Retail Sector Ideas

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>>> Berkshire likes Ulta Beauty

https://finance.yahoo.com/news/warren-buffett-buys-beautifully-cheap-123300605.html

One of the more interesting of Buffett’s second-quarter moves was the purchase of 690,000 shares of Ulta Beauty (ULTA) , worth $266 million at the quarter’s end.

Ulta is the country’s largest specialized beauty retailer.

The stock traded at $366 on June 15, up 11% from a day earlier on the Buffett news. It’s still down 25% year to date amid strong competition.

TheStreet Pro columnist Paul Price is another Ulta bull.

The veteran investor, who worked at Merrill Lynch and Wells Fargo, recommended the stock in a column the day before news of Berkshire’s purchase.

Ulta’s 234% shareholder return over the past 10 years represents a 57% discount to its cumulative earnings-per-share growth, he said.

So Ulta’s forward price-earnings ratio stands at 12.4 versus a 10-year average of 25.2.

“That means you can now own this top-quality, proven grower at much less than the market multiple of far inferior companies,” Price said.

Two analysts bullish on Ulta Beauty

Oppenheimer analyst Rupesh Parikh also is an Ulta enthusiast. He was impressed with Buffett’s move and the market’s reaction to it.

“The firm views this development as a vote of confidence for the company’s longer-term prospects and a further validation of Ulta’s significantly discounted valuation,” he wrote in a commentary cited by The Fly.

Parikh rates Ulta as outperform, with a price target of $450.

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Winmark - >>> While Amazon is one of the best-known companies in the world, Winmark (NASDAQ: WINA) flies under the radar. Winmark is a franchisor of stores that resell used items. Its brands include Play it Again Sports, Plato's Closet, Once Upon a Child, and others. Winmark has been a winning stock for a long time, but it's still relatively small, with a market capitalization of $1.4 billion.

https://finance.yahoo.com/news/2-magnificent-stocks-im-never-134500518.html

What's attractive about owning Winmark's stock is its business model. As a franchisor, most of the costs associated with owning a retail business fall on the franchisees. This provides Winmark with attractive margins.

For example, in second-quarter 2024, Winmark's gross margin was 95.8%. Looking further down the income statement, this led to a net profit margin of 51.8%. These margins have also ticked up slowly and steadily over time.

While it's clear that the economics of being a franchisor work out well for Winmark and its shareholders, there's evidence that its franchisees are happy as well. In Q2 2024, Winmark had a 100% renewal rate in four out of five of its brands.

Winmark adds new stores throughout the year, but the pace is deliberate. So far in 2024, the company has grown its total store count by 1.2%. The fact that its franchisees renew in such high numbers is a good sign for the future of the business, as it helps supplement the slow but steady store growth.

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>>> Walmart Inc. (NYSE:WMT), the world’s largest retailer, is renowned for its extensive footprint and ability to generate steady cash flows, making it a prime candidate for dividend investors.

https://finance.yahoo.com/news/3-must-dividend-stocks-according-180056727.html

“Dividends continue to be a part of our diversified capital returns approach. We're proud to be increasing our annual dividend for the 51st consecutive year. This year’s nine percent increase is the largest in over a decade, and a sign of our confidence in our growth potential and cash flow,” said Walmart’s CFO and executive vice president, John David Rainey, in a news release.

The company joined the elite ranks of Dividend Kings in 2024, having increased its dividends for the 51st consecutive year in February 2024. Walmart currently pays an annual dividend of $0.83 per share, resulting in a yield of 1.23% on its current stock price. Earlier in February, the company made headlines with a 9% hike in its annual payout – the largest increase over a decade.

Tigress Financial has a "Buy" rating on Walmart with a price target of $86, indicating a potential upside of over 26%. KeyBanc also has a "Buy" rating on the company with a price target of $82, indicating a potential upside of nearly 21%.

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>>> Casey's General Stores to Buy Fikes Wholesale for About $1.15B


MarketWatch

July 26, 2024

By Denny Jacob


https://www.marketwatch.com/story/casey-s-general-stores-to-buy-fikes-wholesale-for-about-1-15b-update-852c69af


Casey's General Stores agreed to acquire Cefco Convenience Stores owner Fikes Wholesale in an all-cash deal worth about $1.15 billion.

The convenience-store chain's acquisition would include 198 retail stores and a dealer network throughout Texas, Alabama, Florida and Mississippi, which will increase Casey's footprint to nearly 2,900 stores. The transaction also includes a fuel terminal and a commissary to support stores in Texas.

Casey's Chief Executive Darren Rebelez said the acquisition expands its presence in the Lone Star State by bringing 148 additional stores to the area.

Expanding into Texas, Alabama, Florida and Mississippi extends its reach further from neighboring states such as Oklahoma and Tennessee. Casey's footprint is primarily concentrated in the Midwest, according to an investor-day presentation.

Casey's acquisition fits into a strategy laid out at its investor day in June 2023. The company guided for more than 350 additional stores to be built or acquired by fiscal 2026, putting it more than three-quarters of the way to its minimum goal.

The Fikes acquisition speaks to consolidation in the convenience-store industry that is facing declining tobacco sales, rising cost pressure and labor shortages.

Casey's said it expects to achieve about $45 million in annual run-rate synergies after kitchen installations in the acquired stores are completed.

The deal, financed through balance-sheet cash and bank financing, is expected to close in the fourth quarter.

Fikes and Cefco began as a single "filling station" in Cameron, Texas, in 1952 and grew to operate stores in multiple states.

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>>> Costco Hikes Annual Membership Fee for First Time Since 2017


Bloomberg

by Jaewon Kang and Brendan Case

Jul 10, 2024


https://finance.yahoo.com/news/costco-raises-annual-membership-fee-202829281.html?.tsrc=fin-notif


(Bloomberg) -- Costco Wholesale Corp. is boosting its membership fees for the first time since 2017, raising the charge for a basic membership to $65 a year from $60.

The 8% price increase for US and Canadian members will take effect Sept. 1, Costco said in a statement Wednesday. The price of the retailer’s premium membership will rise to $130 from $120. The move will affect about 52 million memberships.

Costco shares rose 2.4% at 5:40 p.m. in extended trading in New York. The stock has gained 34% this year through Wednesday’s close, outpacing the advance of the S&P 500 Index.

Investors and analysts have long waited for the Issaquah, Washington-based company to raise its membership price. Costco has typically increased fees every five years or so, prompting analysts in recent quarters to ask about the company’s thinking on the timing.

Executives had said an increase was only a matter of time, and that the company has experienced strong renewal rates, new sign-ups and customer loyalty. On earnings calls, they have acknowledged that an increase has taken longer than usual to materialize.

Jennifer Bartashus, a Bloomberg Intelligence analyst, wrote in a Wednesday note that the fee increase was expected and overdue from Costco’s usual five-year cadence.

“The company delayed an increase amid consumer concerns about inflation and the economic outlook, which have eased some,” she wrote, adding that she expects renewal rates to stay steady after the increase.

US consumers have faced surging prices across the economy in recent years, though increases have started to moderate. Retailers are anticipating inflation will return to more normalized levels of low single digits this year, and have reported drops in some areas, including general merchandise.

Costco’s customer base tends to be more affluent given the company’s membership model, and it has been relatively insulated from the broader pullback in sales growth and discretionary spending across the sector. The company said Wednesday that US comparable sales, excluding gasoline, grew 6.3% in June from a year ago.

Membership income is especially important for Costco, which has used the proceeds to invest in its operations and keep the price of goods down. The higher fees will provide a profit tailwind for Costco, which tries to entice shoppers with low prices on bulk amounts for a relatively narrow assortment of goods. Premium memberships have driven growth, and make up just over half of Costco’s total paid members.

Costco appointed a new chief financial officer earlier this year, hiring Gary Millerchip from Kroger Co. Ron Vachris has served as chief executive officer since January. The company has been adding more stores in the US and overseas, while investing in e-commerce.

The company is following Sam’s Club, owned by Walmart Inc., in raising the price of its membership as US consumers flock to warehouse stores that offer wholesale quantities of goods. Sam’s Club boosted its annual fee to $50 for basic and $110 for premium in 2022, although it used its rewards program to return the extra cost to members during the first year.

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Costco - >>> Why Are Gold Bar Sales Surging at Costco?


The New York Times

by Rebecca Carballo

April 11, 2024


https://www.yahoo.com/news/why-gold-bar-sales-surging-175059774.html


Alongside its $1.50 hot dog and soda combo, gallon tubs of mayonnaise and value packs of socks, Costco, the warehouse retailer, has been selling gold bars since October.

Now, Costco is selling up to $200 million worth of gold and silver each month, according to an analysis from Wells Fargo.

Online forums and Reddit threads have cropped up where customers give one another advice on how to purchase the bars before they sell out.

“I’ve gotten a couple of calls that people have seen online that we’ve been selling one-ounce gold bars, yes, but when we load them on the site, they’re typically gone within a few hours,” Richard Galanti, Costco’s executive vice president and chief financial officer, said in an earnings call in September.

Costco started selling gold bars in October.

Costco is now selling one-ounce, 24-karat gold bars, according to its online store. The bars can be purchased only by members, and the price varies based on market rates. As of Thursday, the bars were sold out for members online, but The Wall Street Journal reported that shoppers purchased them for around $2,000 in December.

Costco has also been selling silver coins, advertised as 99.9% pure silver, since January, according to an analyst report from Wells Fargo.

People buy gold in times of turmoil.

The precious metal has set a series of records as it surged to $2,350 per troy ounce, up roughly $300 since the start of March.

Buying gold becomes more common in times of economic turmoil. Although the U.S. economic outlook has improved and inflation has slowed, it remains higher than the targets from the Federal Reserve, said Sadiq S. Adatia, the chief investment officer for BMO Global Asset Management. And on Wednesday, a key inflation rate was revealed to be stronger than expected.

Investors have said they were puzzled about the rally.

Geopolitical concerns could also be a factor in an increasing interest in gold, Adatia said. There has been more interest in gold since Ukraine’s currency collapsed after Russia’s invasion, he said.

For those looking to purchase gold for the first time, Costco provides familiarity and ease, Adatia said.

“They make it convenient,” he said. “People can physically go in and pick it up and that’s it, versus opening up an account and buying gold shares.”

