Wrapping up Q1 earnings, we look at the numbers and key takeaways for the non-discretionary retail stocks, including Sprouts (NASDAQ: SFM) and its peers.

Food is non-discretionary because it's essential for life (maybe not those Oreos?), so consumers naturally need a place to buy it. Selling food is a notoriously tough business, however, as the costs of procuring and transporting oftentimes perishable products and operating stores fit to sell those products can be high. Competition is also fierce because the alternatives are numerous. While online competition threatens all of retail, grocery is one of the least penetrated because of the nature of the product. Still, we could be one startup or innovation away from a paradigm shift.

The 8 non-discretionary retail stocks we track reported a strong Q1. As a group, revenues were in line with analysts’ consensus estimates while next quarter’s revenue guidance was 37.4% above.

In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.

Best Q1: Sprouts (NASDAQ: SFM)

Playing on the secular trend of healthier living, Sprouts Farmers Market (NASDAQ: SFM) is a grocery store chain emphasizing natural and organic products.

Sprouts reported revenues of $2.24 billion, up 18.7% year on year. This print exceeded analysts’ expectations by 1.4%. Overall, it was an exceptional quarter for the company with EPS guidance for next quarter exceeding analysts’ expectations and an impressive beat of analysts’ EBITDA estimates.

“We are delighted with Sprouts’ strong start to 2025,” said Jack Sinclair, chief executive officer of Sprouts Farmers Market.

Sprouts scored the fastest revenue growth of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 5.2% since reporting and currently trades at $161.75.

We think Sprouts is a good business, but is it a buy today? Read our full report here, it’s free.

Dollar Tree (NASDAQ: DLTR)

A treasure hunt because there’s no guarantee of consistent product selection, Dollar Tree (NASDAQ: DLTR) is a discount retailer that sells general merchandise and select packaged food at extremely low prices.

Dollar Tree reported revenues of $4.64 billion, up 11.3% year on year, outperforming analysts’ expectations by 2.4%. The business had a very strong quarter with revenue guidance for next quarter exceeding analysts’ expectations and full-year EPS guidance beating analysts’ expectations.

Dollar Tree achieved the biggest analyst estimates beat among its peers. The market seems happy with the results as the stock is up 18.5% since reporting. It currently trades at $114.50.

Is now the time to buy Dollar Tree? Access our full analysis of the earnings results here, it’s free.

Weakest Q1: Target (NYSE: TGT)

With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE: TGT) serves the suburban consumer who is looking for a wide range of products under one roof.

Target reported revenues of $23.85 billion, down 2.8% year on year, falling short of analysts’ expectations by 2%. It was a disappointing quarter as it posted full-year EPS guidance missing analysts’ expectations significantly and a significant miss of analysts’ EBITDA estimates.

Target delivered the weakest performance against analyst estimates and slowest revenue growth in the group. Interestingly, the stock is up 8% since the results and currently trades at $106.05.

Read our full analysis of Target’s results here.

Grocery Outlet (NASDAQ: GO)

Due to its differentiated procurement and buying approach, Grocery Outlet (NASDAQ: GO) is a discount grocery store chain that offers substantial discounts on name-brand products.

Grocery Outlet reported revenues of $1.13 billion, up 8.5% year on year. This result was in line with analysts’ expectations. It was a strong quarter as it also produced an impressive beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.

Grocery Outlet pulled off the highest full-year guidance raise among its peers. The stock is down 15.6% since reporting and currently trades at $13.76.

Read our full, actionable report on Grocery Outlet here, it’s free.

Dollar General (NYSE: DG)

Appealing to the budget-conscious consumer, Dollar General (NYSE: DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.

Dollar General reported revenues of $10.44 billion, up 5.3% year on year. This number surpassed analysts’ expectations by 1.7%. Overall, it was a very strong quarter as it also logged a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ EPS estimates.

The stock is up 10.7% since reporting and currently trades at $107.51.

Read our full, actionable report on Dollar General here, it’s free.

Market Update

In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.

Want to invest in winners with rock-solid fundamentals? Check out our Strong Momentum Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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