The global grocery industry is thriving, propelled by rising demand, the proliferation of hypermarkets, and heightened consumer awareness of high-quality nutritional products.

Therefore, investors could consider investing in top grocery stocks Koninklijke Ahold Delhaize N.V. (ADRNY), Tesco PLC (TSCDY), and Marks and Spencer Group plc (MAKSY) to secure this month.

In November 2023, U.S. online grocery sales reached over $8 billion, up by 5% from the previous year, driven by an 8.6% increase in delivery channel sales. On top of it, online sales accounted for 11.7% of total weekly grocery spending by the end of November last year.

Besides, the global online grocery delivery market is booming due to increased digitization and widespread internet and smartphone use. This growth is also driven by changing consumer preferences linked to higher household expenditures and urbanization.

The global online grocery delivery services market is expected to grow at a CAGR of approximately 26% and reach around $2.16 trillion by 2030.

Furthermore, supermarkets are transforming through technology integration and adapting to online shopping trends, emphasizing customer convenience and efficient supply chain management. This evolution underscores the industry's commitment to enhancing the overall shopping experience.

In 2024, the supermarket market is estimated at $0.98 trillion and is expected to expand at a CAGR of 3.3% to reach $1.16 trillion by 2029.

Considering these conducive trends, let’s examine the fundamentals of three Grocery/Big Box Retailers stock picks, beginning with the third choice. 

Stock #3: Koninklijke Ahold Delhaize N.V. (ADRNY)

Based in Zaandam, the Netherlands, ADRNY is a retail food and e-commerce company with operations primarily in the United States and Europe. It operates under various brands and provides a diverse range of products and services, including groceries, household items, electronics, and pharmacy products.

On January 9, 2024, ADRNY announced that it had repurchased 548,342 of its common shares between January 2, 2024, and January 5, 2024, as part of its €1 billion ($1.09 billion) share buyback program. The shares were acquired at an average price of €26.83 per share, amounting to €14.70 million ($16.08 million).

On August 31, 2023, ADRNY paid an interim quarterly dividend of €0.49 per common share for 2023. The company pays $1.18 annually, which translates to a yield of 3.96% on the prevailing price level. Its four-year average dividend yield is 3.59%. The company has raised its dividend payouts at a CAGR of 2.5% and 8.6% over the past three and five years, respectively.

In the third quarter that ended September 29, 2023, ADRNY reported net sales of €21.93 billion ($24 billion). The company's underlying operating income and EBITDA amounted to €839 million ($917.95 million) and €1.71 billion ($1.87 billion), respectively. Moreover, its free cash flow rose 285% year-over-year to €512 million ($560.18 million).

For the fiscal year 2023, the company expects its free cash flow to be in the approximate range of €2.20 billion ($2.41 billion) to €2.40 billion ($2.63 billion).

ADRNY’s revenue and EPS are expected to grow 2.5% and 3.2% year-over-year to $99.60 billion and $2.80, respectively, for the fiscal year ending December 2024.

ADRNY’s shares increased 1.4% over the past year to close the last trading session at $29.45.

ADRNY’s POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ADRNY has an A grade for Stability and a B for Value and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #12 among 38 stocks.

In addition to the POWR Ratings stated above, one can access ADRNY’s additional Growth, Momentum, and Sentiment ratings here. 

Stock #2: Tesco PLC (TSCDY)

Based in Welwyn Garden City, the United Kingdom, TSCDY is a leading grocery retailer providing in-store and online services, complemented by offerings like banking, insurance, mobile operations, and consultancy services.

On January 9, 2024, TSCDY reduced prices on over 150 items by 12.5%, spanning groceries like strawberries, coffee, and pasta sauce, aiming to assist customers post-Christmas. Additional initiatives include double Clubcard points for seven weeks and a price freeze on over a thousand products until Easter 2024.

On November 24, TSCDY paid an interim dividend of 3.85 pence per ordinary share. The company pays $0.02 annually, which translates to a yield of 0.34% on the prevailing price level. Its four-year average dividend yield is 9.53%. The company has raised its dividend payouts at a CAGR of 17.8% over the past five years.

During the half year, which ended August 26, 2023, TSCDY’s revenue and gross profit rose 5% and 53.8% from the prior-year period to £34.15 billion ($43.46 billion) and £2.56 billion ($3.26 billion), respectively. The company's adjusted operating profit increased 14% year-over-year to £1.48 billion ($1.89 billion). Moreover, its adjusted EPS grew 16.8% from the prior-year period to 12.26 pence.

The company anticipates achieving a retail adjusted operating profit in the range of £2.60 billion ($3.30 billion) to £2.70 billion ($3.44 billion) for the 2024 fiscal year. Additionally, it projects to generate retail free cash flow between £1.80 billion ($2.29 billion) and £2 billion ($2.55 billion) for the same year.

Analysts expect TSCDY’s revenue and EPS to rise 6% and 8.3% year-over-year to $87.30 billion and $0.89, respectively, for the fiscal year ending February 2024.

The stock has gained 29.1% over the past year to close the last trading session at $11.42.

TSCDY’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

It has an A grade for Stability and a B for Growth, Value, and Sentiment. Within the same industry, it is ranked #5.

To see TSCDY’s additional POWR Ratings for Momentum and Quality, click here.

 Stock #1: Marks and Spencer Group plc (MAKSY)

Headquartered in London, the United Kingdom, MAKSY operates retail stores in various segments, including UK Clothing & Home; UK Food; International Ocado; and All Other. The company offers a range of products, from food items to clothing, financial services, and renewable energy, and operates internationally and online.

On January 9, 2024, MAKSY announced that it was expanding its 'Refilled' scheme to 25 stores, offering customers pre-filled, returnable bottles for own-brand cleaning and laundry products to reduce plastic waste.

The initiative supports MAKSY's goal to eliminate 1 billion units of plastic packaging by 2027, removing an estimated 150,000 pieces of plastic. The expansion follows a successful trial in six stores.

The company pays $0.41 annually, which translates to a yield of 3.62% on the prevailing price level. Its four-year average dividend yield is 2.14%.

In the half year ended September 30, 2023, MAKSY’s revenue grew 10.8% year-over-year to £6.13 billion ($7.81 billion). The company's operating profit and profit for the period amounted to £315 million ($400.88 million) and £206.90 million ($263.31 million), respectively, up 83.7% and 24.1% from the previous-year period. Moreover, its adjusted EPS rose 55.8% year-over-year to 12 pence.

Street expects MAKSY’s revenue and EPS to grow 11.3% and 25.6% year-over-year to $16.41 billion and $0.54, respectively, for the fiscal year ending March 2024.

MAKSY’s shares have gained 107.1% over the past year to close the last trading session at $7.27.

MAKSY’s POWR Ratings reflect an optimistic outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

The stock has a B grade for Growth, Stability, Sentiment, and Quality. Within the same industry, it is ranked #2.

Click here for MAKSY’s additional Value and Momentum ratings.

What To Do Next?

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ADRNY shares were trading at $29.25 per share on Wednesday afternoon, down $0.21 (-0.70%). Year-to-date, ADRNY has gained 1.92%, versus a 0.03% rise in the benchmark S&P 500 index during the same period.

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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