The Federal Reserve is broadly expected to decrease its interest rate hike from 75 to 50 bps during its meeting later this week. However, it’s the terminal rate, and its effect on the growth prospects of the U.S. economy are keeping investors concerned.

A robust employment data and hotter-than-expected producer price data for November have anything but allayed those concerns. Matt Toms, global chief investment officer at Voya Investment Management, anticipates that the Fed’s target rate could continue to climb before a recession forces the central bank to change course rapidly later next year.

However, there is little sign that consumer demand has plummeted, and Holiday expenditure is expected to keep it that way. Hence, fundamentally strong consumer stocks BJ’s Wholesale Club Holdings, Inc. (BJ) and Dillard’s, Inc. (DDS) might be ideal investments to keep portfolios relatively immune to downside risks from panic-led pullbacks.

BJ’s Wholesale Club Holdings, Inc. (BJ)

BJ operates warehouse clubs on the eastern coast of the United States. The company offers a curated assortment of merchandise, perishable, gasoline, and other ancillary services.

On December 9, BJ opened its brand-new club in Midlothian, Virginia, marking the retailer’s 14th location in the state. This opening has closely followed November 18, November 4, and October 28 openings in Wayne, New Jersey, New Albany, Ohio, and Greenburgh, New York, respectively.

With 235 clubs in the U.S., significant improvement is expected in the club’s top line.

On December 1, BJ announced the launch of its retail media program, BJ’s Media Edge, using Microsoft PromoteIQ. This program would offer a comprehensive portfolio of advertising solutions, helping brands drive business growth and brand engagement.

On October 12, BJ announced its partnership with Capital One Financial (COF). According to the terms of the agreement, COF would become the exclusive issuing partner for BJ’s co-brand Mastercard program, expected to launch in early 2023. COF has also entered into an agreement to acquire the existing portfolio of BJ’s credit card accounts.

This partnership is expected to deliver additional value for consumers while increasing sales and brand loyalty for BJ.

BJ’s total revenues increased 12.2% year-over-year to $4.79 billion in the third quarter that ended October 29, 2022. During the same period, the company’s operating income increased 12.8% year-over-year to $191.97 million, while its adjusted EBITDA increased 19.2% year-over-year to $272.31 million.

BJ’s adjusted net income for the quarter came in at $135.83 million or $0.99 per share, up 7.9% and 8.8%, respectively.

Wall Street expects BJ’s EPS for the current fiscal year (ending January 2023) to increase 16.4% year-over-year to $3.78. During the same period, its revenue is expected to increase 15.2% year-over-year to $19.19 billion. The company has surpassed consensus EPS estimates in each of the trailing four quarters.

The stock has gained 7% year-to-date to close the last trading session at $70.28.

BJ has an overall rating of B, translating to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

BJ also has a grade of B for Value and Sentiment. It is ranked #20 of 39 stocks in the A-rated Grocery/Big Box Retailers industry.

Click here to see the other ratings of BJ for Growth, Momentum, Stability, and Quality.

Dillard’s, Inc. (DDS)

DDS operates retail department stores in the southeastern, southwestern, and midwestern areas of the United States. Its stores offer merchandise, fashion apparel, accessories, cosmetics, home furnishings, and other consumer goods.

On November 17, DDS announced a quarterly cash dividend of $0.20 per share, payable on January 30, 2023. The company pays $0.80 annually as dividends, translating to a yield of 0.24% at the current price. Dividend payouts have grown for the past 11 years.

On August 15, DDS announced the debut of Courtney Grow for Antonio Melani. It features high-end garments for fall and transitional attire, such as dresses, sportswear, jackets, shoes, and a handbag.

Through this initiative, Courtney Grow for Antonio Melani, one of Dillard’s limited-edition collaborations with prominent social media influencers, aims to foster brand recognition and fashion passion through unique and intriguing partnerships with tastemakers, attracting new customers while boosting adherence to DDS’s exclusive brands.

For the fiscal third quarter, ended October 29, 2022, net sales of DDS increased 4.3% year-over-year to $1.54 billion. During the same period, the company’s EPS increased 11.7% year-over-year to $10.96.

The total assets of DDS came in at $3.79 billion as of October 29, 2022, compared to $3.74 billion as of October 30, 2021.

DDS’ EPS and revenue for fiscal 2023 are expected to increase 6.5% and 5% year-over-year to $42.64 and $6.96 billion, respectively. Moreover, it has an impressive earnings surprise history of surpassing the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 4.4% over the past month and 34.5% year-to-date to close the last trading session at $337.08.

DDS’ POWR Ratings reflect its solid prospects. The company has an overall rating of B, which equates to a Buy in our proprietary rating system. It has an A grade for Quality and a B for Value.

DDS is ranked #5 out of 66 stocks in the Fashion & Luxury industry.

Click here to see the other ratings of DDS for Growth, Momentum, Stability, and Sentiment.

BJ shares were trading at $70.63 per share on Monday afternoon, up $0.35 (+0.50%). Year-to-date, BJ has gained 5.47%, versus a -15.34% rise in the benchmark S&P 500 index during the same period.

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

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