How much is Costco profiting from this?

Probably not too much.

Given its pricing and shipping costs, it’s likely a “very low profit business at best,” analysts with Wells Fargo wrote in a note to clients on Tuesday.

Costco sold more than $100 million of gold during its first quarter, or the three-month period ending on Sept. 30 last year, Galanti said on a December earnings call. However, those sales have likely grown since then and may now be running at $100 million to $200 million per month, which could increase its sales figures by 1%.

“The reason that we looked at this is that it’s becoming a larger contributor to sales for them,” said Edward Kelly, managing director of equity research at Wells Fargo. “It’s not that $100 or $200 million a month is a lot for Costco, but it’s new business and they didn’t have that business last year.”

In the three-month period ending on Dec. 31, Costco’s e-commerce sales grew 18% compared with the same period a year earlier, driven in part by demand for the precious metals, Galanti told investors on an earnings call in March.

Investing in metals can be volatile.

The Commodity Futures Trading Commission has urged caution when buying gold because precious metals can be highly volatile.

“Like other commodities, precious metal prices rise as demand goes up, so when economic anxiety or instability is high, the people who typically profit from precious metals are the sellers,” the agency said in a statement.

The commission likely puts that warning out to signal that it is not a guaranteed investment, said Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report. He recommends the average person invest 3% to 5% of their assets in gold.

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>>> Home Depot bulks up Pro-business with $18.25 billion deal for building products supplier SRS


Reuters

by Deborah Mary Sophia, Savyata Mishra and Abigail Summerville

Mar 28, 2024


https://finance.yahoo.com/news/home-depot-buy-srs-distribution-101427534.html?.tsrc=fin-notif


(Reuters) -Home Depot will buy building materials supplier SRS Distribution in an $18.25 billion deal, in the top U.S. home improvement chain's largest acquisition, as it looks to broaden its professional customer base to better tackle tepid demand.

The company and rival Lowe's Cos have projected a slower recovery this year as U.S. consumers pause big home remodeling and renovation projects due to sticky inflation.

This has put pressure on the Do-It-Yourself (DIY) segment, which makes up about half of Home Depot's business, and the company has sharpened its focus on "Pro-customers" such as professional builders and contractors to drive sales.

Thursday's deal will help Home Depot leverage SRS' warehouse network and delivery fleet to better serve existing customers.

SRS, a portfolio company of private equity firms Leonard Green & Partners and Berkshire Partners, primarily serves Pro-customers including roofers, landscapers and pool contractors. The firm, which raked in $10 billion in revenue in 2023, will operate as an independent unit within Home Depot.

Leonard Green had bought a majority stake in SRS in a $3.55 billion deal in 2018, a person familiar with the matter told Reuters on Thursday.

Last December, Leonard Green allowed some of its fund investors to cash out of SRS at a valuation of about $16 billion, including debt, the source said, adding Home Depot agreed to the deal following a sale process for the company.

"This is a great deal at a great time," said Thomas Hayes, chairman at Great Hill Capital.

"You need (to) only look to the housing shortage - and young demographics of our millennials - to understand that as rates moderate construction will boom," he said.

Shares of Home Depot, which has a market value of $382.42 billion according to LSEG data, slipped 1%. Home Depot will assume SRS' debt and will fund the deal with cash on hand and debt.

'DRIVING CUSTOMER EXPERIENCE'

The deal is all about "driving the customer experience" along with sales and profitability, Home Depot CFO Richard McPhail said on a call with analysts.

The company has often faced criticism from customers, particularly larger contractors, over order, delivery and logistics hiccups that could hinder timely completion of projects.

"The problem with (ordering on Home Depot's website) is when it comes to delivery, it's very sporadic ... the problem was always logistics" said Eddie Prchal, CEO of Gunner, a roofing solutions firm.

Through the deal, expected to close by the end of fiscal 2024, Home Depot will add SRS' network of more than 2,500 professional sales force in 760 plus locations to its footprint of over 2,000 U.S. stores and distribution centers.

It would also allow Home Depot to take advantage of SRS' more than 4,000 truck fleet and jobsite delivery capabilities.

"SRS is very good at delivering those things. (They have) good customer service, deliveries on time... So Home Depot will be able to start servicing and have a whole new focus on contractors," Prchal said.

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>>> Why Costco is selling gold bars and silver coins


CNN

by Nathaniel Meyersohn

March 7, 2024


https://finance.yahoo.com/news/why-costco-selling-gold-bars-173244588.html


Costco locked in $1.50 hot dog-soda loyalists. Now, it’s chasing a different clientele: precious metal investors and collectors.

Costco recently started selling silver coins for the first time, finance chief Richard Galanti told CNN.

The company is selling 25-count tubes of 1 oz. Canada Maple Leaf Silver Coins online for $675. The front of the coins features a maple leaf, and King Charles III is on the back. The coins are non-refundable, and members can purchase a maximum of five.

Costco is trying to replicate its recent success with gold bars. It began selling $2,000 gold bars online in September and sold more than $100 million worth of the bars last quarter.

But Costco’s move is more about marketing than just about increasing sales. After all, not many people are actually stashing away gold bars in their homes.

It’s selling precious metals to try to reinforce its “treasure hunt” brand image where it peppers its stores with unexpected, limited-time items to keep shoppers coming back.

“We try to create an attitude that, if you see it, you ought to buy it because chances are it ain’t going to be there next time,” Costco’s founder once said. “That’s the treasure-hunt aspect. We constantly buy that stuff and intentionally run out of it from time to time.”

Costco is also selling precious metals as they become more valuable. Gold prices have notched record highs this week. Silver futures are up 21% in the past year.

Precious metal prices have gone up because investors are betting that the Federal Reserve will cut interest rates in the back half of the year.

Gold and silver are considered to be one of the most resilient investments. When interest rates fall, holding income-paying assets (like bonds) becomes less appealing than owning the precious metals. When interest rates are low, falling or — as in this case — expected to fall, demand for Treasury bonds ebbs, and precious metals, which don’t pay out any interest, become relatively more attractive.

Some investors also believe them to be a hedge against inflation, wagering that they will hold their value even if it begins to surge, even though metals face price fluctuations like any other commodity.

Costco’s success in selling the metals comes as the company continues to report strong profits from the pandemic in 2020, when customers rushed to stores to load up on groceries and household staples. Millions of first-time customers signed up for club memberships during the pandemic and have held on to them, pushing Costco’s member rolls to all-time highs.

Shares of Costco (COST) have rallied 60% over the past year.

Costco reported quarterly earnings Thursday. The company’s sales at stores open for at least one year increased 5.6%, but fell short of analyst forecasts.

Costco said inflation was roughly flat during the quarter, which allowed it to reduce prices on some items.

Galanti told analysts on a call Thursday that Costco cut reading glasses, for example, from $18.99 to $16.99 and cut a 48-count of batteries from $17.99 to $15.99.

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>>> Dollar Tree Down Most Since May on Plan to Shut 1,000 Stores


Bloomberg

by Jaewon Kang

3-13-24


https://www.msn.com/en-us/money/companies/dollar-tree-down-most-since-may-on-plan-to-shut-1-000-stores/ar-BB1jOWBv?OCID=ansmsnnews11


(Bloomberg) -- Dollar Tree Inc. plans to shutter about 1,000 stores in an effort to improve profitability as the discount retailer battles a spate of litigation and other headwinds.

The company expects to close about 600 Family Dollar stores in the first half of fiscal 2024 and shut down an additional 370 Family Dollar and 30 Dollar Tree locations as their leases expire, according to a statement Wednesday. Dollar Tree said it expects a benefit of 15 cents a share to 2024 earnings from the store closures.

The shares fell as much as 14% at the open of US markets, the most since May.

Dollar Tree, which operated more than 16,770 stores across 48 states and Canada as of last month, said last year that it would review its portfolio of Family Dollar stores to address underperformance. The chain has been beset by complaints of miserable working conditions, and fourth-quarter adjusted earnings of $2.55 a share included an impact of about 17 cents a share from general liability insurance claims.

Closing the stores appears to be “a prudent decision, but echoes the move to close 400 stores in 2019,” Bloomberg Intelligence analysts Jennifer Bartashus and Jibril Lawal said in a note. “Nearly $2 billion in assorted impairment charges suggests widespread efforts to improve operations have had mixed results and that the right formula remains elusive.”

The earnings for the quarter that ended in February missed analysts’ average estimate of $2.66 a share. Same-store sales rose 3%, more than Wall Street expected.

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Abercrombie - >>> This Once-Bankrupt Retailer Went From Facing Boycotts To A 285% Stock Price Increase And Now Is Outpacing Nvidia


Benzinga

by Caleb Naysmith

March 4, 2024


https://finance.yahoo.com/news/once-bankrupt-retailer-went-facing-212719788.html


Over the past decade, Abercrombie & Fitch Co. (NYSE:ANF) has undergone a significant transformation, bouncing back from its lowest point to reestablishing itself as a dominant player in the retail landscape.

In 2023, Abercrombie & Fitch experienced a 285% increase in its stock price, followed by more than 50% uptick so far in 2024. While other fashion retailers like American Eagle Outfitters Inc., Levi Strauss & Co. and Macy’s have also seen growth in their stock prices in 2024, none have matched the rise of Abercrombie & Fitch.

Abercrombie & Fitch even outpaced artificial intelligence (AI) powerhouse Nvidia Corp. in 2023, a feat that caught many by surprise given Nvidia’s formidable reputation in the technology sector. Nvidia saw a 238% stock price growth in 2023.

Abercrombie & Fitch is seeing constantly growing sales. Revenue was up 20% compared with the previous year, according to its third-quarter report.

A key factor in Abercrombie & Fitch's success has been its strategic use of platforms like TikTok to engage with customers and build a stronger, more relevant brand in today’s fashion landscape. By listening to customer feedback and leveraging the authenticity of TikTok’s community, Abercrombie & Fitch has humanized its brand and better connected with its target audience.

"Over the past few years, we've been laser-focused on listening to our customers and TikTok has been the perfect platform for fostering that communication," Abercrombie Brands’ Senior Vice President and Head of Marketing Carey Collins Krug told Teen Vogue. "We watch the reviews and hauls of our products. We take notes of how people describe the quality and fit. There's an authenticity innate to TikTok and its entire community that has allowed us to humanize Abercrombie."

