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Consumers are fed up with inflation. Even though the numbers are steadily dropping (below 3% in both Canada and the U.S.), people continue to vote with their dollars. The beneficiaries: discount retailers across North America.
For example, as of Aug. 29, shares in Canadian-based Dollarama were up 45% year-to-date, one of the best performances on the Toronto Stock Exchange. In the U.S., TJX Companies, which operates Winners, HomeSense, and Marshalls amongst other brands, is ahead 25% this year. Ross Stores, which confines its outlets to the U.S. only, is ahead 9.4%.
The Big Box giants are also gaining ground as shoppers search for bargains wherever they can be found. Target stock has gained 10.8% so far this year while Walmart is up 45%. That’s a remarkable gain for a mature business, although it was helped by a 3-for-1 stock split in February.
Here’s a closer look at these discount retailers. I also track all of them in my Internet Wealth Builder newsletter.
Walmart Inc. (NYSE: WMT) is the world’s largest bricks-and-mortar retailer with 10,500 stores in 24 countries, plus an expanding e-commerce operation. It employs some 2.3 million people worldwide and had revenue in the 2024 fiscal year of $648 billion.
On Feb. 26, Walmart split its shares 3 for 1. So, for every 100 shares you previously owned, you now have 300. The stock took a drop in the early August selloff but has since recovered. The shares pay a quarterly dividend of $0.2075 ($0.83 a year) to yield 1% at the recent price. During the first two quarters, Walmart repurchased 33.4 million shares, for $2.1 billion.
Second-quarter revenue to July 31 was $169.3 billion, up 4.8% from the same period last year. eCommerce was up 21% globally. Net income attributed to common shareholders was $4.5 billion ($0.56 per diluted share), down from $7.9 billion ($0.97) last year. However, adjusted earnings were $0.67 per share, excluding the loss on investments. Earnings were above the Street’s expectations.
The company raised its sales and earnings guidance for the full fiscal year. Sales are expected to be up 3.75% to 4.75% over last year while adjusted earnings are expected to be between $2.35 and $2.43 per share.
Target Corp. (NYSE: TGT) is a Minneapolis-based operator of big box stores, with almost 2,000 outlets in all 50 states and the District of Columbia. The company opened its first store in 1962 and now employs 350,000 people. It attempted to establish a presence in Canada a few years ago but the initiative failed miserably, and the company pulled out after incurring heavy losses.
The shares fell to below $134 in the Aug. 5 market drop but have staged a strong recovery since.
The company reported a strong second quarter as sales improved by 2% while earnings made a big jump thanks to higher margins. Total revenue of $25.5 billion in the second quarter was 2.7% higher than last year. Net earnings were $1.2 billion ($2.57 per diluted share) compared with $835 million ($1.80 per share) the year before. The company increased its quarterly dividend by two cents to $1.12 per share ($4.48 per year), effective with the August payment. The yield is 2.9%. It also repurchased $155 million worth of its shares in the quarter, retiring 1.1 million shares of common stock at an average price of $145.94.
Target says its full-year guidance range of a 0 to 2% increase in its comparable sales remains appropriate, but it now expects the increase will more likely be in the lower half of that range. However, based on strong profit performance in the front half of the year, Target now expects full-year GAAP and Adjusted EPS of $9.00 to $9.70, up from the prior range of $8.60 to $9.60.
Dollarama Inc. (TSX: DOL), based in Montreal, has 1,569 stores in Canada. Its highly profitable business model includes directly sourcing its products at low cost, generally from Asia and China in particular. All stores are company-owned and operated and are in leased premises. It also owns 60% of the fast-growing 547-store Dollar City chain with locations in Colombia, El Salvador, Guatemala, and Peru.
This is one of the top performing stocks on the TSX this year. The stock is currently trading near its all-time high. The shares pay a quarterly dividend of $0.092 ($0.368 a year) to yield 0.3% at the current price. Dollarama is also buying back stock, repurchasing 1,281,166 common shares for cancellation for $145.5 million.
The company reported strong first quarter 2025 results (to April 28) as sales increased 8.6% to $1.4 billion. Diluted net earnings per share increased 22.2%, to $0.77, compared with $0.63 last year. The company opened 18 net new stores.
Ross Stores Inc. (NSD: ROST) is a leading off-price retailer that operates over 1,800 stores under the Ross Dress for Less and dd’s Discounts brands. It’s been a bumpy year, but the stock has gradually been moving up and recently touched a new all-time high before pulling back.
Strong second quarter net income was $527 million, up from $446 million in the same period last year. Earnings per share were $1.59 compared with $1.32 in 2023. Total sales for the 2024 second quarter increased 7%, to $5.3 billion, up from $4.9 billion for the same period in 2023, with comparable store sales up 4% versus last year. The stock pays a quarterly dividend of $0.3675 ($1.47 a year) to yield 1% at the current price.
For the six months ended Aug. 3, earnings per share were $3.05 on net income of $1 billion. These results compare to earnings per share of $2.41 on net earnings of $818 million in the first half of 2023. Sales for the first six months of 2024 grew to $10.1 billion, up from $9.4 billion in the prior year. Comparable store sales for the first half of 2024 were up 3%.
During the quarter, a total of 1.8 million shares of common stock were repurchased for an aggregate price of $262 million. The company remains on track to buy back a total of $1.05 billion in common stock during fiscal 2024 under its two-year $2.1 billion authorization approved by its board in March of this year.
For both the third and fourth quarters, Ross expects comparable sales growth of 2% to 3% on top of 5% and 7% gains, respectively, in 2023. If the second half of 2024 performs in line with these sales projections, earnings per share for the third quarter are projected to be $1.35 to $1.41 versus $1.33 last year and $1.60 to $1.67 for the fourth quarter, compared with $1.82 in 2023.
The TJX Companies Inc. (NYSE: TJX) is a leading off-price retailer. It operates 5,000 stores worldwide under various banners such as T.J. Maxx, Marshalls, HomeGoods, Sierra, Winners, HomeSense, and T.K. Maxx. There are Marshalls, Winners, and HomeSense stores in several Canadian cities. The shares touched an all-time high of $121.13 in August.
The company reported a strong performance for the second quarter of fiscal year 2025 (to Aug. 3). Net sales were $13.5 billion, an increase of 6% versus the second quarter of fiscal 2024. Consolidated comparable store sales increased 4%. Net income for the quarter was $1.1 billion ($0.96 per diluted share), up 13% on an EPS basis from last year. The company repurchased a total of $1.1 billion worth of TJX stock, retiring 10.4 million shares.The stock pays a quarterly dividend of $0.375 a share ($1.50 a year). The yield is 1.3% at the current price.
For the first half of the year, net sales were $25.9 billion, an increase of 6% compared with 2024. Consolidated comparable store sales increased 3%. Net income was $2.2 billion ($1.89 per share), up 17%.
The stock pays a quarterly dividend of $0.375 a share ($1.50 a year). The yield is 1.3% at the current price. The company repurchased a total of $1.1 billion worth of TJX stock, retiring 10.4 million shares.
These stocks are suitable for growth portfolios, and can be volatile. Consult with your financial advisor before investing to ensure they align with your risk tolerance and financial objectives.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
Notes and Disclaimer
Content © 2024 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
Image: iStock.com/Andrzej Rostek
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