The grocery industry appears well-positioned for robust expansion, driven by rising consumer expenditure, technological advancements, and innovative delivery approaches. Therefore, I think investors could consider buying quality grocery stocks Carrefour SA (CRRFY), Koninklijke Ahold Delhaize N.V. ADR (ADRNY), and Village Super Market, Inc. (VLGEA).
The essential nature of groceries ensures consistent demand. As people need food and household items regularly, the grocery industry is relatively recession-resistant.
In September 2023, the grocery sector experienced a 7% increase in spending, surpassing the figures reported in July and August. Moreover, overall retail spending also witnessed a notable upturn of 3.4% in September, outperforming the growth reported in August 2023.
Moreover, grocery stores are expanding their product offerings, providing ready-made meals, organic and health-focused products, and even household items, becoming a one-stop shop for consumers.
As a result, the grocery retail sector in the United States is expected to grow by 5.6% to reach $1.5 trillion this year.
Additionally, the grocery market is expected to grow due to shifting consumer preferences during the pandemic and the continued rise of e-commerce. Online payment choices and contactless grocery delivery options provided by online grocers will further boost market expansion.
The global online grocery market is expected to expand at a CAGR of 25.3% from 2022 to 2030.
Furthermore, new delivery models like BOPIS, curbside pickup, and direct-to-door are gaining popularity, reflecting changing consumer behavior. Short delivery times are becoming the norm, raising delivery expectations. Grocers are adapting by optimizing physical stores to accommodate evolving consumption patterns and the growth of subscription services and direct-to-consumer models.
The global food & grocery retail market is expected to grow at a CAGR of 3% from 2022 to 2030.
Considering these conducive trends, let’s look at the fundamentals of the three best Grocery/Big Box Retailers stocks, starting with number 3.
Stock #3: Carrefour SA (CRRFY)
Based in France, CRRFY is a multinational retail corporation. It operates a range of retail formats, including service stations, e-commerce websites, supermarkets, hypermarkets, and cash and carry stores. CRRFY is engaged in several industries besides retail, including banking, insurance, and real estate development.
On October 25, 2023, CRRFY and seven industrial partners started an international coalition in September 2023. This coalition's main objective is to increase the sales of plant-based substitutes.
Their combined goal is to reach an overall target of €3 billion ($3.17 billion) for the eight partner companies and €500 million ($528.98 million) in sales of plant-based protein products in Europe through CRRFY by 2026.
During the six months ended June 30, 2023, CRRFY's net sales rose 7.8% year over year to €40.74 billion ($43.04 billion). Its gross margin from recurring operations increased 7.6% year-over-year to €8.07 million ($8.53 billion). The company’s net income, Group share, adjusted for exceptional items, grew 5.2% and 9.8% from the previous-year quarter to €326 million ($344.39 million) and €0.45 per share.
Street expects CRRFY’s revenue for the fiscal third quarter that ended September 2023 is expected to rise 4.4% year-over-year to $24.96 billion.
The stock has soared 11.2% over the past year to close the last trading session at $3.46.
CRRFY’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CRRFY has an A grade for Value and Stability and a B for Growth. Within the A-rated Grocery/Big Box Retailers, it is ranked #11 among 38 stocks.
Click here to see CRRFY’s additional POWR Ratings for Momentum, Sentiment and Quality.
Stock #2: Koninklijke Ahold Delhaize N.V. ADR (ADRNY)
Headquartered in Zaandam, the Netherlands, ADRNY is a retail food store and e-commerce company with operations in the United States and Europe. The company offers a wide range of products, including groceries, household items, electronics, and pharmacy products.
On October 30, ADRNY announced that it was set to acquire Romanian grocery retailer Profi. This complements ADRNY's existing Mega Image brand and expands its footprint in Romania, serving both urban and rural areas. The acquisition, valued at approximately €1.3 billion, will more than double ADRNY’s presence in Romania, generating revenue growth and synergies.
On October 24, ADRNY announced that it had repurchased 966,000 common shares between October 16, 2023, and October 20, 2023, as part of its €1 billion ($1.06 billion) share buyback program. The shares were acquired at an average price of €27.56 ($29.11) per share, amounting to €26.60 million ($28.10 million).
To date, the company had repurchased a total of 28,752,360 common shares at a cost of €853.40 million ($901.54 million) under this program.
The company pays an annual dividend of $1.06, which translates to a yield of 3.59% on the prevailing price level. Its four-year average yield is 3.60%.
During the second quarter ended June 30, 2023, ADRNY’s net sales increased 2.9% year-over-year to €22.07 billion ($23.31 billion). Its underlying EBITDA grew 2.1% year-over-year to €1.76 billion ($1.86 billion). Moreover, its free cash flow rose 30.3% year-over-year to €864 million ($912.74 million).
ADRNY’s revenue for the fiscal third quarter that ended September 2023 is expected to grow 4.1% year-over-year to 23.35 billion.
The stock has soared 6.1% over the past year and 3.2% year-to-date to close the last trading session at $29.61.
ADRNY’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
ADRNY has an A grade for Stability and Quality and a B for Value. Within the same industry, it is ranked #7.
In addition to the POWR Ratings stated above, one can see ADRNY’s additional POWR Ratings for Growth, Momentum, and Sentiment here.
Stock #1: Village Super Market, Inc. (VLGEA)
VLGEA is a nationwide chain of supermarkets in the US that offers a wide variety of goods, such as prepared foods, frozen goods, dairy products, meat, produce, and seafood. Additionally, it offers non-food items through retail and online stores, including general merchandise, liquor, pharmacy products, and health and beauty products.
On October 26, 2023, VLGAE paid quarterly cash dividends of 0.25 and $0.1625, respectively, to shareholders. With a four-year average dividend of 4.34%, VLGAE pays $1 as dividends annually, translating to a yield of 4.16%.
In the fiscal fourth quarter that ended July 29, 2023, VLGEA’s sales stood at $553.81 million, up 5% year-over-year. The company’s gross profit rose 8.6% year-over-year to $161.06 million and operating income came in at $20.21 million, representing an increase of 12.2% year-over-year. Moreover, its adjusted net income increased 26.7% year-over-year to $15.57 million.
The stock has soared 9.1% over the past year and 8.7% over the past six months to close the last trading session at $24.04.
VLGEA’s POWR Ratings reflect this positive outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
VLGEA has an A grade for Value and Stability and a B for Growth and Quality. Within the same industry, it is ranked #2.
To see VLGEA’s additional POWR Ratings for Sentiment and Momentum, click 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.
ADRNY shares were trading at $30.06 per share on Monday afternoon, up $0.45 (+1.52%). Year-to-date, ADRNY has gained 7.59%, versus a 9.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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