The upcoming holiday season has already started making buzz in the market, as indicated by surging grocery and retail sales. The retail market has also been booming with the Fed rate cuts, which have boosted consumer morale and solid economic growth in recent periods.

Against this backdrop, investors could consider investing in quality retail stocks Casey’s General Stores, Inc. (CASY), The Kroger Co. (KR), and Walmart Inc. (WMT) for the holiday shopping surge.

Easing inflation and increasing consumer demand are boosting the retail market. According to the Retail Monitor, core retail sales (excluding restaurants in addition to automobile dealers and gasoline stations) were up 0.94% year-over-year in September 2024. Also, during August 2024, sales increased 0.17% month-over-month and 1.93% year-over-year.

Recently implemented interest rate cuts from the Federal Reserve could further boost consumer confidence in the coming months, supported by economic growth and an improving employment market. As per SpendingPulse insights, in-store and online retail sales spending is expected to be up 3.2% year-over-year this holiday season, from November 1 to December 24, 2024.

Besides, the retail industry is expected to grow to $47.24 trillion by 2029, exhibiting growth at a CAGR of 7.7% driven by e-commerce prevalence, multichannel retailing and online buying, and evolving consumer trends.

Also, with changing consumer preferences and the adoption of cutting-edge technologies like online platforms, AI-driven personalized shopping experiences, and smart supply chain management, the food and grocery retail industry is projected to reach a valuation of $16 billion by 2031, exhibiting a 4% CAGR.

Given these favorable market trends, let’s look at the fundamentals of the top Grocery/Big Box Retailers‘ stocks, starting with the third choice.

Stock #3: Casey’s General Stores, Inc. (CASY)

CASY operates convenience stores under the names Casey’s and Casey’s General Store. The company’s stores offer pizza, donuts, breakfast items, and sandwiches, and tobacco and nicotine products. The company’s stores provide food items, appetizers, health and beauty aids, automotive products, electronic accessories, housewares, and pet supplies.

On July 26, CASY announced an agreement to acquire Fikes Wholesale, Inc., owner of CEFCO Convenience Stores, in an all-cash transaction for $1.14 billion. CASY’s acquisition of Fikes includes 198 retail stores and a dealer network, and the transaction will increase CASY’s presence to nearly 2,900 stores.

The strategic acquisition will expand CASY’s presence into Texas and southern markets, deliver accretive growth, and create value for shareholders, team members, and guests.

For the first quarter that ended July 31, 2024, CASY’s total revenue increased 5.9% year-over-year to $4.10 billion. Its income before income taxes grew 7.1% from the year-ago value to $237.31 million. The company’s net income came in at $180.20 million and $4.83 per common share, up 6.5% and 6.8% from the prior year’s quarter, respectively.

Furthermore, the company’s EBITDA rose 9.1% from the prior-year quarter to $345.78 million.

Street expects CASY’s revenue and EPS for the second quarter (ending October 2024) to increase marginally and 0.9% year-over-year to $4.08 billion and $4.28, respectively. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.

CASY’s stock has increased 24.6% over the past six months and 41.9% over the past year to close the last trading session at $385.90.

CASY’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Sentiment and Quality. Within the A-rated Grocery/Big Box Retailers industry, CASY is ranked #18 out of 37 stocks.

Click here to access additional CASY ratings for Value, Momentum, Growth, and Stability.

Stock #2: The Kroger Co. (KR)

KR operates as a food and drug retailer. It operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses. It offers grocery, health, and beauty care items, general merchandise, pet centers, fresh seafood, and organic produce.

On October 8, KR announced that Boost by Kroger Plus will include Disney streaming options as part of its annual memberships. Its members can select Disney+ Basic (With Ads), Hulu (With Ads), or an ESPN+ subscription as part of an inclusion benefit.

On October 4, KR closed the transaction to sell its specialty pharmacy business to Elevance Health. KR entered into a definitive agreement with Elevance Health for the sale on March 18, 2024. The specialty pharmacy, earlier owned by KR, serves patients with chronic illnesses that require complex care.

