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Finance

4 “Big-Box” Retailers Built to Last

The stock up phase of the Coronavirus economy is coming to an end. In its wake you have growing concerns that some many retailers across the country are not going to be able to survive. Especially small to medium sized retailers who don’t have the financial strength of the big-box chains.

This is leading many investors to consider who will survive post Coronavirus and thus actually thrive given the removal of many competitors. In that light investors should consider these 4 resilient retailers: TGT, WMT, KR and BJ.

Target Corporation (TGT)

While the vast majority of Mom and Pop shops have been closed during the coronavirus pandemic, the big box stores have remained open.  In particular, TGT has raked in the cash during the outbreak.  This big box retailer deserves kudos for taking the lead by installing “sneeze shield” barriers at each cash register to prevent the spread of the virus in its stores.

TGT products are considered “discount” yet you would not know it based on store aesthetics.  TGT stores are clean, visually polished and ultimately encourage customers to spend.  Furthermore, TGT digital sales have spiked by a considerable margin during the pandemic.

Though TGT’s wage increases combined with increases in supply chain costs will take a bite out of short-term profits, the stock is likely to increase as time progresses, stealing that much more market share from smaller stores unlikely to survive the pandemic.  Look for TGT to trend toward the $122.19 average analyst price target as detailed on TipRanks.

(Note that Target is 1 of only 7 positions in the Reitmeister Total Return portfolio. Learn more).

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Walmart (WMT)

There is certainly plenty of backlash against big box stores such as WMT.  Though it is true big boxes like WMT price out competitors and congest traffic, they are essential businesses that ultimately provide consumers with the lowest possible price point and employ large numbers of people.

The fact that WMT is an “essential business” is evidenced by the fact that its stock has climbed from $104 on March 12 all the way up to its current price of $128.30.  The masses need what Walmart is selling, so much so that the stock is likely to break through TipRanks’ average analyst price target of $131.53 in the coming weeks.

Even if we endure a prolonged recession, Walmart will likely excel simply because this big box sells consumer staples that will always be necessary.  Furthermore, WMT online sales jumped 30% in the two months leading up to April, meaning the company is poised to expand its market share both on and off the internet.

Kroger Company (KR)

Food, medication, alcohol, electronics and pet supplies.  These are KR’s primary categories, most of which the average person considers essential to a decent quality of life.   In other words, KR sells items likely to be in demand far into the future, ultimately helping its stock push through TipRanks’ average analyst price target of $34.68 in the months ahead.

Zacks ranks KR in the top 9% of its industry, rating the stock as a 2, meaning “Buy.”  Though KR took out a billion dollar loan from its revolving line of credit, this growth-oriented business is raking in the cash, selling consumer goods at a high clip throughout the CoVid-19 pandemic.  Buy this stock today, hold it for the foreseeable future and it is likely to eclipse its 52-week high of $36.84 within a quarter or two.

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BJ’s Wholesale Club (BJ)

Human psychology amidst a pandemic is quite interesting.  The average person “panic buys” more food, water, toilet paper and other consumer staples than necessary, assuming such items will be out of stock or stores might be completely shut down.  This phenomenon benefits the likes of BJ’s Wholesale Club.

BJ stock has climbed higher since late February as a result of bulk buying during the coronavirus pandemic.  After all, most people did not make a beeline to the small businesses in town to load up on essentials.  Rather, they went directly to the likes of BJ, bought hundreds of dollars worth of goods and hunkered down at home for weeks.  This is precisely why 11 TipRanks analysts rate BJ as a “Buy”, three rate it as a “Hold” and none rate it as a “Sell.”

The icing on the cake is the fact that Zacks has a “2-Buy” rank on the stock, grading it out with an “A” on every single Style Score ranging from Value to Growth, Momentum and beyond.  Buy BJ today, hold it for the long run and your portfolio is likely to benefit even if you are a bit dismayed by the fact that your local Mom and Pop shops lose ground to big boxes like BJ.

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TGT shares closed at $115.83 on Friday, up $2.47 (+2.18%). Year-to-date, TGT has declined -9.14%, versus a -8.61% rise in the benchmark S&P 500 index during the same period.

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About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…

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