The retail industry has tremendous growth potential as retailers continue to innovate and adapt to changing consumer habits. By staying ahead of trends, embracing technology, and prioritizing sustainability, retailers can position themselves for long-term success in the evolving retail landscape.
Amid this backdrop, investors could consider adding fundamentally strong retail stocks such as Casey's General Stores, Inc. (CASY), Upbound Group, Inc. (UPBD), and The Cato Corporation (CATO) to their watchlist for high growth this year.
The retail industry has shown high growth potential in recent years as consumer habits continue to evolve in response to technological advancements and changing preferences. With the rise of e-commerce and the increasing popularity of online shopping, traditional retailers have adapted to meet their customers' demands.
The shift toward omnichannel retailing, where consumers expect a seamless shopping experience across multiple online, mobile, and in-store platforms, has encouraged retailers to invest in technology and innovation to enhance their digital capabilities and provide personalized, convenient shopping experiences. For instance, the global food and grocery retail market is projected to reach $14.78 trillion by 2030, growing at a 3.2% CAGR.
Furthermore, the accelerated adoption of online shopping and contactless payment options has prompted retailers to rethink their business strategies and rapidly embrace digital transformation.
Many retailers have shifted their focus to e-commerce and invested in improving their online platforms to meet the surge in online shopping demand. The increasing consumer demand and rising disposable income have led the global specialty retailers market to reach $42.70 billion by 2031, exhibiting a 4% CAGR.
Considering these conducive trends, let’s examine the fundamentals of the three retail stock picks.
Casey's General Stores, Inc. (CASY)
CASY operates convenience stores under the names Casey's and Casey's General Store. Its stores offer pizza, donuts, breakfast items, sandwiches, and tobacco and nicotine products.
On May 15, 2024, CASY launched a new BBQ Pulled Pork Pizza with slow-smoked pulled pork for summer. The pizza starts with CASY’s made-from-scratch dough and is then topped with Sweet Baby Ray's barbecue sauce, real mozzarella, slow-smoked pulled pork, bacon, cheddar cheese, red onion, and thick-cut pickles. This launch might bode well for the company.
Over the past three and five years, CASY’s revenue grew at CAGRs of 19.5% and 12.2%, respectively. Its net income grew at a CAGR of 17.1% over the past three years.
CASY’s total revenue for the fiscal fourth quarter that ended April 30, 2024, increased 8.2% year-over-year to $3.60 billion. Its adjusted EBITDA stood at $224.55 million, up 34.5% from the prior-year quarter. In addition, its net income rose 55.1% from the year-ago quarter to $87.02 million. Also, its net income per common share grew 57% year-over-year to $2.34.
Analysts expect CASY’s revenue and EPS for the quarter ending July 31, 2024, to increase 7.2% and 1.5% year-over-year to $4.15 billion and $4.59, respectively. The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Over the past year, the stock has gained 68.1%, closing the last trading session at $382.87.
CASY’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
CASY has an A grade for Sentiment and a B for Growth and Quality. It is ranked #10 out of 36 stocks in the A-rated Grocery/Big Box Retailers industry. Click here to see CASY’s Value, Momentum, and Stability ratings.
Upbound Group, Inc. (UPBD)
UPBD leases household durable goods to customers on a lease-to-own basis in the United States, Puerto Rico, and Mexico. It operates through four segments: Rent-A-Center; Acima; Mexico; and Franchising.
On June 18, 2024, UPBD’s Acima Leasing announced its newest partnership with the "Top 30" furniture retailer, Slumberland Furniture. This agreement will make Acima Leasing available at Slumberland corporate stores in Iowa, Illinois, Kansas, South Dakota, and Nebraska. Acima Leasing will also be the preferred LTO provider for Slumberland's franchise locations.
On June 6, 2024, UPBD announced the opening of a new Rent-A-Center store in Dania Beach, Florida. The store offers a flexible lease-to-own option for high-quality furniture, appliances, electronics, computers, and a wide range of other durable goods.
Over the past three and five years, UPBD’s revenue grew at CAGRs of 9% and 8.9%, respectively. Its EBITDA grew at a CAGR of 1.5% over the past three years.
For the first quarter that ended March 31, 2024, UPBD’s total revenues and gross profit stood at $1.10 billion and $529.07 million, up 7.9% and 4.5% year-over-year, respectively. For the same quarter, its non-GAAP net earnings and earnings per share came to $43.94 million and $0.79, respectively.
Street expects UPBD’s EPS for the quarter ending September 30, 2024, to increase 20.4% year-over-year to $0.95. Its revenue for the quarter ending June 30, 2024, is expected to rise 5.8% year-over-year to $1.04 billion. The company surpassed consensus EPS and revenue estimates in each of the trailing four quarters. UPBD has gained 2.4% over the past nine months, closing the last trading session at $30.13.
UPBD’s strong fundamentals are reflected in its POWR Ratings. Its overall rating is B, equating to Buy in our proprietary rating system.
It has a B grade for Growth and Quality. It is ranked #4 out of 42 stocks in the Specialty Retailers industry. Get UPBD’s Value, Momentum, Stability, and Sentiment ratings here.
The Cato Corporation (CATO)
CATO is a specialty retailer of fashion apparel and accessories, primarily in the southeastern United States. It operates through two segments: Retail and Credit.
In May, CATO declared a regular quarterly dividend of $0.17 per share, which was payable to shareholders on June 24, 2024. This cumulates to $0.68 on an annualized basis, representing an annualized yield of 11.7%.
Over the past three years, CATO’s revenue grew marginally. CATO’s total revenues for the fiscal first quarter that ended May 4, 2024, amounted to $177.10 million. Its gross margin came to $62.77 million. The company’s net income stood at $10.97 million and $0.54 per share, up 147.8% and 145.5% from the year-ago quarter.
The stock has declined 2.2% over the past month to close the last trading session at $5.89.
CATO’s POWR Ratings reflect its robust prospects. It has an overall B rating, equating to Buy in our proprietary rating system.
CATO has a B grade for Growth and Value. Within the Specialty Retailers industry, it is ranked #10. Click here for the additional POWR Ratings of CATO (Momentum, Stability, Sentiment, and Quality).
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CASY shares were trading at $378.66 per share on Friday afternoon, down $4.21 (-1.10%). Year-to-date, CASY has gained 38.22%, versus a 15.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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