Additionally, Abercrombie & Fitch has integrated AI technology into its product design process, allowing it to quickly iterate and refine its offerings based on historical data and customer preferences. This strategic integration of technology has enabled Abercrombie & Fitch to stay ahead of the curve and continuously innovate in a rapidly evolving retail environment.

Samir Desai, the company's executive vice president and chief digital and technology officer, elaborated on this approach, stating, “We feed [the tech] historical images of products that have sold really well and use prompts to iterate and refine and base a new line off of that. It's driving inspiration, it's driving velocity and how quickly [the team] can produce product images.”

It’s important to acknowledge Abercrombie & Fitch's past challenges, including controversies surrounding its lack of plus-size options in 2013, which led to a boycott and accusations of discrimination. The company has since taken steps to address these issues and broaden its inclusivity, reflecting a commitment to adaptability and growth.

Abercrombie & Fitch’s resurgence serves as a testament to the enduring power of strategic vision, adaptability and innovation in the face of change. As the company continues to evolve and innovate, its trajectory highlights the importance of staying agile and responsive to shifting consumer preferences and technological advancements in the retail industry.

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Kroger - >>> 4 Warren Buffett Stocks to Buy After Berkshire Hathaway’s Latest 13F Filing

Plus, the stocks Berkshire bought and sold last quarter.


Morningstar

by Susan Dziubinski

Feb 14, 2024


https://www.morningstar.com/stocks/4-warren-buffett-stocks-buy-after-berkshire-hathaways-latest-13f-filing


Kroger -

Morningstar Rating: 4 stars
Morningstar Economic Moat Rating: Narrow
Morningstar Capital Allocation Rating: Exemplary
Industry: Grocery Stores

Berkshire Hathaway owns about 7% of Kroger’s outstanding shares. Kroger and rival Albertsons have announced merger plans, though regulatory hurdles persist. We think Kroger has carved out a narrow economic moat and is run by a management team that has done an exemplary job of allocating capital. Kroger stock trades 14% below our $53 fair value estimate.

Here’s Morningstar senior analyst Dan Wasiolek’s take on Kroger’s business strategy and outlook:

Of the traditional grocers, we believe Kroger’s scale, partnerships, private-label fare, and data capabilities uniquely position the company to defend its returns against competition that should intensify as Amazon, mass merchandisers, and hard discounters continue to price aggressively to boost volume. We contend that Kroger still benefits from enduring intangible assets and cost advantages, even if its acquisition of Albertsons is derailed by regulators.

Grocers use price as a primary lever to drive traffic, necessitating efficiency and cost leverage to deliver returns. We expect this environment to endure as the industry changes, with an omnichannel experience likely to prevail as customers use a combination of deliver-to-home, click-and-collect, and in-store shopping, particularly since most American consumers drive past grocers on their commutes and home delivery can be inconvenient for buyers with uncertain schedules (although the COVID-19 pandemic likely accelerated delivery adoption in the long term). In physical retail, we anticipate shoppers will choose sellers based on convenience, price, and breadth of assortment, demanding high value as well as a compelling store environment.

Kroger should be able to capitalize on the changing landscape. We maintain that its local market scale allows it to derive cost leverage that fuels competitive pricing and the investments needed to build on its presence in the emerging channels. Its progress should be accelerated by partnerships (with Ocado, Walgreens, Microsoft, and others) that we do not believe are available to smaller rivals because they cannot deliver the same value to counterparts.

Nearly all Kroger's transactions are derived from its loyalty database, providing consumer insights that should play a large role in its digital transformation, fueling promotional efforts and customer engagement while informing assortment and providing salable insights as nongrocery revenue streams. We expect data to play a key role in efforts to drive traffic, efficiency, and conversion that few can match.

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>>> Murphy USA Inc. (MUSA) Reports Solid Q4 and Full Year 2023 Financial Results


GuruFocus Research

February 7, 2024


https://finance.yahoo.com/news/murphy-usa-inc-musa-reports-215915108.html


Net Income: Q4 net income increased to $150.0 million, with full-year net income at $556.8 million.

Fuel Contribution: Total fuel contribution for Q4 was 32.5 cents per gallon, with a yearly average of 31.4 cents per gallon.

Retail Gallons: Stable at 1.2 billion in Q4, with a slight decline in same store sales.

Merchandise Contribution: Grew by 4.6% in Q4 to $197.7 million, with a full-year increase of 4.7%.

Share Repurchase: Approximately 442.2 thousand shares repurchased in Q4; over 1 million shares in full year 2023.

Store Openings: 10 new stores in Q4, bringing the total count to 1,733 by year-end.

Dividends: Quarterly cash dividend paid at $0.41 per share, with an annual increase of 11.7%.


On February 7, 2024, Murphy USA Inc (NYSE:MUSA) released its 8-K filing, announcing its financial results for the fourth quarter and full year ended December 31, 2023. The company, a prominent retailer of gasoline products and convenience merchandise, operates a network of retail stations across the United States, with a significant number of stores adjacent to Walmart locations.

Fiscal Performance Highlights

Murphy USA Inc (NYSE:MUSA) reported a net income of $150.0 million, or $7.00 per diluted share, for the fourth quarter of 2023, an increase from the $117.7 million, or $5.21 per diluted share, recorded in the same quarter of the previous year. For the full year, net income was $556.8 million, or $25.49 per diluted share, compared to $672.9 million, or $28.10 per diluted share, in 2022. The company's total fuel contribution for the fourth quarter was 32.5 cents per gallon (cpg), up from 30.6 cpg in the prior year's quarter. However, the full-year fuel contribution averaged 31.4 cpg, down from 34.3 cpg in 2022.

Despite a challenging environment, Murphy USA maintained stable retail gallon sales at 1.2 billion for both the fourth quarter and the full year, matching the previous year's figures. However, same store sales (SSS) volumes saw a slight decline of 2.0% for the quarter and 1.8% for the year. The merchandise contribution for the fourth quarter increased by 4.6% to $197.7 million, with unit margins holding steady at 19.4%, reflecting a consistent performance in merchandise sales.

Strategic and Operational Developments

President and CEO Andrew Clyde highlighted the company's robust operational performance and strategic initiatives, stating,

2023 financial results and operational performance are a testament to the strong foundations we have built at Murphy USA over the last decade, successfully executing against our strategy, and widening our advantage in the marketplace."

Clyde emphasized the company's focus on new store growth, continuous improvement, and investment in people, technology, and innovation to drive in-store performance.

The company continued its share repurchase program, buying back approximately 442.2 thousand common shares for $162.0 million in the fourth quarter, and over 1.0 million shares for a total of $336.2 million for the full year. This reflects Murphy USA's commitment to returning value to shareholders.

Murphy USA also expanded its store portfolio, opening 10 new stores in the fourth quarter, resulting in a net year-end total of 1,733 stores. The company's capital allocation strategy remains focused on growth, with a strong and agile balance sheet supporting these efforts.

Financial Position and Outlook

As of December 31, 2023, Murphy USA reported cash and cash equivalents of $117.8 million, with total marketable securities of $11.5 million. The company's long-term debt stood at $1,784.7 million. The effective income tax rate for the fourth quarter was 23.6%, slightly up from 22.3% in the previous year's quarter.

Looking ahead, Murphy USA provided guidance for 2024, anticipating sustained growth in new store additions and investments in raze-and-rebuild sites. The company expects to maintain market share gains and foresees modest growth in store operating expenses per site, excluding credit card fees and rent. SG&A costs are projected to reflect continued investments in productivity initiatives, with an effective tax rate expected to be in the range of 24% to 26%.

For detailed financial tables and further discussion of Murphy USA's financial performance, including reconciliations of non-GAAP financial measures, please refer to the full 8-K filing.

Investors and stakeholders are invited to join the earnings call on February 8, 2024, to discuss the Q4 and full-year results. The call will provide an opportunity to gain deeper insights into the company's financial health and strategic direction.

Murphy USA Inc (NYSE:MUSA) remains focused on delivering shareholder value and is poised to leverage its strong Q4 performance and strategic initiatives to drive continued success in 2024.

Explore the complete 8-K earnings release (here) from Murphy USA Inc for further details.

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>>> Murphy USA Inc. (MUSA) engages in marketing of retail motor fuel products and convenience merchandise. The company operates retail stores under the Murphy USA, Murphy Express, and QuickChek brands. It operates retail gasoline stores principally in the Southeast, Southwest, and Midwest United States. The company was founded in 1996 and is headquartered in El Dorado, Arkansas.

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https://finance.yahoo.com/quote/MUSA/profile?p=MUSA



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>>> Costco to Pay Special Dividend of $15 Per Share: What You Need to Know


Motley Fool

by Daniel Sparks

December 14, 2023


We knew it was coming. We just didn't know when.

Costco (NASDAQ: COST) Chief Financial Officer Richard Galanti's rhetoric in recent earnings calls, when asked about whether the company would pay out another special dividend, has been that it's "probably a question of when, not if." The day has finally come.

Costco announced on Thursday it would pay a special cash dividend of $15 per share on Jan. 12, 2024 to shareholders of record as of the close of business on Dec. 28. This, of course, is on top of the quarterly dividend the company has already committed to.

The news of Costco's special dividend builds on an upbeat quarterly financial update released on Thursday. The report, which featured double-digit year-over-year earnings-per-share growth, highlighted the membership-based wholesale warehouse's resilience, even in a challenging macroeconomic environment.

Costco's dividend history

This will be Costco's fifth-ever special dividend. Previous special dividends were paid in 2012, 2015, 2017, and 2020 in the amounts of $7, $5, $7, and $10, respectively. This makes the company's 2024 special dividend of $15 its largest, by far.

To fund this dividend, Costco will pay an aggregate amount of $6.7 billion to shareholders.

Unlike many of its peers, Costco operates its business with a significant net cash position. This means its interest expense is extremely low, which helps the company keep its cost structure low to pass those savings onto members. At the end of its just-reported fiscal first quarter, Costco had about $7 billion of debt and nearly $18 billion of cash, cash equivalents, and short-term investments. So there's plenty of cash to spare.

