locations with the introduction of a new Netflix Streaming Gift Card.  The Hub seeks to bring fans closer to their favorite series and movies with music, apparel, collectibles, games, and seasonal goods.

On October 26, WMT announced the completion of the renovations made to the retrofitted regional distribution center (RDC) in Palestine, Texas, transforming it into a high-tech automation center.

The brand-new, ground-breaking technological investment will modernize Walmart’s extensive supply chain network by combining AI-powered software systems, robotics, and automation, which will boost distribution speed.

For the fiscal 2023 third quarter ended October 31, 2022, WMT’s net sales increased 8.8% year-over-year to $151.47 billion, while total revenues increased 8.7% from the year-ago value to $152.81 billion. The company’s total assets came in at $247.66 billion, up 1.1% year-over-year.

WMT pays a $2.24 per share dividend annually, which translates to a 1.46% yield on the current price. Its four-year average dividend yield is 1.71%. WMT’s dividend payments have grown at a CAGR of 1.9% over the past five years.

Analysts expect revenue to increase 3% year-over-year to $619.56 billion for the fiscal year 2024. The company’s EPS for the next year is expected to rise 8.6% year-over-year to $6.59. WMT has surpassed its consensus EPS estimates in three of the four trailing quarters, which is impressive.

The stock has gained 7.7% over the past month and 22.3% over the past six months to close the last trading session at $153.37.

WMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Sentiment and a B for Stability. Within the Grocery/Big Box Retailers industry, it is ranked #11 of 39 stocks.

Beyond what we stated above, we also have WMT’s ratings for Growth, Value, Quality, and Momentum. Get all WMT ratings here.

The Hershey Company (HSY)

HSY manufactures and sells snacks, chocolate, and non-chocolate confectionery globally. The company operates through three segments, North America Confectionery; North America Salty Snacks; and International.

Given HSY’s strong performance as of the third quarter and visibility into the fourth quarter, the company raised its net sales and earnings outlook for the year. The company now expected net sales growth of 14%-15%, up from the prior guidance of 12%-14%. Its adjusted EPS growth is expected to range from 14% to 15%, compared to the previous guidance of 12%-14%.

The improved financial outlook reflects higher-than-anticipated consumer demand and favorable price elasticities across segments.

On November 4, the Board of Directors announced quarterly dividends of $1.036 on the Common Stock and $0.942 on the Class B Common Stock. The dividends were declared on November 2, 2022, and are payable on December 15, 2022, to stockholders of record as of November 18, 2022.

HSY has raised its dividends for 13 consecutive years. It pays a $4.14 per share dividend annually, which translates to a 1.79% yield on the current price. Its four-year average dividend yield is 2.01%. Its dividend payments have grown at a CAGR of 9% over the past three years.

For the fiscal 2022 third quarter ended October 2, 2022, HSY’s non-GAAP gross profit increased 10.8% year-over-year to $1.16 billion, while its non-GAAP operating profit increased 9.3% from the year-ago value to $615.29 million. Its non-GAAP net income grew 2.8% year-over-year to $447.07 million. In addition, the company’s non-GAAP EPS came in at $2.17, a 3.3% from the year-ago value.

The consensus EPS estimate of $8.24 for the current fiscal year (ending December 2022) indicates a 14.6% year-over-year improvement. Likewise, the consensus revenue estimate for the same year of $10.33 billion reflects a rise of 15.2% from the prior year.

Furthermore, the company’s EPS and revenue for the next year are expected to increase 8.1% and 6.1% year-over-year to $8.90 and $10.96 billion, respectively.

The stock has gained 32.1% over the past year to close the last trading session at $231.88.

HSY’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

The stock has a B grade for Sentiment and Quality. Within the Food Makers industry, it is ranked #23 of 82 stocks.

To see additional POWR Ratings for Growth, Stability, Momentum, and Value for HSY, click here.

Dillard’s, Inc. (DDS)

DDS is a retailer of cosmetics, clothing, and furniture. The company operates through two segments, the Operation of Retail Department Stores and a General Contracting Construction Company. It operates over 280 Dillard’s shops, 30 clearance centers, and an extensive online presence.

On August 15, DDS announced the debut of Courtney Grow for Antonio Melani. It features high-end garments for fall and transitional attire, such as dresses, sportswear, jackets, shoes, and a handbag.

Through this initiative, Courtney Grow for Antonio Melani, one of Dillard’s limited-edition collaborations with a significant social media influence, aims to foster brand recognition and fashion passion through unique and intriguing partnerships with tastemakers, attracting new customers while boosting adherence to Dillard’s exclusive brands.

For the fiscal 2023 third quarter ended October 29, 2022, DDS’ net sales increased 4.9% year-over-year to $1.54 billion, while its EPS grew 11.7% from the year-ago value to $10.96. The company’s current assets came in at $2.52 billion, up 5.8% year-over-year, and its total assets increased 1.4% from the previous year to $3.79 billion.

DDS has raised its dividends for 11 consecutive years. It pays a $0.80 per share dividend annually, which translates to a 0.22% yield on the current price. DDS’s dividend payments have grown at a CAGR of 21.1% over the past three years. Its four-year average dividend yield is 2.15%.

The consensus revenue estimate of $6.96 billion for the fiscal year (ending January 2023) reflects a rise of 5% from the previous year. The consensus EPS estimate of $42.64 for the current year indicates a 6.5% year-over-year increase. DDS has surpassed its consensus EPS in each of the four trailing quarters.

The stock has gained 9.9% over the past month and 43.4% year-to-date to close the last trading session at $359.28.

DDS’ POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

The stock has an A grade for Quality and a B for Value. Within the Fashion & Luxury industry, it is ranked #4 of 66 stocks.

Click here to see additional ratings of DDS for Stability, Growth, Momentum, and Sentiment.

WMT shares were trading at $153.02 per share on Friday afternoon, down $0.35 (-0.23%). Year-to-date, WMT has gained 7.02%, versus a -13.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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