Many traditional brick-and-mortar retailers continue to close stores in record numbers due to reduced foot traffic, years of debt financing and fierce competition from e-commerce giant Amazon.com, Inc. (AMZN ). Sears’ Chapter 11 bankruptcy filing in October of last year – along with disappointing first quarter results from major shopping centers JC Penney Company, Inc. (JCP) and Nordstrom, Inc. (JWN) – reaffirm to what point it is important for the big players in retail to evolve and remain relevant to today’s consumer.
âIt’s an ongoing challenge for department storesâ¦ to define who they want to be in this new era,â AT Kearney partner Ryan Fisher told CNBC. âFor me, the pressure is on them in 2019 to push their experiences online and in-store. And many department store operators still have too much physical space that needs to be ‘streamlined’,â he added.
The three discount variety stores discussed below continue to thrive in the digital age through the successful adaptation of their business models to reflect and capitalize on the changing buying behaviors of the modern customer. Let’s take a look at how every business has reinvented itself to stay at the forefront of the retail world despite a tough environment.
Walmart Inc. (WMT)
Founded by Sam Walton in 1945, Walmart Inc. (WMT) sells a variety of general merchandise and grocery items through three lines of business: Walmart US, Walmart International and Sam’s Club. The big box retailer has evolved in several ways. First, it significantly strengthened its digital footprint in 2016 when it bought online retailer Jet.com for $ 3.3 billion. The acquisition helped facilitate the successful launch of the online brands of Walmart, Bonobos and ModCloth. Second, the company has focused on growth by focusing on less saturated markets, like India, while downsizing its stores in underperforming countries. Finally, to combat Amazon’s logistics advantage, Walmart invested in same-day delivery across the United States and turned some of its stores into distribution centers. As of June 17, 2019, the discount retailer’s shares had a market cap of $ 311.36 billion, issued a 2.09% dividend, and were trading up 18.23% year-to-date (YTD) .
Walmart shares trended steadily upward between January and May before accelerating in early June to hit a 52-week high of $ 109.59 in Friday’s trading session. The Relative Strength Index (RSI) shows an overbought reading above 70, increasing the likelihood of a consolidation before price attempts to continue its bullish momentum. Those looking to buy the stock should look for an entry point near $ 104, where an old horizontal resistance line now acts as a crucial support area.
Target company (TGT)
With a market value of $ 44.98 billion, Target Corporation (TGT) operates as a general merchandise retailer in the United States, offering everything from clothing to groceries. It sells its products in 1,844 stores and digital channels, such as Target.com. The Minneapolis, Minnesota-based retail giant has adapted to the new age retail business by expanding its delivery options, redesigning many of its stores, and opening in smaller locations such as university towns and urban areas to target cost-conscious consumers. The discount store has also introduced new trend lines and collaborates with well-known brands. For example, it recently partnered with Vineyard Vines to launch a limited edition summer collection of clothing, accessories and swimwear. The target stock currently trades at $ 87.79, offers an attractive dividend yield of 3.18% and is up nearly 35% on the year, outperforming the discount store industry average of 13% in the year. during the same period as of June 17, 2019.
Target’s stock broke the 200-day simple moving average (SMA) on May 22 after the company beat analysts’ earnings expectations. Since then, the price has risen sharply to a 52-week high on Thursday, June 13 at $ 89.15. Traders should consider buying withdrawals at $ 82.50, where price finds support from the April high, which roughly matches the 38.2% Fibonacci retracement level.
Dollar General Corporation (DG)
Dollar General Corporation (DG) is a discount retailer, supplying a wide variety of consumable products to 15,000 stores in 44 states. The $ 35.05 billion company has remained competitive in today’s retail environment by operating smaller stores in rural areas, lowering costs and reducing competition from retail giants retailers headquartered in town like Walmart. Additionally, the Goodlettsville, Tennessee-based company does not own its stores, giving it the ability to quickly close underperforming locations. Dollar General also has a strong line of private label brands that allow for higher margins due to the control of manufacturing costs and prices. Dollar General stock has an annual yield of 26.11% and pays a dividend of 0.94% as of June 17, 2019.
Dollar General stock closed above its late April high with above-average volume after the company beat first-quarter earnings expectations on May 30. Price continued its bullish momentum this month but appears overbought in the short term, with the RSI indicator reading high near 75. Traders who want a position in the stock should set a limit order near $ 127 – an area where price meets support since the April peak and the 50-day SMA.