Costco also notably pays a meaningful, growing quarterly dividend of $1.02. The company's most recent hike came in at a double-digit rate of 12%.

Support for a high stock price

A robust special dividend comes at a good time for shareholders. The stock has soared nearly 40% year to date, giving the stock a somewhat pricey valuation. The stock's price-to-earnings ratio is now in the forties. Fortunately, a special dividend and double-digit growth in earnings per share help support this high valuation.

Speaking of Costco's earnings, the company's fiscal first-quarter revenue and earnings per share both came in higher than analysts' estimates. Total revenue of $57.8 billion was up from $54.4 billion in the year-ago quarter, beating analysts' average forecast for revenue of $57.7 billion. Earnings per share of $3.58 (up 17% year over year) was also higher than a consensus estimate of $3.42.

Sales in the quarter were helped by growing demand for the company's groceries and essentials. But strong growth in membership fees also helped. Membership fee revenue rose more than 8%, outpacing net sales growth by 2 percentage points.

Altogether, Costco's results offer a strong reminder of why the company's shares are worth a high premium. This is especially true ahead of a likely membership fee increase in the near future.

Just as management has hinted at a special dividend, it's also hinted that a membership fee increase is up for consideration. Indeed, it wouldn't be surprising to see Costco raise the prices of its memberships in 2024.

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>>> Costco hotdogs, rotisserie chicken, self-checkout: What changed under exiting CEO Jelinek


by Bailey Schulz

USA TODAY

October 19, 2023


https://finance.yahoo.com/news/costco-ceo-craig-jelinek-step-164328197.html


After about a dozen years at the helm, Costco's Craig Jelinek is stepping down from his role as chief executive.

The transition is set to take place on Jan. 1, with President and Chief Operating Officer Ron Vachris taking over as CEO. Jelinek will remain at Costco through April 2024 in an advisory role and will stand for reelection on the board in January, according to a statement from the company.

Jelinek became CEO in January 2012 and has continued his predecessor's focus on keeping prices low and employees happy within the country’s third-largest retailer.

But not everything has remained the same. Here are some of the changes ushered in during Jelinek’s time as CEO:

Revenue growth and more warehouses

When Jelinek’s succession was announced, Costco had 592 warehouses in operation, 429 of which were in the United States. The company’s footprint has gone up 45% since then, with 861 warehouses – including 591 in the U.S. – operating today.

Jelinek has also helped increase Costco's international presence, opening warehouses in China, Spain, France, Iceland, New Zealand and Sweden.

The company's share price has surged under Jelinek, from about $80 per share in early 2012 to over $550 today. Its share price has gone up over 25% so far this year, outperforming the benchmark S&P 500.

And revenue has more than doubled, from $99 billion in 2012 to $242.3 billion in the latest fiscal year.

Costco removed self-checkouts … then brought them back

Jelinek told Bloomberg Businessweek in 2013 that the company would be eliminating self-checkout in stores after experimenting with the technology, noting that he thought employees did the job better.

“They are great for low-volume warehouses, but we don’t want to be in the low-volume warehouse business,” he said at the time.

Costco reversed its decision in 2019 and is now cracking down on checking membership cards at self-checkout lanes to prevent unauthorized card-sharing.

A new poultry complex to keep rotisserie chicken prices down

In 2019, Costco opened a $450 million poultry complex in Fremont, Nebraska, to help keep its rotisserie chicken prices at $4.99.

In a 2019 earnings call, Chief Financial Officer Richard Galanti said the plant can process about 2 million birds a week. The plant was estimated to save Costco about 35 cents per bird in 2015, or about $35 million annually.

Membership prices went up

Costco membership fees went up from $55 to $60 in 2017 under Jelinek, the first price hike since a $5 increase in 2011.

Membership prices are expected to jump again soon, with Galanti noting in an earnings call that “it’s a question of when, not if.” He noted that membership hikes typically take place every five to six years.

How much is Costco's annual fee? Costco membership price increase 'a question of when, not if,' CFO says

Some ? but not all ? food court prices went up

Certain food court items, including the chicken bake and soda, have seen price hikes in recent months, according to Insider.

But there is one item on the menu with a price that has remained unchanged since 1985: the Costco hotdog.

During an earnings call last year, Galanti said other parts of the business should help the company keep its hotdog prices stable “forever.” And when Jelinek was asked on CNBC last year if he would raise the food court item’s price from $1.50, he had a simple answer: “No.”

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>>> Why Casey's General Stores Stock Was Up This Week


Motley Fool

by John Ballard

Sep 15, 2023


https://www.fool.com/investing/2023/09/15/why-caseys-general-stores-stock-was-up-this-week/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Casey’s latest earnings results show a resilient business to the macroeconomic challenges affecting other retailers.

Its focus on the rural market is working to its advantage.

The stock is still reasonably valued after the post-earnings jump

This convenience store continues to shine in a challenging retail environment.


What happened

Week to date, shares of Casey's General Stores (CASY) were up 15.8% through Thursday's market close, according to data provided by S&P Global Market Intelligence.

The company delivered a solid round of financial results for the fiscal first quarter ending July, with same-store sales up 5.4% and earnings per share increasing by 11% year over year.

The balanced top- and bottom-line growth in a challenging retail environment certainly got Wall Street's attention. The stock hit a new all-time high but is still reasonably valued.

So what

Casey's saw good sales performance across several categories. It highlighted the strong sales of its new thin crust pizza, in addition to strong sales of whole pizza pies. Sales of beverages, both alcoholic and nonalcoholic, performed well, too.

The focus on rural locations and on high-margin food and private-label offerings appears to be working to Casey's advantage, with other retailers reporting mixed results this year. Casey's hasn't been immune to the macroeconomic headwinds, as it's not growing as fast as it was a few years ago, but it's handling the challenges much better than others right now. The stock has more than doubled over the last five years, and it could deliver similar returns over the next five years.

Now what

Management is working to keep operating expenses down, which has led to improving operating margin and stellar earnings performance lately. It's also good at executing acquisitions that profitably expand the store base without diluting the company's return on capital. It currently has 125 stores under agreement to acquire.

The stock still trades within its historical price-to-earnings ratio range. This is a well-managed convenience store chain that should continue to deliver returns to shareholders consistent with the performance of the underlying business.

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>>> Casey's General Stores -- Another attractive business with a lot of room for growth is Casey's General Stores (CASY). This is a growing chain of small convenience stores scattered across the Midwest. The company's roots date back to 1968, which shows this is a time-tested retail store that has seen several recessions in the economy but keeps on growing.


https://www.fool.com/investing/2023/10/03/2-growth-stocks-buy-now-less-500/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Casey's grew revenue and earnings at an annualized rate of 8% and 16%, respectively, over the last decade. That was enough to push the stock up 273% over the last 10 years, and the stock recently hit new highs following another strong earnings report.

Further growth in same-store sales and controlled operating expenses drove an 11% increase in earnings per share for the fiscal quarter ending July 31. These are relatively strong numbers for the retail industry right now.

Casey's footprint in rural areas works to its advantage. Many people will stop for gas and tend to make impulse purchases of snacks and beverages. The number of fuel gallons sold, a key performance metric the company reports, notched a small increase over the year-ago quarter. But Casey's experienced strong demand in prepared food, where the company earns a healthy profit. Casey's is seeing strong sales for its made-from-scratch pizza, which it's known for, in addition to snacks, candy, and beverages.

While Casey's already has a large footprint of over 2,500 stores, it operates in only 16 states, so there are potentially thousands of stores it could open across the U.S. in the coming decades.

The stock historically trades at an average P/E between 20 to 25, which means the share price just continues to climb along with the growth of the business. Casey's should continue to grow earnings at double-digit rates as it opens more stores and grows same-store sales. That should spell market-beating returns for long-term investors.

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Casey's General Stores - >>> Fifth-largest U.S. Pizza Chain Casey’s Is Now The Official Pizza and Beer HeadquartersTM


Business Wire

October 9, 2023


https://finance.yahoo.com/news/fifth-largest-u-pizza-chain-130000574.html


Casey’s is also the fourth-largest holder of liquor licenses in the U.S., making it the ideal place to get handmade pizza and ice-cold beer

ANKENY, Iowa, October 09, 2023--(BUSINESS WIRE)--Casey’s (Nasdaq: CASY) and pizza fans alike already knew it, but now there is a trademark to prove it. Announced today, Casey’s is The Official Pizza and Beer HeadquartersTM. As the fifth-largest pizza chain and third-largest convenience store in the U.S., Casey’s is a unique one-stop shop for anyone looking for handmade, delicious pizza and refreshing, ice-cold beer.

According to a recent Casey’s survey, pizza and beer is one of the best food and beverage pairings out there. Here’s why:

Half of adults ages 21 and older and two-thirds of millennials say there’s no better pairing than pizza and an ice-cold beer.

Nearly 1 in 2 adults ages 21 and older would like to order a pizza from a place where they can also get beer. And as The Official Pizza and Beer Headquarters, Casey’s answers this call.

This popular pairing is also perfect for a party, with nearly two-thirds of adults ages 21 and older noting that pizza and beer are the easiest combo to please a crowd. And 55% of adults ages 21 and older and 72% of millennials say that having pizza and beer makes them the favorite host.

"One thing that truly separates Casey’s is the convenience of ordering craveable, handmade pizza from a place where you can also buy fuel, groceries and, of course, beer. We are The Official Pizza and Beer Headquarters because we are the only leading pizza chain in the country where you can also purchase a wide variety of beer, wine and liquor options," said Tom Brennan, Chief Merchandising Officer at Casey’s. "Whether you're watching the big game, headed to a get-together or having dinner with your crew, pizza and beer is the perfect pairing and there’s no easier place to get both than at Casey’s."

The trademark filed with the U.S. Patent and Trademark Office also comes at the perfect time for those looking to celebrate International Beer and Pizza Day (Oct. 9) or National Pizza Month (October). Casey’s guests can find special deals on their favorite pizzas all month. From now through Oct. 25, all Casey’s guests can get $9.99 large single-topping pizzas when they order two.

In addition, Casey’s Rewards members in participating states can get $5 off their next pizza when purchasing a 12-pack of certain beers. Casey’s Rewards members also will earn double points on every whole-pie pizza purchase starting in October. That’s 20 points per $1 spent – any crust and any size. Guests can choose to use these extra points at any time for fuel discounts, school donations or even more pizza. Order online or in the app.

