Which stocks should you consider as a recession hit retail?

Retail companies have faced many adversities for decades, including high inflation and frequent supply chain disruptions. Amid fears of a recession, several retail companies have lowered their guidance for the current year. However, not all stocks are expected to be weakened by the recession. Kroger (KR) has raised its full-year guidance, indicating its ability to survive a recession. However, Target (TGT) and The Gap (GPS) are expected to suffer losses this year from poor consumer demand and inventory pileup. let’s discuss.

Shutterstock.com – Stocknews

The economy has been facing several macroeconomic hurdles in the past few months. Inflation hit a new multi-decade high last month, and the Federal Reserve is trying to moderate it through aggressive policy tightening. The Fed has raised benchmark interest rates three times this year, and further rate hikes are likely.

Many analysts believe that raising interest rates could push the economy into recession, which is expected to hurt the retail industry significantly. The retail industry is already facing adverse conditions like supply chain disruptions and rising prices, thereby impacting consumer demand.

Retail companies are seeing inventory pile up due to dwindling demand, shipping delays and other supply chain constraints. With fears of a recession, consumers are cutting discretionary spending, which should further impact the retail industry.

However, there are still investment opportunities in the retail sector. Kroger Company (KR) could be a nice addition to one’s portfolio as the company beat analysts’ EPS estimates last quarter and raised its full-year guidance. This indicates the ability of KR to survive bearish.

However, investors should avoid Target Corporation (TGT) and The Gap, Inc. ,GPS) because of their weak probabilities.

Kroger Company (KR,

KR is a food retail company that owns and operates supermarkets, multi-department stores and fulfillment centers. The company manufactures and processes certain foods for sale in its supermarkets.

The company also has store equipment, fixtures, leasehold improvement and processing, and food production equipment. It provides online personalized ordering, in-store pickup and home delivery services.

On June 20, 2022, KR announced that its customers would have greater access to electric vehicle charging stations at various KR locations. Yale Cosette, KR’s Senior VP and Chief Information Officer, said, “Increasing our customers’ access to EV charging stations at convenient Kroger locations supports our collective transition to a low-carbon economy. We are using technology to reduce our greenhouse gas emissions.” and leveraging innovation and providing customers with easier ways to live more sustainable lifestyles.”

KR sales increased 8% year-on-year to $44.60 billion for the first quarter ended April 30, 2022. of the company operating profit grew 86.9% year-over-year to $1.50 billion. Plus, its net income increased 374.2 percent year-over-year to $664 million.

For the whole year 2022, company directed“We now expect similar sales without fuel to be in the range of 2.5% to 3.5%, adjusted FIFO operating profit of $4.3 billion to $4.4 billion, and adjusted net income per diluted share in the range of $3.85 to $3.95. Will be.”

Analysts expect KR’s EPS to grow 4.3% and 5% year-over-year to $3.84 and $144.73 billion, respectively, for fiscal 2023. It exceeded Street EPS estimates in each of the last four quarters. Over the past year, the stock is up 22.2% to close the previous trading session at $48.40.

KR’s strong fundamentals are reflected in its power rating, It has an overall rating of A, which equates to a strong buy in our proprietary rating system. The POWR rating is calculated by considering 118 different factors, each factor weighted to an optimum degree.

It has a B grade for Growth, Value and Quality. It’s A-rated. Ranked #5 out of 38 stocks in Grocery/Big Box Retailer industry. click here View KR’s other ratings for Momentum, Stability and Sentiment.

Target Corporation (TGT,

TGT is a general merchandise retailer selling products through its stores and digital channels. The company sells an assortment of available goods and food. The company’s products include apparel and accessories, beauty and home essentials, food and beverage, hardline, home furnishing and decor.

On March 1, 2022, TGT announced its plans to invest up to $5 billion in 2022 to continue its operations. Investments will go into its physical stores, digital experience, fulfillment capabilities and supply chain capabilities that further differentiate its retail offering and drive continued growth.

Michael Fidelke, TGT’s Chief Financial Officer, said: “We see ample opportunity for deeper guest engagement and building on our core capabilities to drive long-term growth.”

For the fiscal first quarter ended April 30, 2022, TGT’s total revenue increased 4% year-over-year to $25.17 billion. The company’s net earnings declined 51.9% year-over-year to $1 billion. In addition, its adjusted EPS came in at $2.19, representing a decrease of 40.7% year-over-year.

For the quarter ended July 31, 2022, TGT’s EPS is expected to decline 76.6% year-on-year to $0.85. However, its revenue is expected to grow 4.3% year-over-year to $26.15 billion for the quarter ended July 31, 2022. It exceeded consensus EPS estimates in three of the last four quarters. Over the past nine months, the stock has lost 40% to close the previous trading session at $144.70.

TGT’s POWR rating is in line with this mixed view. The company has an overall rating of C, which translates to neutral in our proprietary rating system.

It has a C grade for momentum and stability. It is ranked #34 in the same industry. click here To view TGT’s other ratings for Growth, Value, Sentiment and Quality.

Gap, Inc. ,GPS,

GPS is an apparel retail company that offers apparel, accessories and personal care products for men, women and children under the Old Navy, Gap, Banana Republic and Athlete brands.

GPS net sales declined 12.8% year-over-year to $3.47 billion for the first quarter ended April 30, 2022. The company’s net loss stood at $162 million, compared to a net income of $166 million in the year-ago period. Also, its loss per share came in at $0.44, compared to EPS of $0.44.

Analysts expect GPS’ EPS for the quarter ended July 31, 2022, to decline 74.3% year-over-year to $0.18. Its revenue is expected to decline 5.2% year-over-year to $15.81 billion for fiscal year 2023. Over the past year, the stock has fallen 72.1% to close the previous trading session at $8.82.

The POWR rating of GPS reflects its poor prospects. The company has an overall D rating, which translates into a cell in our proprietary rating system.

It has an F grade for growth and sentiment and a D for stability. It is ranked #64 out of 68 stocks in fashion and luxury industry. click here To see other GPS ratings for price, speed and quality.

Shares of KR remained unchanged in premarket trading on Wednesday. Year-over-year, KR has gained 7.84%, versus -20.79%, in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Dipanjan Banchur Headshots 3

Since he was in grade school, Dipanjan was interested in the stock market. This led to him receiving a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a keen interest in reading and analyzing emerging trends in the financial markets.


Post Which stocks should you consider as a recession hit retail? first appeared StockNews.com