As commodity prices continue to rise due to high inflation and the risk of a recession could stagnate future incomes, more and more American consumers are flocking to good-value retailers in hopes of saving money. Against this backdrop, U.S. retail stocks ushered in a good opportunity to rebound. Costco $COST, Walmart $WMT, and Dollar Tree $DLTR rose against the trend, and their stock prices repeatedly hit new highs.
First, there are many bull stocks, and the retail stocks of US stocks will explode in the near future?
Retail sales rose 0.5% to a record $665.7 billion in March, Commerce Department data showed on Thursday. Gasoline spending rose the most, up 8.9 percent, while retail store sales rose 5.4 percent, the second-highest increase.
Wharton marketing professor David Reibstein has said that retailers are often good at capitalizing on inflation. “Inflation is actually a good opportunity, because a lot of customers are thinking, how can they save money with inflation? So they're going to more of those stores that are cheap and good. So in times like these, Costco, Walmart, One Dollar Stores and other stores should be full of customers.”
It is worth noting that the US retail industry is also full of bull stocks. In the past five years, Target's share price has quadrupled, and Costco and American Dollar General have nearly tripled. In addition, Kroger and Walmart rose more than 110%, both significantly outperformed the broader market. Strategists say these companies have wide moats, huge physical empires and continued dividend growth, making them “safe havens” in the current high-risk environment.
Second, Buffett and Munger support, these retail stocks are not simple?
Target
Target, the second largest retail department store group in the United States after Wal-Mart, provides customers with today's fashion-forward retail services at affordable prices. Target is one of the few retailers that has thrived during the pandemic. As brick-and-mortar stores selling non-essentials closed temporarily or permanently during the height of the pandemic, people at home turned to Target's online service for everything from groceries to cleaning supplies.
Target, which will invest up to $5 billion this year in brick-and-mortar stores, remodels, new brands and expanding its online presence, plans to continue driving sales growth and building a competitive edge over rivals.
Costco
Costco can be said to be one of the largest retail department stores in the United States, with a wide variety of products at relatively affordable prices. Different from the profit model of traditional retailers earning the difference in sales of goods, Costco’s higher proportion of profit contribution comes from membership fees, and the sales of goods follow the principle of low gross profit. Companies will use price promotions to reduce profits, and form a reciprocal relationship with consumers through the profits earned.
Costco, as a “company that Munger wants to take into the grave”, Munger recognized it very much. He once said, “If you spend at Costco, you will continue to spend at Costco for the rest of your life.” This sentence is not groundless. Costco's membership renewal rate in the past five years has reached 90%. Even if the company has increased membership fees, the incentives of using products with low gross profit will continue to attract consumers to Costco. It can be said that Costco is truly unmatched in terms of membership.
Dollar General
Dollar General is one of the top three discount retailers in the United States. It is known for its low prices and excellent products. Dollar General advertises that the core products in the store are priced from $1 to $20. You can buy it in the store for $1. about a liter of milk. In terms of business expansion, Dollar General also focuses on carpet expansion. The density of branches is quite high. In the United States, it takes an average of 5-10 minutes to drive to a Dollar General.
Different from most of the retail industry, Dollar General will also open stores in low-income suburbs and communities, so that Dollar General has established a very high brand trust in the hearts of local people.
Walmart
Walmart is the largest retail department store in the United States, and has launched “one-stop shopping”. The products include food, livelihood products, home appliances, books, beauty salons, sports goods, kitchenware, etc. There are also restaurants and shops, and even parking lots. Gas stations, as long as you come to Walmart, you can meet all the needs of people's livelihood in a day.
Walmart has operated more than 10,700 shopping malls or membership stores, community stores, etc. in 27 countries in the Americas, Europe and Asia. During the outbreak of the new crown epidemic in 2020, the stock price has not fallen but continued to grow. In addition, Walmart is also transforming from a traditional hypermarket retailer, increasing e-commerce services, and advancing with the times to strengthen its competitiveness.
Kroger
Founded in 1883, Kroger is the largest supermarket chain in the United States and one of the largest suppliers of organic vegetables in the United States. The products in the store are not only fresh but also very affordable. Kroger also has its own membership system. 97% of the purchases in the store come from members, and 85% of households in the United States will become her members.
In addition to popular supermarkets, Kroger Group also has a full range of life services from pharmacies, gas stations and other brands. Pharmacies are also featured in Kroger supermarkets, which are characterized by low prices and longer daily operating hours than traditional hospitals. Data shows that Kroger is already the fifth largest pharmacy in the United States, and it has nearly 2,000 pharmacies.
It is worth noting that Kroger is still Buffett’s favorite stock, and the stock god will start to open positions in this stock in 2020.
Kroger is best known for its organic vegetables
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