Must be 21 years or older and present valid ID to purchase alcohol. Please drink responsibly.

About Casey’s

Casey’s is a Fortune 500 company (Nasdaq: CASY) operating over 2,500 convenience stores. Founded more than 50 years ago, the company has grown to become the third-largest convenience store retailer and the fifth-largest pizza chain in the United States. Casey’s provides freshly prepared foods, quality fuel and friendly service at its locations. Guests can enjoy pizza, donuts, other assorted bakery items, and a wide selection of beverages and snacks. Learn more and order online at www.caseys.com, or in the mobile app.

About the Survey

Casey’s and FleishmanHillard commissioned Atomik Research to conduct an online survey of 2,003 adults across the United States. The sample consists of 1,954 adults ages 21 and older. The margin of error for the overall sample is +/- 2 percentage points with a confidence level of 95%. Fieldwork took place between Aug. 28 and Aug. 30, 2023. Atomik Research is an independent, creative market research agency.

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Costco - >>> Is This the Single Biggest Bear Argument for Costco Stock?


Motley Fool

By Neil Patel

Oct 6, 2023


https://www.fool.com/investing/2023/10/06/is-this-the-single-biggest-bear-argument-costco/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

The mammoth retailer's historical financial performance has been stellar.

Its stock has richly rewarded investors, but it trades at an expensive multiple today.

Investors have to ask if future growth prospects justify the stock’s valuation.


It's hard to find anything wrong with this outstanding business, but investors have to be mindful of one key factor.

Many investors would agree that Costco Wholesale (COST) is a wonderful business. It has an impressive track record of steadily growing revenue and earnings, possesses a cost advantage in the retail sector, and operates a successful membership model that drives customer loyalty.

These favorable traits have led to tremendous returns. In the past decade, its shares are up 395%, beating the Nasdaq Composite by a sizable margin.

However, investors would probably be more well-informed in their understanding of the business if they also knew about Costco's biggest bear case. Let's take a closer look at this top retail stock and what investors should keep in mind.

A steep valuation

A stock that has performed as well as Costco has in the last 10 years, and even more so in recent years, is something every investor seeks for their portfolio. But right now, the shares are extremely expensive.

As of this writing, the stock trades at a trailing price-to-earnings (P/E) ratio of 40.1. That's a premium to Costco's five-year historical average of 37.4, which indicates to me that there is little margin of safety if someone were to go out and buy shares right now. In other words, the optimism and favorable perspective about this business seem to be fully priced in (and then some).

It would be accurate to say that most everyone knows how great of a business this is. As I alluded to earlier, Costco has done a wonderful job at growing its revenue and income at healthy rates in the past. Sales and diluted earnings per share (EPS) have risen at compound annual rates of 8.7% and 11.8%, respectively, in the past 10 fiscal years . And this has translated to strong stock price performance.

The business benefits from having a cost advantage, which I believe is the key source of its economic moat. Due to its tremendous scale, as demonstrated by fiscal 2023 net sales of $238 billion, Costco is the world's third-biggest retailer. This means it can flex its bargaining power over its suppliers, obtaining favorable unit costs. And these savings get passed to shoppers in the form of low prices.

What's more, Costco is able to drive customer loyalty thanks to its membership business model. Having access to low prices and high-quality merchandise is worth the $60 annual fee for the basic membership option. Customers love this, as shown by the worldwide renewal rate of 90.4%. "We ended [the] fourth quarter with 71.0 million paid household members, up 7.9% versus a year ago," CFO Richard Galanti said on the fiscal Q4 2023 earnings call.

Growth outlook

It's kind of funny that a business which sells merchandise at the lowest prices around has a very expensive stock. Consumers have long been in love with what Costco offers, so it's not a surprise that investors have been drawn to the company's shares.

But Costco's P/E ratio is really only justified if the company possesses sizable growth prospects over the next five years. This is a mature business these days, so it's likely not worth the premium valuation.

To be fair, the management team is still focused on opening more warehouses -- 23 net new locations in the last fiscal year to be exact -- which is a primary driver of the expansion strategy. Costco now has 861 warehouses across the globe. But executives do think over the next 10 years the business could open 150 more stores in the U.S. alone, adding to its 591 today. That domestic outlook, coupled with international growth opportunities, particularly in China, is definitely encouraging.

Wall Street consensus forecasts call for 5.8% revenue growth and 10.5% gains in diluted EPS annually over the next five fiscal years. These might seem like strong estimates on the surface. But these figures indicate that shares are trading at 24.4 times fiscal 2028 EPS projections of $23.30. To me, that means the stock is clearly expensive right now, making the prospect of market-beating returns much more difficult to achieve from this point forward.

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>>> Costco Wholesale (COST) -- a membership-only discount retailer with a market capitalization of nearly $250 billion, pays a quarterly dividend of $1.02 per share. The annual yield of 0.73% isn't impressive on the surface, but the company has raised its dividend annually since 2004.


https://www.fool.com/investing/2023/09/17/3-top-dividend-stocks-to-buy-now/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


It also pays a special cash dividend roughly every three years. Given that pattern, shareholders can reasonably anticipate another special dividend in the near future since the last one was paid in December 2020 at $10 per share.

With Costco's business model, monitoring membership growth is an essential measure of health and future growth with membership price increases. In its last 12 reported months, the company grew its number of cardholders from 116.6 million to 124.7 million, resulting in a roughly 7% increase.

Costco's annual membership fees generate approximately $4 billion in high-margin revenue. The company's historical pattern indicates it raises these fees about every five or so years, and the most recent change occurred in June 2017, so it stands to reason that an increase in fees is likely on the horizon, which would boost membership revenue even more.

If there is a downside to investing in Costco, it begins and ends with its valuation. Using the standard valuation metric for mature companies of price-to-earnings (P/E) ratio, the stock trades at a P/E of 41.4, significantly higher than competitors Target and Walmart at a P/E of 16.8 and 31.6, respectively. Costco's five-year average P/E is 37.4, meaning the stock is currently trading at an even higher valuation than usual.

Despite maintaining a consistently high valuation, Costco's stock has demonstrated its status as a long-term winner, delivering a total return of 146% over the last five years. When combined with an impressive balance sheet with $7.2 billion more in cash than debt, Costco emerges as an essential holding for long-term dividend-focused investors.

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>>> Winmark -- While many consumers might be unaware of small-cap stock Winmark (WINA), they are probably aware of its franchise-based retail companies that specialize in buying and selling secondhand goods: Music Go Round, Once Upon a Child, Plato's Closet, Play It Again Sports, and Style Encore.


https://www.fool.com/investing/2023/09/17/3-top-dividend-stocks-to-buy-now/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Winmark's stock has demonstrated remarkable performance, surging 53% year to date, and even more impressively, delivering a total return of 145% over the past five years.

Like Costco, Winmark has a relatively low annual dividend yield and frequently pays a special dividend. Its yield is 0.9%, and it has paid a special dividend each of the last three years at an average of $4.97 per share. With the announcement of its special cash dividend typically in October, it is possible another one could be soon.

As a franchise business, Winmark is incentivized to expand its network because its revenue is primarily derived from franchise fees and royalties. Prospective franchisees must make an initial franchise payment of approximately $25,000 in the United States and contribute 4% to 5% of their weekly gross sales. CEO Brett Heffes believes there are 2,800 open territories for franchises, with only 1,303 locations as of July 1, 2023.

If there is a negative for Winmark, the recent stock run-up has made its valuation expensive, with a current P/E of 32.7. For comparison, Winmark averaged a P/E of 23.2 over the past five years. Nonetheless, with record revenue of $83.2 million and near-record net income of $39.9 million over the trailing 12 months, the market might finally be taking notice of the resale company valued at a market capitalization of $1.3 billion.

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Tractor Supply - >>> 2 Fantastic Reasons Tractor Supply Should Continue Harvesting Growth for Investors


Motley Fool

By Will Healy

Sep 22, 2023


https://www.fool.com/investing/2023/09/22/2-fantastic-reasons-tractor-supply-harvesting/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Shares of the rural lifestyle retailer have risen by nearly 62,000% since 1994.

More people are moving to rural America, increasing its addressable market.

The rural lifestyle retailer is not done growing despite a 49-state footprint.


Tractor Supply (TSCO) is arguably an easy stock to write off for most investors. The company's stores are away from population centers, so it is not a fixture in areas where most Americans live.

Moreover, it has built approximately 2,200 stores spread across 49 states and has shown no apparent inclination to expand internationally. Thus, you might assume it is nearing market saturation.

Nonetheless, Tractor Supply has harvested massive returns for investors, and as it continues forward, its growth should continue for the following reasons.

1. Plenty of room for store growth

Tractor Supply has prospered by carving out a niche among rural lifestyle enthusiasts. Its primary demographic consists of the so-called "hobby farmers" who live on a few acres and engage in smaller-scale agriculture. This approach has taken the stock an astounding 61,500% higher since its initial public offering in 1994.

And the company has not hesitated to acquire retailers in related areas, like the separate Petsense chain for companion animals. It has also bought out other chains like Orscheln Farm & Home, which will become additional Tractor Supply locations. Hence, it remains expansion-minded through a mix of sticking to its core concept and serving the pet market.

Rural America has also begun to grow in population. More employees and contractors work remotely, and the pandemic prompted many former city dwellers to move to the countryside, a trend expanding Tractor Supply's addressable market.

2. Strong financials (relatively speaking)

Tractor Supply's financials have shown some resilience. Despite slow comparable-store sales growth in the first quarter, its net sales in the first half of 2023 were $7.5 billion, 8% more than in the same period last year. Net income was $604 million during the first two quarters of the year, though rising operating expenses meant its profits only grew 3% from year-ago levels.

Due to concerns about falling customer spending, Tractor Supply reduced its 2023 revenue estimate to $14.85 billion at the midpoint, down from $15.15 billion. It also adjusted its net income forecast to a mid-range estimate of $1.135 billion, down from $1.15 billion.

The stock has fallen slightly this year, but that did not stop Tractor Supply from raising its dividend by 12% in February, amounting to a near doubling of the payout in two years. With the dividend now at $4.12 per share annually, new shareholders will earn a 1.9% dividend yield, well above the S&P 500's 1.5% payout.

