Brick & mortar stores have been witnessing rising foot traffic over the past couple of months thanks to a robust COVID-19 vaccination drive and the easing of social distancing protocols and mask mandates. With 43.7% of the U.S. population fully vaccinated as of June 14, people are opting for in-person shopping after more than a year of purchasing online. Physical stores should continue to witness rising sales because the government aims to vaccinate at least 70% of the population with at least one dose by July 4.
The National Retail Federation (NRF) expects retail sales to grow between 10.5% -13.5% to an estimated $4.44 trillion to $4.56 trillion this year. NRF expects the retail industry’s growth rate to be “the fastest growth that we’ve seen in this country since 1984.”
Current market trends indicate that people prefer retail shopping at physical stores over online shopping. In light of all these developments, we think major retail companies Walmart Inc. (WMT) and Target Corporation (TGT), which also strengthened their online platforms amid the pandemic, should grow significantly for the foreseeable future.
Walmart Inc. (WMT)
WMT is the largest retailer in the world, operating in 24 countries, with e-commerce websites that offer a wide range of daily necessity items. The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club.
On May 27, WMT and Gap announced a strategic partnership to launch Gap’s new home collection exclusively on Walmart’s retail platform. This partnership should help WMT to attract more customers with the addition of GAP’s signature collection.
On May 4, WMT and its subsidiary Sam’s club announced that COVID-19 vaccines will be available in all their pharmacies across 49 states. This development is a breakthrough in WMT’s business structure.
WMT’s net sales increased 2.6% year-over-year to $137.16 billion in its fiscal first quarter, ended April 30. Its operating income grew 32.3% from its year-ago value to $6.91 billion. WMT’s revenues came in at $138.31 billion, indicating a 2.7 % rise year-over-year. Its cash and cash equivalents balance rose 52.8% from the prior year quarter to $22.89 billion over this period.
A $567.60 billion consensus revenue estimate for the next year indicates a 2.5% increase year-over-year. The Street expects the company’s EPS to rise 4.9% to $6.26 next year. WMT has an impressive earnings surprise history as well; it beat consensus EPS estimates in three out of trailing four quarters.
Shares of WMT have gained 19.4% over the past year and have gained marginally over the past month.
It is no surprise that WMT has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Stability and Sentiment, and a B grade for Value and Quality. Among the 39 stocks in the A-rated Grocery/Big Box Retailers industry, WMT is ranked #2.
Beyond what we’ve stated above, we have also rated WMT for Momentum and Growth. Click here to view all WMT Ratings.
Target Corporation (TGT)
TGT is a general merchandise retailer in the United States. It provides a wide range of products, including food assortments, apparel, accessories, home decor products, electronics, household essentials and various in-store amenities. TGT operates through its stores and digital channels, which include Target.com.
On April 27, TGT collaborated with plant enthusiast and interior stylist Hilton Carter to add live and faux plants and accessories in the company’s product offerings. With searches for plants on TGT’s online stores increasing more than 300% over the last year, this collaboration should allow the company to generate a substantial rise in revenues.
On April 19, TGT collaborated with designers ALEXIS, Christopher John Rogers and RIXO to install a limited-time-only designer dress collection. This should allow TGT to expand its product offerings, translating to an improvement in its financials.
TGT’s sales increased 23.3% year-over-year to $23.88 billion in the fiscal first quarter, ended May 1. Its income from continuing operations grew 407% from the year-ago value to $2.37 billion. Its net earnings stood at $2.10 billion, up 639.8% from the same period last year. The company’s EPS increased 643.2% year-over-year to $4.17.
Analysts expect TGT’s revenues to increase 8.8% year-over-year to $101.8 billion in the current year. A $12.22 consensus EPS estimate for the current year indicates a 29.7% improvement year-over-year. The company has an impressive earnings surprise history also; it beat the consensus EPS estimates in each of the trailing four quarters.
TGT gained 99.4% over the past year, and 32% year-to-date, respectively.
It is no surprise that TGT has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. TGT has an A grade for Sentiment, and a B grade for Value and Quality. It is ranked #1 in the Grocery/Big Box retailers’ industry.
Click here to view additional TGT Ratings and other details.
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WMT shares were trading at $139.95 per share on Tuesday afternoon, down $0.61 (-0.43%). Year-to-date, WMT has declined -2.13%, versus a 13.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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