Recession resistant and cost-conscious: Even though it's a mouthful, it's worth considering retail stocks that cater to cost-conscious shoppers. If you're anything like most people, during inflationary times, you're ironing out how to buy everything in bulk (à la Costco (NASDAQ: COST) or at least trying to limit your spending on everyday items like paper towels, groceries and laundry detergent.
COVID-19 has impacted all generations' financial strategies. Nearly half of adults (46%) say that the COVID-19 pandemic is now a factor when considering their financial strategy, according to New York Life. COVID-19 has shifted to short-term goals like building an emergency fund (38%), paying off credit card debt (31%) and paying for a vacation (27%).
Those who reported feeling the most confident about meeting their financial goals had savings (46%) and a strategy in place (42%) and could manage debt (37%).
For the vast majority of consumers, saving money also means employing a cost-conscious retail strategy. Let's dive into how you can do it.
Why Buy Cost-Conscious Retail Stocks?
During difficult economic times, consumers tend to spend more money at dollar stores or discount retailers, grocery and discount department stores and low-priced retailers. For example, they may choose to change the oil in their cars themselves, gravitating toward auto parts stores for supplies. Another example: They'll have a contractor finish their basements or retile their bathroom floor, visiting home improvement retailers to get the supplies for their DIY projects.
A CNBC/Momentive poll of nearly 4,000 adults found that amid high prices, Americans have cut back on dining out (53%) and driving (39%) and 52% say they’re under more financial stress now than a year ago. A full 81% say the U.S. will likely face a recession in 2022 — 61% disapprove of the way President Biden is handling inflation.
3 Cost-Conscious Retail Stocks for Investors
Let's take a look at three options to take advantage of retail stock momentum.
The discount retailer Dollar General Corporation, headquartered in Goodlettsville, Tennessee, retails products in the southern, southwestern, Midwestern and eastern United States such as paper and cleaning products like paper towels, bath tissues, paper dinnerware, trash and storage bags, disinfectants and laundry products).
It also sells packaged food like cereals, pasta, canned soups, fruits and vegetables, condiments and flour as well as perishables and snacks like candies, cookies and crackers. The company also sells health and beauty products such as medicines, personal care products, pet supplies and pet food, tobacco products and holiday items as well as home and kitchen supplies. The company also provides casual everyday apparel. The company operates over 18,130 stores in 46 states as of January 28, 2022.
In 2021, Dollar General showcased net sales of $34.2 billion with an operating profit of $3.2 billion. The company reported a net income of $2.4 billion and diluted earnings per share of $10.17. Cash flows from operations totaled $2.9 billion.
In Q4, net sales increased 2.8% and fiscal year net sales Increased 1.4%. Q4 operating profit decreased 8.7% to $796.7 million and fiscal year operating profit decreased 9.4% to $3.2 billion. The board of directors declared a quarterly cash dividend of $0.55 per share, an increase of 31% compared to the prior quarter.
Costco Wholesale Corporation, based in Issaquah, Washington, operates membership warehouses in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China and Taiwan. The company offers a wide range of merchandise categories, including dry groceries, meat, produce, appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products (including tire installation centers), pharmacies, opticals, food courts and hearing aid centers.
The company owns over 800 membership warehouses across the world and operates e-commerce websites throughout the world.
Operating results for the first quarter (twelve weeks) of fiscal 2022 ended November 21, 2021 reported an increase in net sales for the first quarter of 16.7% to $49.42 billion from $42.35 billion last year. Net income for the quarter was $1,324 million, $2.98 per diluted share, compared to $1,166 million, $2.62 per diluted share at this time last year.
For the 31 weeks ended April 3, 2022, the company reported net sales of $130 billion, an increase of 16.7% from $111.37 billion during last year's similar period.
Dollar Tree Inc., headquartered in Chesapeake, Virginia, operates discount variety retail stores through two segments: Dollar Tree and Family Dollar. The Dollar Tree segment offers merchandise at a fixed $1.25, including merchandise, including candy and food, health and personal care as well as household paper, perishable and non-perishable food, toys, housewares, seasonal goods and more. The company operated over 8,000 stores under the Dollar Tree and Dollar Tree Canada brands, as well as distribution centers in the United States and Canada.
Family Dollar sells food and beverages, tobacco, health and personal care items, paper products, hardware and automotive supplies as well as pet food and supplies. It also sells home products, housewares, home décor, and giftware as well as seasonal items and more. The Family Dollar brand consists of more than 8,000 stores under the Family Dollar brand as well as 11 distribution centers.
Buy Retail Stocks — with a Twist
There's no question that retail stocks offer major benefits to consumers. However, retail stocks that cater to a select market — cost-conscious consumers — can put a twist on a traditional investment area right now.
As consumers have tightened their spending habits across the board, look to invest in retailers that offer low-cost products to consumers or allow consumers to buy in bulk, allowing them to save money during these economically trying times.
Before you consider Dollar General, you'll want to hear this.
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