The retailer has hiked its payout every year since introducing it in 2010, raising its profile as a dividend stock, especially with the size of the aforementioned increases. So investors might want to buy it despite its price-to-earnings ratio of 21, a moderate level considering the history of the stock.

Consider Tractor Supply

Despite an extensive 49-state footprint and some recent sluggishness, Tractor Supply is not done returning bumper crops of growth and earnings. The company has many avenues related to its core business that it can take advantage of, especially with a rising rural population.

Even at a moderate valuation, its history of massive growth and a fast-growing dividend should help boost the retail stock. If more urban investors take notice of Tractor Supply's success in the countryside, it could reap a bountiful harvest.

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>>> Tractor Supply -- Paying a 1.8% dividend, rural lifestyle retailer Tractor Supply has the largest yield of this group. Over the last five years, Tractor Supply has seen annualized dividend growth of 28% and maintained a payout ratio of 39%. A company's payout ratio measures the percentage of net income used to pay its dividends each year -- highlighting that Tractor Supply has ample room for increases, even if net income doesn't grow.


https://www.fool.com/investing/2023/09/07/4-top-dividend-payers-of-the-sp-500/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


However, the company has increased earnings per share (EPS) by 19% annually since 2013, so it isn't likely the company's profits will stagnate for an extended period. Led by a Neighbor's Rewards Club with over 31 million members -- a figure that grew by 19% from last year -- Tractor Supply's sales are steadier than one might think.

Even as consumer spending tightened in 2023, leading to a drop in seasonal and big-ticket purchases, the company eked out same-store sales growth of 3% thanks to its consumable, usable, and edible (CUE) sales rising by over 10%. These repeat sales help Tractor Supply generate consistent profitability, recording a return on invested capital (ROIC) of 34%. This ROIC places the company in the top decile of the S&P 500 and is an excellent sign for interested investors as stocks with higher ROICs outperform their less-profitable peers.

With a price-to-earnings (P/E) ratio of 22, Tractor Supply trades at a slight discount to its historical averages, making it an elite dividend growth stock to buy and hold forever.

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Floor & Decor (FND) - >>> A niche, Buffett-backed home improvement retailer


https://www.fool.com/investing/2023/04/04/build-wealth-buy-these-growth-stocks/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Berkshire Hathaway's chairman and chief executive officer, Warren Buffett, loves businesses that possess an edge over their competitors. This is probably why his holding company owns a 4.5% position in the specialty home improvement retailer Floor & Decor (FND) worth almost $500 million.

Floor & Decor may not have the name recognition of its larger, more generalized counterparts like Home Depot and Lowe's. But nobody knows the hard-surface flooring space better than the under-the-radar retailer. With the average store coming in at around 79,000 square feet and offering about 4,400 tile, wood, laminate, vinyl, and natural stone flooring products, Floor & Decor can't be beat on product selection. And since the company sources its products straight from manufacturers, it passes savings on to customers with reasonable prices.

As you'd expect for a smaller company, Floor & Decor has yet to peak as a business. The company currently has fewer than 200 stores, which is far below its long-term target of 500 stores. Analysts believe that adjusted diluted EPS will increase at a rate of 13.8% annually through the next five years. That's drastically superior to the home improvement retail industry average earnings growth forecast of 4.1%.

Topping it off, the stock looks to be a bargain for its quality. Floor & Decor's forward P/E ratio of 28.8 is cheap compared to the home improvement retail industry average forward P/E ratio of 16.5. This is why I expect the stock to keep generating double-digit annual total returns for shareholders for at least the medium term.

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Ulta Beauty, Inc. (NASDAQ:ULTA) - >>> Number of Hedge Fund Holders: 43


https://www.insidermonkey.com/blog/5-best-beauty-stocks-to-buy-now-3-1137038/


Beauty products and salon company Ulta Beauty, Inc. (NASDAQ:ULTA) shares are gaining ground after the company crushed analyst estimates for the fourth quarter. After the quarterly results, Canaccord Genuity analyst Susan Anderson gave bullish comments on Ulta Beauty, Inc. (NASDAQ:ULTA) and said the company is expected to continue its growth momentum as “management looks to open additional doors across the US, expands in Targets, and increases its penetration of prestige and luxury products.”

A total of 43 hedge funds tracked by Insider Monkey had stakes in Ulta Beauty, Inc. (NASDAQ:ULTA). The net worth of these stakes was $1.5 billion. The biggest stakeholder of Ulta Beauty, Inc. (NASDAQ:ULTA) was D E Shaw which had a $204 million stake.

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>>> Lowe's Companies, Inc. (NYSE:LOW) - Number of Hedge Fund Holders: 68


https://finance.yahoo.com/news/14-cheap-quarterly-dividend-stocks-161933738.html


Dividend Yield as of 3/29: 2.19%

Lowe's Companies, Inc. (NYSE:LOW) is another leading home improvement retailer that is trading for a fairly low valuation given the quality of its business and its growth potential in the long term. As of March 30, Lowe's Companies, Inc. (NYSE:LOW) has a forward P/E of 13.03, making the stock potentially attractive in the long term if demand for the home improvement retailer's products grows again. In Q3 of 2022, Lowe's Companies, Inc. (NYSE:LOW) was one of the stocks with the biggest buybacks. For those of you interested, check out 10 Stocks with the Biggest Buybacks for stocks with the biggest buybacks in Q3 of 2022.

68 hedge funds in our database owned shares of Lowe's Companies, Inc. (NYSE:LOW) at the end of Q4, ranking the stock #6 on our list of 14 Cheap Quarterly Dividend Stocks to Buy.

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>>> The Home Depot, Inc. (NYSE:HD) - Number of Hedge Fund Holders: 62


https://finance.yahoo.com/news/14-cheap-quarterly-dividend-stocks-161933738.html


Dividend Yield as of 3/29: 2.95%

The Home Depot, Inc. (NYSE:HD) shares are down over 10.29% year to date and have a forward P/E ratio of 16.85 as of March 29 given the sluggish growth expected in the home improvement industry this year. As a result of the sluggishness, The Home Depot, Inc. (NYSE:HD) sees sales growth and comparable sales growth for fiscal 2023 to be approximately flat compared to fiscal 2022. Despite the headwinds, The Home Depot, Inc. (NYSE:HD)'s board of directors in February 2023 authorized a 10% increase in the quarterly dividend to $2.09 per share, which equates to an annual dividend of $8.36 per share.

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>>> Ulta Beauty COO on record-breaking sales: ‘The whole store is hot’


Yahoo Finance

by Edwin Roman

April 9, 2023


https://finance.yahoo.com/news/ulta-beauty-coo-on-record-breaking-sales-the-whole-store-is-hot-142511750.html


Inflation and slowing consumer spending on discretionary items haven't put the brakes on Ulta's (ULTA) momentum in the beauty category.

In its fiscal fourth-quarter earnings last month, the beauty retailer reported record annual revenue in 2022 that surpassed $10 billion for the first time in its 33-year history while its customer loyalty program reached an impressive 40.2 million members.

"The whole store is hot," Ulta Beauty COO Kecia Steelman told Yahoo Finance's Brian Sozzi at the 2023 Shoptalk Conference (video above). "But I would say one of the categories that we're really seeing that's coming through COVID that's really stuck is wellness. ... So we're seeing wellness stick, and we're also seeing [consumers] really lean in a little bit more to cosmetics, which is great."

According to Susan Anderson, analyst at Canaccord Genuity, Ulta's strength can be attributed to the strength of the category overall as well as factors specific to the retailer, such as its rewards program, omnichannel presence, and range of products and services across mass and prestige cosmetics, skincare, and wellness.

The beauty category has "continued to be strong into this year," Anderson told Yahoo Finance Live following her bullish Buy rating on Ulta stock. "I think that's only going to benefit Ulta."

"We also see them as a share gainer despite the higher growth category," added Anderson, who has a $622 price target on the stock. "We see them taking share from department stores, particularly as they roll out their prestige business further and then also add luxury such as Dior to their lineup of brands that they sell in the store."

Even as Ulta makes a push into more luxury segments, Steelman noted that the retailer is still attracting a broad range of consumers.

"What we're really pleased that we see is that the consumer across all income sectors is spending at a great pace," the COO said. "There's not one income sector that's outperforming another. So it's very consistent across the spectrum, and I think part of that is because we do offer everything in one place across all price points."

Ulta Beauty's momentum has given its collaborator Target (TGT) reason to celebrate as it saw a boost in makeup sales in the fourth quarter. The 350 Ulta shop-in-shops in Target stores have also incrementally boosted Ulta's sales and expanded its customer base.

"Target has over a hundred million customers in their loyalty program," Anderson said. "The next largest is probably Ulta. So it's definitely very large, but there's over a hundred million adult women in the U.S., so we think there's still opportunity for them to grow that loyalty program."

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>>> Tractor Supply: The leader in a quickly growing niche

https://www.fool.com/investing/2023/03/18/market-plunge-why-im-loading-up-on-these-2-stocks/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Worker burnout following the COVID-19 pandemic has played a major factor in a mass migration away from urban areas and into rural areas over the last few years. A full two-thirds (66%) of Americans polled in a recent survey said that they would consider moving to a rural home or a subdivision if telecommuting is possible.

With over 2,200 stores in the U.S., Tractor Supply (TSCO 1.50%) has been and should continue to be the biggest beneficiary of this trend. This is because with more Americans embracing the rural lifestyle, the demand for the company's products has especially shot up in the last few years.

That explains why analysts believe the company's diluted EPS will grow by 10.1% annually through the next five years. Putting this into perspective, that is slightly above the specialty retail industry average earnings growth outlook of 9.4%.

Tractor Supply's 1.8% dividend yield is a bit higher than the S&P 500 index's yield. And considering that the company's dividend payout ratio will be less than 40% for the current fiscal year, this dividend has tons of room for future growth.

Tractor Supply's forward P/E ratio of 20 is much more than the specialty retail industry average forward P/E ratio of 16. But considering its massive tailwinds and remarkable track record of dividend growth, the stock is worthy of such a premium valuation.

