Discount stores

Inflation is driving shoppers to discount stores: 4 actions to watch – December 15, 2021


Rising inflation on a line of products is pinching the pockets of consumers, who are now flocking to discount stores to face the same. Well, the strategy of selling products at discounted prices has helped industry players attract customers, who were looking for both value and convenience amid rising prices. The consumer price index rose 0.8% month-on-month in November, after rising 0.9% in October. This jump is mainly attributable to gasoline prices. Year over year, the metric increased 6.8%, the fastest pace since 1982.

Under the current circumstances, people from low to middle income groups have shown a preference for discount stores to get quality products at reasonable prices. Clearly, a differentiated product line resonates well with customer buying habits. Buyers are looking for better deals – whether for basic necessities or other consumer goods – in the current inflationary environment.

No wonder industry participants focused on deepening engagement with consumers, creating innovative and compelling products, and improving digital and data analytics capabilities to capitalize on the prevailing scenario. Companies have also come up with the best deals to entice bargain hunters to make the most of the holiday season. With global supply chains in disarray, retailers have ensured that they had enough inventory to meet anticipated consumer demand for the holiday season.

With consumers’ product preferences in mind, retailers have restocked shelves with merchandise in demand. Initiatives such as building omnichannel channels, creating loyalty and marketing programs, and offering faster delivery options, whether it’s door-to-door delivery, curbside pickup or purchase online and in-store pickup are worth mentioning.

That said, we have highlighted four Retail – Discount Stores stocks that appear well positioned to serve customers in this inflationary environment. The industry currently holds a Zacks Industry Rank # 68, which places it in the top 27% of over 250 Zacks industries.

Year-to-date price performance

Image source: Zacks Investment Research

4 important actions

Target company (TGT Free Report) has invested to improve omnichannel capabilities, develop new brands, renovate stores, and expand same-day delivery options to provide a seamless shopping experience for customers. Notably, this general merchandise retailer has made a number of changes to its business model to fit and stay relevant in the ever-changing retail landscape. Buyers can even join the retailer’s loyalty program, Target Circle, and maximize the savings on every purchase they make. The Target RedCard also offers a 5% discount.

Impressively, Target has a surprise earnings surprise for the past four quarters of 19.7%, on average. This company Zacks Rank # 2 (Buy) has an estimated long-term profit growth rate of 14.4%. Zacks’ consensus estimate for Target’s sales and EPS for the current year suggests growth of 13.9% and 40%, respectively, from the prior year period. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Costco Wholesale Company‘s (COST Free Report), growth strategies, better pricing management, decent membership trends, and increasing penetration of e-commerce business have contributed to its performance. Cumulatively, these factors have helped this member warehouse operator achieve an impressive number of comparable sales. Costco quickly embraced the omnichannel mantra to deliver a seamless shopping experience, whether online or in-store.

Costco has a surprise earnings for the last four quarters of 8.3%, on average. This Zacks Rank # 2 company has an estimated long-term profit growth rate of 8.8%. Zacks’ consensus estimate for Costco’s sales and EPS for the current fiscal year suggests growth of 10.7% and 13.2%, respectively, from the prior year period.

TJX Companies Inc.‘s (TJX Free Report) A flexible non-price business model, store expansion strategies, a strong supplier relationship, and the availability of branded merchandise provide huge opportunities to drive sales and traffic. This is clear from The TJX Companies ‘exceptional performance in the third quarter of fiscal 2022, where both top and bottom results not only exceeded Zacks’ consensus estimate, but also improved year over year. other.

Impressively, The TJX Companies has a surprise earnings surprise for the last four quarters of 16%, on average. This Zacks Rank # 3 (Hold) company has an estimated long-term profit growth rate of 10.5%. Zacks’ consensus estimate for current year sales and EPS from The TJX Companies suggests growth of 52.4% and 841.9%, respectively, from the prior year period.

Societe Generale Dollar‘s (DG Free Report), better prices, private label offerings, effective inventory management and merchandise initiatives all contributed to its performance. These, along with the focus on the consumable and non-consumable categories, are noteworthy. Dollar General offers “better-for-you” products at affordable prices. In addition, it expanded its cooling facilities to stimulate the sale of perishable items. Initiatives such as DG Pickup and DG GO! The mobile checkout aims to provide a convenient, contactless shopping experience. The company has partnered with DoorDash, the last mile logistics platform, to offer same-day delivery of essential household items.

Dollar General has a surprise profit over the last four quarters of 8.8%, on average. This Zacks Rank # 3 company has an estimated long-term profit growth rate of 12.3%. Zacks’ consensus estimate for Dollar General’s current year sales suggests growth of 1.5% over the prior year period.