The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how non-discretionary retail stocks fared in Q3, starting with Grocery Outlet (NASDAQ:GO).
Food is non-discretionary because it's essential for life (maybe not those Oreos?), so consumers naturally need a place to buy it. Selling food is a notoriously tough business, however, as the costs of procuring and transporting oftentimes perishable products and operating stores fit to sell those products can be high. Competition is also fierce because the alternatives are numerous. While online competition threatens all of retail, grocery is one of the least penetrated because of the nature of the product. Still, we could be one startup or innovation away from a paradigm shift.
The 8 non-discretionary retail stocks we track reported a satisfactory Q3. As a group, revenues along with next quarter’s revenue guidance were in line with analysts’ consensus estimates.
In light of this news, share prices of the companies have held steady as they are up 1.1% on average since the latest earnings results.
Weakest Q3: Grocery Outlet (NASDAQ:GO)
Due to its differentiated procurement and buying approach, Grocery Outlet (NASDAQ:GO) is a discount grocery store chain that offers substantial discounts on name-brand products.
Grocery Outlet reported revenues of $1.17 billion, up 5.4% year on year. This print fell short of analysts’ expectations by 0.8%. Overall, it was a mixed quarter for the company with a beat of analysts’ EPS estimates but full-year EBITDA guidance missing analysts’ expectations.
“In the third quarter, we made progress on our key initiatives while delivering strong bottom-line results. In addition, we launched our store refresh program at an initial group of pilot stores,” said Jason Potter, President and CEO of Grocery Outlet.
Grocery Outlet achieved the highest full-year guidance raise of the whole group. Still, the market seems discontent with the results. The stock is down 20.8% since reporting and currently trades at $11.35.
Read our full report on Grocery Outlet here, it’s free for active Edge members.
Best Q3: Dollar General (NYSE:DG)
Appealing to the budget-conscious consumer, Dollar General (NYSE:DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.
Dollar General reported revenues of $10.65 billion, up 4.6% year on year, in line with analysts’ expectations. The business had an exceptional quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.
The market seems happy with the results as the stock is up 20.8% since reporting. It currently trades at $132.74.
Is now the time to buy Dollar General? Access our full analysis of the earnings results here, it’s free for active Edge members.
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 $25.27 billion, down 1.6% year on year, in line with analysts’ expectations. It was a mixed quarter as it posted full-year EPS guidance beating analysts’ expectations but a significant miss of analysts’ EBITDA estimates.
Target delivered the slowest revenue growth in the group. Interestingly, the stock is up 4.3% since the results and currently trades at $92.35.
Read our full analysis of Target’s results here.
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 $179.5 billion, up 5.8% year on year. This print surpassed analysts’ expectations by 1.1%. More broadly, it was a satisfactory quarter as it also produced a decent beat of analysts’ gross margin estimates but full-year EPS guidance meeting analysts’ expectations.
The stock is up 14.5% since reporting and currently trades at $115.27.
Read our full, actionable report on Walmart here, it’s free for active Edge members.
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 $5.35 billion, up 4.9% year on year. This number met analysts’ expectations. Zooming out, it was a mixed quarter as it also recorded a beat of analysts’ EPS estimates but a slight miss of analysts’ EBITDA estimates.
The stock is flat since reporting and currently trades at $91.33.
Read our full, actionable report on BJ's here, it’s free for active Edge members.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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