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>>> Lowe's: A major player in a trillion-dollar industry


https://www.fool.com/investing/2023/03/18/market-plunge-why-im-loading-up-on-these-2-stocks/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Operating as the second-biggest player in the $1 trillion home improvement retail industry, Lowe's Companies (LOW) has benefited from the emphasis placed on homeownership in North America. It's anticipated that soaring mortgage rates and elevated home values will result in a meaningful slowdown in the housing market.

But the good news for Lowe's is that demographics remain on its side; 72% of the nearly 70 million individuals living in the U.S. who are members of Generation Z intend to buy a home in less than six years. Beyond the near term, this bodes well for the company.

That's why analysts believe that Lowe's non-GAAP (generally accepted accounting principles) adjusted diluted earnings per share (EPS) will compound at 8.8% annually over the next five years. For context, that's about double the home improvement retail industry average earnings growth forecast of 4.4%.

Income investors will appreciate Lowe's 2.1% dividend yield, which is significantly more than the S&P 500 index's 1.7% yield. And because the company's dividend payout ratio was modest at less than 27% in its previous fiscal year, Lowe's appears poised to continue delivering strong dividend growth to shareholders in the years ahead.

The stock is trading at a forward price-to-earnings (P/E) ratio of 13.5, which is well below the home improvement retail industry average forward P/E ratio of 15.9. Given the company's superior growth prospects over industry peers, Lowe's arguably deserves a greater valuation multiple. That's probably why analysts have an average 12-month price target of $229, which represents a 15% upside from the current $199 share price.

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Tractor Supply - >>> This rural-lifestyle retailer is the best performer of these four stocks over the last five years, with a total return of around 280%.


https://www.fool.com/investing/2023/03/21/history-suggests-these-4-sp-500-stocks-could-soar/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Its incredible fourth-quarter report saw sales, same-store sales, and EPS rise by 21%, 9%, and 26%, respectively, proving that its growth in 2021 was more than just a pandemic-aided bump. In fact, the company has reported 31 consecutive years of sales growth, with revenue doubling again in the last six years alone.

Tractor Supply has 28 million members in its Neighbor's Club rewards program, thanks in part to its 25% market share in animal feed. These recurring purchases are crucial for the company's customers, and they help fuel Tractor Supply's stellar ROIC of 37%.

The company's 8% net income margin -- robust for a retailer -- helps to fund its dividend (with a 1.6% yield) and a stock buyback program that has lowered its share count by 20% in the last decade.

On top of this, Tractor Supply trades at a reasonable P/E of 24, making its predictable growth very enticing for investors focused on the long term.

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Costco Wholesale - >>> Costco offers its 123 million cardholding members a slimmed-down assortment of products in bulk quantities, and it has built a wide moat with the outsize cost advantages it has developed.


https://www.fool.com/investing/2023/03/21/history-suggests-these-4-sp-500-stocks-could-soar/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Thanks to the $4.3 billion in membership fees generated over the last year, the world's third-largest retailer has a ROIC of 22%, eighth best (out of 37 stocks) in the S&P 500's consumer defensive sector.

This cost-leadership positioning and strong profitability helped Costco more than triple the returns of the S&P 500 over the last five years.

Trading with a price-to-earnings (P/E) ratio of 36, the stock is not cheap. However, the company increased its dividend (currently yielding 0.7%) for 16 consecutive years -- yet still only uses 26% of its net income to fund these payments, leaving ample room for growth over the long term.

Furthermore, of Costco's 848 stores, only 117 are outside the U.S., Canada, and Mexico, leaving a long international growth runway ahead.

Why does this matter to investors? During its last earnings call, chief financial officer Richard Galanti explained that some of its foreign countries already generate higher profit margins than its U.S. stores. So investors would be wise to add to Costco over time as the company eyes new foreign markets.

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Home Depot - >>> Home improvement giant Home Depot (HD) needs no introduction, as its more than 2,000 stores are likely within a short drive of nearly anywhere in the country. While many consumers know Home Depot as the go-to location for all things home improvement, it also has a large business that caters to professionals hired for home improvement projects.


https://www.fool.com/investing/2023/03/15/3-growth-stocks-to-buy-now-if-interest-rates-remai/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Home Depot is seeing strong performance from its Pro segment. In Q4 2022, Pro sales growth outpaced the do-it-yourself (DIY) segment, and backlogs for the Pro segment remained higher than their historical average. This performance was led by categories one might expect to see in a typical home renovation project like building materials, plumbing, and bath-related items.

Overall, Home Depot had a strong 2022. Revenue increased by 4% and comparable sales grew by about 3%. The company also announced a 10% increase to its dividend, which now yields 2.7%. It has also repurchased more than 1 billion of its shares over the last 10 years, reducing its shares outstanding by more than 30%.

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Tractor Supply - >>> In 2009, the worst year of the Great Recession, Tractor Supply's net sales increased by almost 7%. To be fair, the company's net-sales increase was the result of opening new stores -- it opened 76 that year. By contrast, same-store sales (a measurement of sales at existing locations) fell 1.1%. But that's actually still quite resilient during an economic downturn.


https://www.fool.com/investing/2023/02/23/2-recession-proof-growth-stocks-im-loving-now/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


In my opinion, there's a simple explanation for Tractor Supply's resiliency. In 2009, 39% of net sales were in the livestock-and-pet category -- an expense animal owners will pay even during lean times. And this category is only more important for Tractor Supply now. Investors are waiting on the annual filing for 2022, but livestock-and-pet sales accounted for 47% of sales in 2021.

To put this all into perspective, Tractor Supply's supply chain moved more than 8 billion pounds of animal feed in 2022. To me, that's too much weight for e-commerce companies to want to get involved.

Moreover, on the topic of resiliency, Tractor Supply had over 28 million members in its customer loyalty program at the end of 2022, up 20% year over year. These customers accounted for 75% of the company's sales last year, suggesting its core customer base is a big fan of the brand -- something that can help it remain strong during any potential economic downturn.

With fiscal discipline, ongoing sales growth, and regular share repurchases, Tractor Supply's earnings per share (EPS) are growing at a rate capable of carrying the stock to market-beating gains. Its regular increases to the dividend are generous as well, as the chart below shows.

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Ulta Beauty - >>> Ulta Beauty offers a unique opportunity among cosmetics stocks. The company is a retailer of beauty products, with stores found in strip malls across the country. Its hair salons also help drive traffic into its stores, giving the company an advantage that other brick-and-mortar retailers don’t have, as well as an edge over other beauty retailers such as Sephora.


https://www.fool.com/investing/stock-market/market-sectors/consumer-staples/cosmetic-stocks/


The company has put up steady comparable sales growth over its history and the stock has been a steady winner, up more than 400% over the past decade. Ulta also signed a deal with Target (NYSE:TGT) to open 100 stores inside Target locations over the coming years, providing another avenue for growth for the company.

Like most brick-and-mortar retailers, the company struggled through much of the pandemic, but the business is now on the rebound. Its results are above pre-pandemic levels and on track for record results this year, including close to $15 in earnings per share -- strong EPS growth from before the pandemic.

Considering the broader tailwinds in cosmetics and the company’s unique business model, Ulta seems poised for continued growth.

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Walmart - 10 recession stocks -


https://www.insidermonkey.com/blog/5-companies-and-industries-that-make-money-during-a-recession-1113601/5/


Industry: Hypermarkets and Super Centers


S&P 500 Outperformance in 2008: 56.3%


Walmart Inc. (NYSE:WMT) is a consumer staples company that operates retail, wholesale, and other units globally. It is based in Bentonville, Arkansas.

Ivan Feinseth at Tigress Financial upgraded Walmart Inc. (NYSE:WMT) shares from Neutral to Buy on January 26, with a $176 price target.

Walmart Inc. (NYSE:WMT) falls under the category of discount stores that sell general merchandise. Consumers with limited purchasing power during a recession thus find value in such companies. The company generated a total return of 7.4% between 2007 and 2009. Its stock also outperformed the S&P 500 by 56.3% and 5.1% in 2008 and 2020, respectively.

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Ross Stores - 10 recession stocks -


https://www.insidermonkey.com/blog/5-companies-and-industries-that-make-money-during-a-recession-1113601/3/


Industry: Apparel Retail

S&P 500 Outperformance in 2008: 33.15%


Ross Stores, Inc. (NASDAQ:ROST) operates off-price retail apparel and home fashion stores. The company’s brands include Dress for Less and dd’s Discounts.

An Overweight rating was reiterated on Ross Stores, Inc. (NASDAQ:ROST) shares on January 13 by analyst Adrienne Yih at Barclays.

Between 2007 and 2009, Ross Stores, Inc. (NASDAQ:ROST) generated a total return of 10.1%. The company strives to offer 20%-60% savings on branded clothes compared to department stores. As such, during recessions the company has managed to perform well since it offers consumers a much cheaper alternative for quality clothing when money is tight.

Madison Funds, managed by Madison Investment Management, mentioned Ross Stores, Inc. (NASDAQ:ROST) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“The top five contributors for the quarter were Arch Capital Group, Ross Stores, Inc, Gartner, Markel, and PACCAR. Ross Stores is experiencing a difficult retail environment for the low-end consumer. However, results held up better than expected and the outlook appears to be improving.”

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Home Depot - 10 recession stocks -


https://finance.yahoo.com/news/10-companies-industries-money-during-165619500.html


Industry: Home Improvement Retail

S&P 500 Outperformance in 2008: 23.9%


The Home Depot, Inc. (NYSE:HD) is a consumer discretionary company operating Home Depot stores across the US. The company sells home improvement products, maintenance, repair, and operations products, and much more. It is based in Atlanta, Georgia.

On December 13, Max Rakhlenko at Cowen reiterated an Outperform rating on The Home Depot, Inc. (NYSE:HD) shares. The analyst also raised his price target on the stock from $350 to $379.

Typically, sales for a company like The Home Depot, Inc. (NYSE:HD) would fall during a recession because of decreased consumer spending. However, the company is well-versed in allocating capital in a way that grows its value. Over the past 10 years, the company's profit margin increased from 6% to 11%. The Home Depot, Inc. (NYSE:HD) also outperformed the S&P 500 by 23.9% in 2008. Additionally, in 2020 it was seen that interest rate cuts and a lack of entertainment activities in 2020 actually led to a boom in the housing and home improvement markets. So in 2020, The Home Depot, Inc. (NYSE:HD) outperformed the benchmark index by 5.3% as well.

