The retail market continues to struggle, and although inflation might be coming down, there is still trouble in the immediate future. Interest rates are higher, and don’t look like they’ll be coming down until potentially June.
Yet when it comes to investing, this could be a good time to take advantage of retail stocks while they’re down. So today, we’re going to look at three retail stocks that I would consider buying hand over fist. Then, I’ll hold onto them for the next several years.
Loblaw
Loblaw Companies (TSX: L) recently saw a boost in share price after the company provided strong earnings for its fourth quarter. Revenue hit $13.3 billion, a 4.8% increase compared to the same time last year. Net income, however, fell by 14%, even though adjusted earnings per share rose 8% to $1.12 per share.
Loblaw stock continues to be a market leader as Canada’s largest grocer. And that not only looks unlikely to change, but expand. The company has many other companies and retail locations under its banner. What’s more, it has managed to come out on top thanks to offering more deals for consumers, and lower prices than competitors on an average basis.
With the potential for more locations to open across the country, and being a provider of all types of essential goods, Loblaw stock looks like a strong option. Especially as the market and economy recovers, and with a 1.29% dividend to consider.
Canadian Tire
Another company offering value, though perhaps with a more shaky immediate future, is Canadian Tire (TSX: CTC.A). The company reported earnings that sent shares dropping. Management found the last year quite difficult, as earnings across the board dropped more than expected.
Sales were down 6.8% in the fourth quarter, with retail income before income taxes down to $161.7 million. For the year, sales dropped 2.9%, with softer consumer demand. Revenue dropped 16.8% for the fourth quarter, with the full-year seeing a drop of 6.5% to $16.7 billion. Overall, it was a rough year. But could that be in the rear view?
The company still plans to repurchase up to 5.1 million shares, already picking up 1.6 million in the last year. And while it didn’t increase the dividend, it remains stable at $7 per share. The company overall looks to be facing a tough time that should eventually come to an end. Especially as it offers everything under one roof, and well-known brands throughout Canada.
Dollarama
Finally, Dollarama (TSX: DOL) is a retail stock you just can’t live without. The company does well during downturns, as Canadians seek cheaper options of well-known brands. Those brands have also expanded over the last few years, offering brand recognition for its clients.
But as management stated in the past, even during a strong economy there are benefits. Canadians have more cash to spend, and thus also go there for non-essential items. Furthermore, the value retailer has been able to grow through expanding more locations and acquiring businesses in other markets.
Dollarama offers a unique position in Canada, with strong growth potential. This was seen recently during earnings, with an 11.1% increase in sales, 24% growth in earnings before interest, taxes, depreciation and amortization (EBITDA), net earnings up 31.4%, and increasing fiscal guidance. It now expects continued 11% to 12% growth in store sales for 2024 as well. So if there’s only one retail stock I’d pick up, it’s certainly Dollarama stock.
