The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Costco (NASDAQ:COST) and the rest of the large-format grocery & general merchandise retailer stocks fared in Q2.
Big-box retailers operate large stores that sell groceries and general merchandise at highly competitive prices. Because of their scale and resulting purchasing power, these big-box retailers–with annual sales in the tens to hundreds of billions of dollars–are able to get attractive volume discounts and sell at often the lowest prices. While e-commerce is a threat, these retailers have been able to weather the storm by either providing a unique in-store shopping experience or by reinvesting their hefty profits into omnichannel investments.
The 4 large-format grocery & general merchandise retailer stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 1%.
Inflation progressed towards the Fed’s 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut’s timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Thankfully, large-format grocery & general merchandise retailer stocks have been resilient with share prices up 6.6% on average since the latest earnings results.
Best Q2: Costco (NASDAQ:COST)
Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ:COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.
Costco reported revenues of $58.52 billion, up 9.1% year on year. This print was in line with analysts’ expectations, and overall, it was a very strong quarter for the company with an impressive beat of analysts’ gross margin estimates and a narrow beat of analysts’ earnings estimates.
Costco scored the fastest revenue growth but had the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is up 11.3% since reporting and currently trades at $906.85.
Is now the time to buy Costco? Access our full analysis of the earnings results here, it’s free.
Target (NYSE:TGT)
With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.
Target reported revenues of $25.45 billion, up 2.7% year on year, in line with analysts’ expectations. The business had a very strong quarter with an impressive beat of analysts’ gross margin estimates and a solid beat of analysts’ earnings estimates.
The market seems happy with the results as the stock is up 7.3% since reporting. It currently trades at $154.92.
Is now the time to buy Target? Access our full analysis of the earnings results here, it’s free.
Slowest Q2: Walmart (NYSE:WMT)
Known for its large-format Supercenters, Walmart (NYSE:WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.
Walmart reported revenues of $169.3 billion, up 4.8% year on year, exceeding analysts’ expectations by 1.2%. Still, it was a mixed quarter as it posted underwhelming earnings guidance for the full year.
Interestingly, the stock is up 15.3% since the results and currently trades at $79.11.
Read our full analysis of Walmart’s results here.
BJ’s (NYSE:BJ)
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE:BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
BJ’s reported revenues of $5.21 billion, up 4.9% year on year. This number beat analysts’ expectations by 1%. Zooming out, it was a very strong quarter as it also produced a decent beat of analysts’ earnings estimates but underwhelming earnings guidance for the full year.
The stock is down 7.5% since reporting and currently trades at $80.99.
Read our full, actionable report on BJ’s here, it’s free.
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