Despite economic uncertainty, the grocery retail industry is likely to remain resilient due to inelastic demand for necessary commodities and the ability to adapt to changing consumer preferences.
Given the industry’s growth prospects, J Sainsbury plc (JSAIY), Weis Markets, Inc. (WMK) and Carrefour SA (CRRFY) might be ideal additions to your watchlists.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the grocery industry.
Retail sales in the US rose 0.6% month-over-month in December 2023, following an upwardly revised 0.3% increase in November. This increase in retail sales suggests consumer spending remained strong over the holiday season.
The global online grocery market is expected to reach $2.83 trillion by 2032, growing at a CAGR of 22.7%. The global online grocery market is driven by convenience, providing a handy alternative to traditional retailers.
The supermarket industry is projected to reach $1.16 trillion by 2029, with a CAGR of 3.3%. This growth can be ascribed to a variety of factors, including rising population, rising disposable income, and shifting customer tastes toward convenience and online shopping. Also, technological improvements and the use of e-commerce platforms are accelerating the expansion of the supermarkets.
So, let’s take a look at the fundamentals of the three Grocery/Big Box Retailers stocks, starting with number 3.
Stock #3: J Sainsbury plc (JSAIY)
Headquartered in London, the United Kingdom, JSAIY together with its subsidiaries, engages in the food, general merchandise and clothing retailing, and financial services activities in the United Kingdom and the Republic of Ireland.
JSAIY’s trailing-12-month asset turnover ratio of 1.20x is 40.7% higher than the industry average of 0.86x. However, its 8.04% trailing-12-month gross profit margin is 75.9% lower than the 33.39% industry average.
For the six-month September 16, 2023, JSAIY reported revenue of £16.98 billion ($21.57 billion), increased 3.5% year-over-year. Also, its gross profit increased 4.3% year-over-year to £16.98 billion ($1.21 billion) for the same period.
However, JAIY’s profit came in at £155 million ($196.90 million), declined 45.6% year-over-year. Also, its EPS came in at $6.5, down 46.3% for the same period.
Analysts expect JSAIY’s revenue to increase 5.1% year-over-year to $41.33 billion for the quarter ending March 2024. Its EPS is expected to come in at $1.06 for the same period. Shares of JSAIY have increased 20.4% over the past year to close the last trading session at $14.35.
JSAIY’s POWR Ratings reflect this uncertain outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JSAIY has a C grade for Growth, Value, Momentum and Quality. It is ranked #28 out of 38 stocks in the Grocery/Big Box Retailers industry. Click here for the additional POWR Ratings for Stability and Sentiment for JSAIY.
Stock #2: Weis Markets, Inc. (WMK)
WMK is a food retailer that engages in the retail sale of food through a chain of supermarkets. The company operates primarily under the Weis Markets name and Weis, Weis 2 Go, Weis Great Meals Start Here, Weis Gas-n-Go, and Weis Nutri-Facts brands. Its retail food stores sell groceries, dairy products, frozen foods, meats, seafood, fresh produce, floral, pharmacy services, deli products, prepared foods, bakery products, etc.
WMK’s trailing-12-month asset turnover ratio of 2.47x is 188.8% higher than the 0.86x industry average. However, its trailing-12-month CAPEX / Sales of 2.39% is 26% lower than the 3.23% industry average.
For the third quarter ended September 30, 2023, WMK’s net sales increased 0.8% year-over-year to $1.16 billion. Its comparable store sales rose 0.8% year-over-year.
However, the company’s net income came in at $23.23 million, decreased 19% year-over-year. In addition, its EPS stood at $0.86, declined 19.6% year-over-year.
WMK has gained marginally intraday to close the last trading session at $60.12.
WMK’s has an overall rating of B, which translates to a Buy in our POWR Ratings system
It is ranked #27 in the same industry. It has a C grade for Growth, Value and Momentum. To see additional WMK’s ratings for Sentiment, Stability and Quality, click here.
Stock #1: Carrefour SA (CRRFY)
Based in Massy, France, CRRFY owns stores in various formats and channels internationally. It operates hypermarkets, supermarkets, convenience stores, and cash and carry stores; e-commerce sites; and service stations. The company is also engaged in banking, insurance, and franchise activities; the provision of travel agency services; and more.
CRRFY’s trailing-12-month ROCE of 11.68% is 3.6% higher than the industry average of 11.27%. Its 18.47% trailing-12-month gross profit margin is 44.7% lower than the 33.39% industry average.
For the third quarter that ended September 30, 2023, CRRFY reported gross sales of €23.63 billion ($25.85 billion), representing like-for-like (LFL) growth of 9%. Sales from France region came in at €10.77 billion ($11.78 billion), up 4.3% LFL, while sales from Latin America region were €6.31 billion ($6.90 billion), an increase of 20.2% LFL.
For the first half that ended June 30, 2023, CRRFY’s net sales increased 7.8% year-over-year to €40.74 billion ($44.57 billion). The company’s net income, Group share, adjusted for exceptional items, was €326 million ($356.65 million), or €0.45 per share, representing increases of 5.2% and 9.8% year-over-year, respectively.
However, its total liabilities came in at €54.15 billion ($58.96 billion) for the period that ended June 30, 2023, compared to €52.76 billion ($57.44 billion) for the period that ended June 30, 2022. Also, its total current liabilities came in at €24.42 billion ($26.59 billion), compared to €24.41 billion ($25.58 billion) for the same period.
Street expects CRRFY’s revenue to increase 4.2% year-over-year to $97.60 billion for the year ending December 2024. Its EPS is expected to grow 31.7% year-over-year to $0.53 for the same period. CRRFY’s shares have gained 5.2% over past three months to close the last trading session at $3.45.
CRRFY’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.
CRRFY has a C grade for Growth, Sentiment and Quality. It is ranked #24 in the same industry. Beyond what is stated above, we’ve also rated CRRFY for Value Stability and Momentum. Get all CRRFY ratings here.
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CRRFY shares were trading at $3.50 per share on Monday morning, up $0.05 (+1.45%). Year-to-date, CRRFY has declined -6.17%, versus a 1.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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