Amidst evolving customer behavior, robust economic growth, and rising personal expenditure, the consumer discretionary industry is experiencing robust growth. It will further diversify and expand with the upcoming holiday sales surge.
Amid this backdrop, investors could consider investing in sound consumer discretionary stocks: Lowe's Companies, Inc. (LOW), The TJX Companies, Inc. (TJX), and Target Corporation (TGT) as the holiday season nears.
During the holiday season, market demand for personal commodities, items of daily use, and luxury goods surges strongly, and 2024 is expected to be no different. As per the National Retail Federation’s latest consumer survey, this holiday season, consumer spending is projected to set a new record of $902 per person on average across gifts, food, decorations, and other seasonal items.
The amount is nearly $25 per person higher compared to last year’s figure and $16 higher than the previous record set in 2019. NRF vice president of industry and consumer insights Katherine Cullen said, “The winter holidays are a treasured time for Americans, and they are prioritizing spending on family this holiday season.”
Also, the recent Federal Reserve rate cut will encourage higher short-term borrowing with lower mortgage, auto loan, and credit card costs. The central bank's Federal Open Market Committee lowered its key overnight borrowing rate by a half percentage point, or 50 basis points, amid an improving job market and inflation easing inflation.
Therefore, amid rising disposable income and a surge in personal expenditure, investors could consider adding sound consumer discretionary stocks to their portfolios. Consumer discretionary includes goods that are not of an essential nature but are desirable for a consumer.
Given these favorable market trends, let’s look at the fundamentals of the top retail stocks such as LOW, TJX, and TGT.
Lowe's Companies, Inc. (LOW)
LOW operates as a home improvement retailer. The company provides a line of products for construction, maintenance, repair, remodeling, and decorating. It also offers home improvement products, such as appliances, seasonal and outdoor living, lawn and garden, lumber, kitchens, and baths.
On June 3, LOW became the first home improvement retailer to offer customers an in-store, Apple Vision Pro-powered experience. With the technology, customers can try Lowe’s Style Studio™ for Apple Vision Pro firsthand, enabling them to envision and design their dream kitchens using spatial computing and the help of a Lowe’s associate.
This breakthrough launch bodes well with LOW’s operations that immerse users in a high-fidelity 3D kitchen environment and enable them to explore, imagine, and bring their unique project to life in minutes.
For the second quarter that ended August 2, 2024, LOW reported net sales of $23.59 billion, and its operating income came in at $3.45 billion. The company’s net earnings and EPS totaled $2.38 billion and $4.17 for the quarter, respectively.
In addition, the company’s cash and cash equivalents were $4.36 billion as of August 2, 2024, compared to $3.49 billion as of August 4, 2023.
Street expects LOW’s revenue and EPS for the first quarter (ending April 2025) to increase marginally and 2.8% year-over-year to $21.38 billion and $3.15, respectively. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
LOW’s stock has increased 37.4% over the past year to close the last trading session at $261.83.
LOW’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Sentiment and Quality. Within the B-rated Home Improvement & Goods industry, LOW is ranked #14 out of 57 stocks.
Click here to access additional ratings of LOW for Momentum, Growth, Value, and Stability.
The TJX Companies, Inc. (TJX)
TJX operates as an off-price apparel and home fashion retailer internationally. The company operates through four segments: Marmaxx; HomeGoods; TJX Canada; and TJX International.
On June 7, TJX entered into a definitive agreement for a joint venture with Grupo Axo, S.A.P.I. de C.V., an operator of global brands in Mexico and South America. Under the agreement, TJX owns 49% of the joint venture. The agreement would comprise Axo’s off-price physical store business in Mexico, which includes over 200 stores.
The strategic collaboration with Axo expanded TJX’s operations in Mexico and gave the opportunity to grow and enhance that country’s leading off-price retailer.
During the second quarter that ended August 3, 2024, TJX’s net sales rose 5.6% year-over-year to $13.47 billion. Its income before income taxes grew 10.6% from the year-ago value to $1.47 billion. The company’s net income and EPS came in at $1.10 billion and $0.96, up 11.1% and 12.9% year-over-year, respectively.
According to the company’s guidance for fiscal year 2025, the company’s EPS is projected to be between $4.09 and $4.13.
Street expects TJX’s EPS for the third quarter (ended October 2024) to increase 6.6% year-over-year to $1.10. For the same quarter, the company’s revenue is expected to grow 5.3% year-over-year to $13.97 billion. Also, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.
TJX’s shares have gained 28.3% over the past year to close the last trading session at $113.03.
TJX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
TJX has a B grade for Sentiment and Quality. It is ranked #15 out of 60 stocks in the B-rated Fashion & Luxury industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of TJX for Growth, Value, Momentum, and Stability. Get all TJX ratings here.
Target Corporation (TGT)
TGT operates as a general merchandise retailer. The company offers apparel for women, men, boys, girls, toddlers, and infants and newborns, and jewelry, accessories, and shoes, and beauty and personal care, baby gear, cleaning, paper products, and pet supplies.
On September 18, TGT’s board of directors declared a quarterly dividend of $1.12 per common share. The dividend will be paid on December 10, 2024 to shareholders of record at the close of business November 20, 2024.
TGT pays an annual dividend of $4.48, which translates to a yield of 2.99% at the current share price. Its four-year average dividend yield is 2.28%. Moreover, the company’s dividend payouts have increased at a CAGR of 14.6% over the past three years. Target has raised its dividends for 55 consecutive years.
During the second quarter 2024, which ended August 3, TGT’s total revenue increased 2.7% year-over-year to $25.45 billion. Its operating income rose 36.6% from the year-ago value to $1.64 billion. The company’s net earnings and EPS of $1.19 billion and $2.57 indicate growth of 42.7% and 42.8% from the prior year’s quarter, respectively.
Street expects TGT’s revenue and EPS for the third quarter (ended October 2024) to increase 2.2% and 9.4% year-over-year to $25.96 billion and $2.30, respectively. Also, the company has topped the consensus revenue and EPS estimates in three of the trailing quarters.
Shares of TGT have surged 38.6% over the past year to close the last trading session at $151.77.
TGT’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
TGT has a B grade for Quality and Value. It is ranked #10 out of 37 stocks in the A-rated Grocery/Big Box Retailers industry.
In addition to the POWR Ratings we’ve stated above, we also have TGT ratings for Momentum, Sentiment, Growth, and Stability. Get all TGT ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
LOW shares were unchanged in after-hours trading Friday. Year-to-date, LOW has gained 19.94%, versus a 21.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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