On July 31, KR expanded its Our Brands portfolio with the addition of Field & Vine™, a fresh produce line grown by U.S. farmers in California, Florida, Georgia, Michigan, New Jersey, North Carolina, Oregon, and Washington. The brand presently provides blueberries, blackberries, raspberries and strawberries.

The new brand offers an enhanced fresh experience and high-quality berries during peak U.S. growing seasons.

For the second quarter that ended on August 17, 2024, KR’s sales increased marginally year-over-year to $33.91 billion, and its operating profit was $815 million. Net earnings attributable to KR amounted to $466 million and $0.64 per common share for the quarter, respectively.

Furthermore, the company’s total assets stood at $51.44 billion as of August 17, 2024, compared to $50.20 billion as of August 12, 2023.

In the updated guidance for the full year 2024, KR reaffirmed adjusted FIFO operating profit of $4.60 billion – $4.80 billion and adjusted net earnings per share of $4.30 – $4.50. Also, the company continues to expect adjusted free cash flow between $2.50 and $2.70 billion.

Street expects KR’s revenue and EPS for the third quarter (ending October 2024) to increase 0.8% and 2.8% year-over-year to $34.22 billion and $0.98, respectively. Also, the company has topped the consensus EPS estimates in each of the trailing four quarters.

Shares of KR have surged 8.5% over the past month and 25.3% over the past year to close the last trading session at $55.36.

KR’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

KR has a B grade for Quality, Sentiment, and Value. It is ranked #17 out of 37 stocks in the A-rated Grocery/Big Box Retailers industry.

In addition to the POWR Ratings we’ve stated above, we also have KR ratings for Momentum, Growth, and Stability. Get all KR ratings here.

Stock #1: Walmart Inc. (WMT)

WMT is engaged in the global operation of retail, wholesale, other units, and eCommerce. The company operates in three segments: Walmart U.S.; Walmart International; and Sam’s Club. The company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under the Walmart and Walmart Neighborhood Market brands.

On October 8, WMT expanded its core pet care offerings to widen access to affordable in-person and virtual veterinary care, pet prescription delivery, grooming services, pet food, and supplies. The new centers opened in Georgia and Arizona reinforce WMT’s commitment to offering seamless, convenient, and affordable pet care solutions to customers.

On August 27, WMT announced the expansion of its marketplace with new categories, multichannel fulfillment solutions, and innovations to simplify selling. These initiatives included the expansion of premium beauty, pre-owned and collectibles categories, multichannel solutions to fulfill orders from any e-commerce site and enable easier product imports, and the launch of Walmart LocalFinds.

During the second quarter that ended July 31, 2024, WMT’s total revenues increased 4.8% year-over-year to $169.34 billion. Its adjusted operating income rose 7.4% from the prior year’s quarter to $7.96 billion. Consolidated net income attributable to Walmart stood at $4.50 billion and $0.56 per common share for the quarter, respectively.

As per the company’s updated fiscal year 2025 guidance, WMT expects consolidated net sales growth of 3.75% to 4.75%. Its consolidated adj. operating income is expected to increase 6.5% – 8%. The company’s adjusted EPS is set in the range of $2.35 to $2.43.

Street expects WMT’s EPS for the third quarter (ending October 2024) to increase 3.4% year-over-year to $0.53. For the same quarter, the company’s revenue is expected to grow 4.3% year-over-year to $166.22 billion. Further, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

WMT’s shares have gained 33.3% over the past six months and 51.9% over the past year to close the last trading session at $80.10.

WMT’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

WMT has an A grade for Stability. It also has a B grade for Momentum, Sentiment, and Growth. It is ranked #8 out of 37 stocks in the same industry.

In addition to the POWR Ratings we’ve stated above, we also have other ratings of WMT for Value and Quality. Get all WMT ratings here.

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WMT shares were unchanged in after-hours trading Monday. Year-to-date, WMT has gained 54.27%, versus a 24.09% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More…

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