After a year of macroeconomic and geopolitical challenges, inflation is beginning to ease, and the Fed is expected to slow down the pace of rate hikes. Federal Reserve Chairman Jerome Powell stated that smaller interest rate increases are likely ahead and could start as soon as this month.

Despite the high inflation, consumer spending has remained firm. According to the Commerce Department, consumer spending increased 0.8% sequentially in October, posting its highest gain since June, driven by spending on rent, food, and new vehicles. Also, the U.S. Census Bureau reported that the overall retail sales in October rose 1.3% sequentially and 8.3% year-over-year.

The National Retail Federation (NRF) expects holiday retail sales to reach between $942.60 billion and $960.40 billion during November and December, representing an increase of 6% and 8% year-over-year. NRF President and CEO Matthew Shay said, “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.”

Given this backdrop, investors could consider buying fundamentally strong retail stocks Walmart Inc. (WMT), The Hershey Company (HSY), Dillard’s, Inc. (DDS), and Movado Group, Inc. (MOV).

Walmart Inc. (WMT)

WMT engages in the operation of retail, wholesale, and other units worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club.

Over the last three years, WMT’s dividend payouts have grown at a 1.9% CAGR. Its four-year average dividend yield is 1.71%, and its forward annual dividend of $2.24 per share translates to a 1.48% yield. It is expected to pay a quarterly dividend of $0.56 per share on January 3, 2023.

On October 31, 2022, Popable, a pop-up shop marketplace platform, and WMT announced a strategic partnership that allows small businesses to rent retail space in WMT stores across the country for short-term leasing. The partnership is believed to help small business owners thrive, keeping excess inventory moving and creating greater built-in foot traffic. WMT will benefit from the utilization of its store space.

For the fiscal third quarter ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion. Its adjusted operating income increased 3.9% year-over-year to $6.02 billion. In addition, its adjusted EPS came in at $1.50, representing a 3.4% increase from the year-ago quarter.

WMT’s revenue for the quarter ending January 31, 2023, is expected to increase 4.1% year-over-year to $157.76 billion. Its EPS for the quarter ending April 30, 2023, is expected to grow 9% year-over-year to $1.42. 

The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. The stock has gained 4.8% year-to-date to close the last trading session at $151.65.

WMT’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the A-rated Grocery/Big Box Retailers industry, it is ranked #8 out of 39 stocks. The company has an A grade for Sentiment and a B for Stability and Quality.

Click here to see the additional POWR Ratings of WMT for Growth, Value, and Momentum.

The Hershey Company (HSY)

HSY engages in the manufacture and sale of confectionery products and pantry items worldwide. The company operates through three segments: North America Confectionery, North America Salty Snacks, and International.

Over the last three years, HSY’s dividend payouts have grown at a 9% CAGR. Its four-year average dividend yield is 2.01%, and its forward annual dividend of $4.14 per share translates to a 1.78% yield. It is expected to pay a quarterly dividend of $1.04 per share on December 15, 2022.

On November 17, 2022, HSY released its progress on its commitment to act on climate change. The company’s recent initiatives include launching a third utility-scale solar project, energy and water optimization investments, and continued progress addressing land use change. 

HSY’s 2021 ESG Report stated that it reduced its Scope 1 and 2 emissions by 48 percent and Scope 3 emissions by 18 percent against a 2018 baseline.

For the fiscal third quarter ended October 2, 2022, HSY’s non-GAAP gross profit increased 10.8% year-over-year to $1.16 million. Its non-GAAP operating profit increased 9.3% from the year-ago period to $615.29 million. Its non-GAAP net income increased 2.8% year-over-year to $447.07 million. In addition, its non-GAAP EPS came in at $2.17, representing an increase of 3.3% from the prior-year quarter.

HSY’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 5% and 10.7% year-over-year to $1.77 and $2.57 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 20.6% year-to-date to close the last trading session at $233.25.

It is no surprise that HSY has an overall rating of B, which translates to a Buy in our proprietary rating system. It is ranked #26 out of 82 stocks in the B-rated Food Makers industry. Moreover, it has a B grade for Quality.

To see the additional ratings of HSY for Growth, Value, Momentum, Stability, and Sentiment, click here.

Dillard’s, Inc. (DDS)

DDS operates retail department stores in the southeastern, southwestern, and midwestern areas of the United States. Its stores offer merchandise, fashion apparel, accessories, cosmetics, home furnishings, and other consumer goods.

Over the last three years, DDS’ dividend payouts have grown at a 21.1% CAGR. Its four-year average dividend yield is 2.15%, and its forward annual dividend of $0.80 per share translates to a 0.22% yield. It is expected to pay a quarterly dividend of $0.20 per share on January 30, 2023.

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 third quarter ended October 29, 2022, DDS’ net sales increased 4% year-over-year to $1.57 billion. The company’s total assets increased 1.4% year-over-year to $3.79 billion. Its EPS came in at $10.96, representing an 11.7% increase from the prior-year period.

DDS’ EPS and revenue for fiscal 2023 are expected to increase 6.5% and 5% year-over-year to $42.64 and $6.96 billion, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 43.7% year-to-date to close the last trading session at $352.16.

DDS’ POWR Ratings reflect solid prospects. The company has an overall rating of B, which equates to a Buy. It is ranked #4 out of 66 stocks in the Fashion & Luxury industry. In addition, it has an A grade for Quality and a B for Value.

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

Movado Group, Inc. (MOV)

MOV designs, sources, markets, and distributes watches worldwide. The company operates in two segments, Watch and Accessory Brands and Company Stores. It offers its watches under the Movado, Concord, Ebel, Olivia Burton, and MVMT brands, as well as licensed brands, such as Coach, Tommy Hilfiger, HUGO BOSS, Lacoste, Calvin Klein, and Scuderia Ferrari.

Over the last three years, MOV’s dividend payouts have grown at a 20.5% CAGR. Its four-year average dividend yield is 2.82%, and its forward annual dividend of $1.40 per share translates to a 4.46% yield. It is expected to pay a quarterly dividend of $0.35 per share on December 16, 2022.

MOV’s non-GAAP net sales for the nine months ended October 31, 2022, increased 5.9% year-over-year to $557.63 million. The company’s non-GAAP gross profit increased 8.9% year-over-year to $324.64 million. Its non-GAAP net income attributable to MOV increased 18.2% year-over-year to $73.53 million. Additionally, its non-GAAP EPS came in at $3.19, representing a 21.3% increase from the year-ago period.

Analysts expect MOV’s EPS and revenue for fiscal 2023 to increase 1.8% and 1.3% year-over-year to $4.01 and $742 million, respectively. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has fallen 1.6% to close the last trading session at $31.45.

MOV’s positive outlook is reflected in its POWR Ratings. The company has an overall rating of B, which equates to a Buy. It is ranked #8 in the same industry. In addition, it has an A grade for Value and Quality.

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

WMT shares were trading at $150.59 per share on Tuesday morning, down $1.06 (-0.70%). Year-to-date, WMT has gained 5.32%, versus a -15.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Malaika Alphonsus

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions. More...

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