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3 Discount Store Stocks to Buy as Retail Sector Sees Boost

Christopher Vargas

Retailers that have adapted well to the changing consumer landscape have done exceptional this year. Stores like Target TGT and Walmart WMT have employed initiatives to expand their e-commerce presence, like speeding up delivery times to compete with Amazon AMZN. Their efforts to refine their companies to contemporary consumer preferences have helped their shares rise 54.7% and 20.2% YTD, respectively.

Chuck Grom, senior analyst at Gordon Haskett Retail Advisors, pointed out that the commonality amongst retailers that have performed well is that they offer some type of value, whether that be in terms of price or convenience. Let’s take a look into what discount stocks look poised to continue their momentum in the closing half of 2019.

Ross StoresROST is set to report their second quarter earnings after the closing bell on Thursday. Our consensus estimates call for the company’s bottom line to climb 7.69% to $1.12 per share and for revenue to total $3.97 billion for a 6.23% hike.

The company is coming off a mixed Q1. Earnings of $1.13 per share beat expectations and revenue of $3.8 billion came in line with analyst expectations, but the company provided soft profit guidance for the upcoming second quarter, sending shares downwards at the time. ROST has beaten our consensus earnings estimates the past four quarters for an average EPS surprise of 2.79%.

Ross Stores is up 27% YTD and is a Zacks Rank #2 (Buy). Their discounted name and designer brand apparel have helped them capitalize on value seeking consumers. Furthermore, estimates have been revised upwards for ROST’s Q2 in the past 60 days with 100% consensus.

Dollar GeneralDG is set to report their second quarter earnings report next Thursday, August 29th before the opening bell. Consensus estimates forecast DG to see earnings pop 3.95% to $1.58 per share on the back of a 6.93% revenue rally to $6.89 billion.

DG had a strong Q1 where their top and bottom-line easily beat the Zacks Consensus Estimate. First quarter EPS of $1.48 was an increase of 8.8% from the year-ago period, and net sales of $6.62 billion rose 8.3%. Looking ahead to the full fiscal year, estimates anticipate EPS to come in at $6.48 per share for a 8.54% climb and for revenue to go up 7.41% to $27.52 billion.

Dollar General has gained 28.3% year-to-date and sports a Zacks Rank #3 (Hold). DG discounted snacks and perishables, appeals to the bargain hunting consumer landscape. The company’s consumables segment accounted for 77.5% of its fiscal 2018 sales.

CostcoCOST has surged 35.3% this year and looks poised to continue its growth in the second half of 2019. Costco reported their Q3 numbers in late May where they surpassed earnings estimates by 3.28% but came in just shy of the sales mark by 0.36%. Their Q3 EPS of $1.89 was an increase of 11.2%, and total sales of $34.7 billion surpassed the proir year’s quarter by 7.4%.

Estimates for Costco’s Q4 look solid, with earnings projected to grow 7.2% on the back of a 6.24% sales increase to $47.18 billion. Costco continues to be one of the dominant retail wholesalers based on the range and quality of merchandise offered. Its bulk products offer consumers deals on everyday essentials by buying them in vast quantities. Costco is listed at a Zacks Rank #3 (Hold) and has outpaced the previous two stocks YTD.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Dollar General Corporation (DG) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
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