The Home Depot, Inc. (NYSE:HD), like The Procter & Gamble Company (NYSE:PG), Colgate-Palmolive Company (NYSE:CL), and Walmart Inc. (NYSE:WMT), is a company that has managed to beat the odds during recessions in the past, making it a safe option for investors as well.

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>>> High ROIC Stock #5: Lowe’s Companies (LOW) - Return on invested capital: 56.8%


https://www.suredividend.com/high-roic-stocks/


Lowe’s Companies is the second-largest home improvement retailer in the US (after Home Depot). Lowe’s operates or services more than 2,200 home improvement and hardware stores in the U.S. and Canada.

Lowe’s reported third quarter 2022 results on November 16th. Total sales for the third quarter came in at $23.5 billion compared to $22.9 billion in the same quarter a year ago. Comparable sales increased 2.2%, while the U.S. home improvement comparable sales increased 3.0%. Of note, pro customer sales rose 19% year-over-year.

The company took a $2.1 billion pre-tax non-cash asset impairment charge related to its Canadian retail business. The sale of the Canadian retail business is expected to close in early 2023. Adjusted net earnings, which excludes this significant impairment charge, rose 19.8% year-over-year to $3.27 per share.

The combination of multiple expansion, 6% expected EPS growth and the 2.2% dividend yield lead to total expected returns of 12.6% per year.

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Ulta Beauty (ULTA) - >>> High ROIC Stock #7: Ulta Beauty, Inc. (ULTA)


https://www.suredividend.com/high-roic-stocks/


Return on invested capital: 45.0%

Ulta has significantly impacted the American beauty retail industry with its strong brand power. Currently operating exclusively in the US, the company had planned a Canadian expansion, which was later cancelled before the pandemic outbreak. Ulta’s loyalty program is highly regarded and among the best in the retail sector, a common attribute of the leading retailers that I cover.

As of the latest update, the program had 39 million members, which represents a 9% YoY increase and accounts for roughly a quarter of all women in the US. This group generates 95% of sales and averages $200 of spend per year. The marketing and data advantages provided by this program are immensely valuable and offer a competitive edge for the company.

In the beauty product sales industry, top brands hold significant power and determine the locations where their products are sold. These high-end brands are highly selective, and the long-standing relationships developed over time prevent newcomers and some e-commerce companies from accessing their products. Initially, this may not seem economically feasible. However, the image of luxury products is crucial. This gives Ulta a nearly impenetrable advantage that few retailers can match.

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The TJX Companies (TJX) - >>> In the emerging digital era, The TJX Companies -- parent company of T.J. Maxx, Marshalls, and HomeGoods -- would seem to be an unlikely winner. The retailer is highly reliant on sales from brick-and-mortar stores, which afford a treasure hunt-style shopping experience, and it has unpredictable inventory because it sources excess goods from manufacturers and retailers. Both of these qualities are not particularly well-suited for e-commerce.

While the company struggled through the pandemic, consumers are increasingly shopping in person and still love getting deals on interesting finds. TJX's sales are quickly rebounding, and the company continues to benefit, even in the digital era, from manufacturers' needs to manage (and monetize) their excess inventories. TJX stock is another long-term value play, and it pays a decent dividend to boot.

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https://www.fool.com/investing/stock-market/market-sectors/consumer-discretionary/apparel-stocks/


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>>> Walmart (NYSE:WMT) - Walmart is the world’s biggest retailer, as well as the world’s largest company by revenue. It has many competitive advantages, including economies of scale that work in its favor, a reputation for low prices, and stores within 10 miles of 90% of the U.S. population.

But what makes the company more than just a long-time Dividend Aristocrat is the fact that Walmart is becoming more than just a retailer. The company is leveraging its physical footprint to enter industries such as healthcare by adding health clinics. It also launched a fintech startup in early 2021 and poached two Goldman Sachs (NYSE:GS) executives to lead it. The company has built a formidable e-commerce business that ranks second in the U.S. behind Amazon, giving it a valuable stake in a rapidly growing market. With the company clearly evolving, Walmart could be a much different organization in five or 10 years.

With its reputation for low prices, Walmart is also well-prepared to endure a recession or economic downturn.

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https://www.fool.com/investing/stock-market/types-of-stocks/large-cap-stocks/



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>>> Ulta Beauty, Inc. (ULTA) operates as a retailer of beauty products in the United States. The company's stores offer cosmetics, fragrances, skincare and haircare products, bath and body products, and salon styling tools; professional hair products; salon services, including hair, skin, makeup, and brow services; and nail services. It also provides its private label products, such as the Ulta Beauty Collection branded cosmetics, skincare, and bath products, as well as Ulta Beauty branded products; and the Ulta Beauty branded gifts. It also distributes its products through its website ulta.com; and mobile applications. The company was formerly known as Ulta Salon, Cosmetics & Fragrance, Inc. and changed its name to Ulta Beauty, Inc. in January 2017. Ulta Beauty, Inc. was incorporated in 1990 and is based in Bolingbrook, Illinois.

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>>> Investing in Retail Stocks


Motley Fool

By Timothy Green

Jan 6, 2023


https://www.fool.com/investing/stock-market/market-sectors/consumer-discretionary/retail-stocks/


Many investors buy retail stocks because it gives them opportunities to own parts of the businesses where they shop. But just because you like shopping at a particular store doesn't mean it's a good portfolio investment.

The COVID-19 pandemic benefited some retailers and hurt others. E-commerce sales boomed as consumers avoided stores, and sales of certain products soared. Spending that would otherwise have gone to travel or entertainment funded home improvement projects and electronic gadgets instead.

Retailers battled shortages and supply chain constraints for much of the pandemic as they scrambled to meet consumer demand. That problem has now flipped: Sky-high inflation and recession fears are beginning to change consumer behavior and lead to excess inventory. Retailers that are able to nimbly adapt will thrive in the late-pandemic era.

Let’s delve into some of the top retail stocks and what you need to know about investing in retail companies.

There are hundreds of publicly traded retailers, but these five have risen to the tops of their industries:


1. Amazon

As the preeminent e-commerce retailer, Amazon.com (NASDAQ:AMZN) got started by selling books and now operates a marketplace enabling the online buying and selling of almost everything. Amazon's 2017 purchase of Whole Foods Market also gives it a ready-made network of brick-and-mortar retail stores to further engage customers.

Amazon enjoyed soaring demand in 2020 and 2021 as shoppers shifted their spending online, prompting the company to aggressively expand capacity. Now that demand is cooling, Amazon is focused on boosting productivity and trimming expenses as it runs up against rising supply chain costs.

Amazon’s profits have plunged so far in 2022, but the online retail giant is well-positioned to lead the e-commerce market in the long run. Smaller players without the scale and logistical muscle of Amazon will struggle mightily to cope with surging supply chain costs, and the company also has a highly profitable cloud computing business to help shore up the bottom line.

While Amazon is facing some short-term issues, it’s never a good idea to bet against the e-commerce pioneer.


2. Home Depot

The home-improvement retailer is best known for its big box warehouse stores and extensive inventory. Serving both do-it-yourself homeowners and professional contractors, Home Depot (NYSE:HD) is consistently expanding both sales and earnings. The company has built a substantial e-commerce presence while largely holding would-be competitors at bay.

Home Depot’s sales soared during the pandemic with the sharp rise in consumers taking on home improvement projects. Strong demand for housing is maintaining high sales volumes even as the pandemic subsides in the U.S.

Home Depot certainly faces some headwinds as rising mortgage rates knock down home sales, and inflation may eventually put a damper on demand for home improvement projects. But the company still managed comparable sales growth of 2.2% in the first quarter of 2022. The sales gains Home Depot made during the pandemic haven’t gone away, and the company expects solid comparable sales growth of 3% for the full year.


3. Lululemon Athletica

As a pioneer in athletic clothing, Lululemon Athletica (NASDAQ:LULU) initially focused on making yoga apparel. The company has gradually courted a wider set of customers who want to stay fit and dress comfortably.

Store closures due to the pandemic hurt Lululemon’s results early in 2020, but the retailer has strongly recovered and maintained that momentum into 2022. Comparable sales jumped 28% in the first quarter, with direct-to-consumer sales soaring 32%. Total revenue has more than doubled over the past three years, with the early pandemic proving to be nothing more than a blip in Lululemon’s growth story.

Office workers won’t be going back to uncomfortable clothing after two years of working from home. Lululemon’s apparel has never been more popular, and that popularity looks like it’s here to stay.


4. Ulta Beauty

Tapping into the trend of providing experiences that lure shoppers into stores, Ulta Beauty (NASDAQ:ULTA) offers in-store salon treatments to its customers. The concept has taken off, and its stores were attracting plenty of customers before the pandemic struck.

Ulta’s sales were severely affected by stay-at-home orders in 2020, but the retailer was able to muddle through a difficult year. Sales have strongly bounced back, and Ulta has been enjoying robust growth in 2022. Comparable sales shot up 18% in the first quarter, and transactions jumped 10%.

Total revenue should come close to $9.5 billion this year, based on the company’s guidance, and an operating margin in the mid-teens is a testament to how well the Ulta model works. A recession would likely hurt sales and profits in the short term, but Ulta’s long-term growth prospects are very much intact.

How to identify the best retail stocks

Finding high-quality retail companies requires looking at some key aspects of the company's retail business. The strongest retailers perform well based on these key metrics:

Sales growth

The best retail companies consistently expand the revenue they generate from the products they sell. Retailers can increase sales both by building more stores in new locations and boosting sales at their existing stores.

Same-store sales, or comparable-store sales, is a retail-specific revenue metric that evaluates revenue growth for stores that have been in business for at least a year. The best retailers produce strong same-store sales numbers and robust overall sales growth.

Earnings growth

A retailer can generate revenue but still not be profitable. Most retailers can lower prices or offer promotions that persuade more people to buy more things, but if their prices are too low, they lose money on each sale.

The top retail companies have loyal customers who are willing to pay premium prices, and these companies are also able to minimize costs to maximize profits. Investors should be cautious about buying shares in retailers that struggle to increase their earnings as measured both by absolute values and earnings per share.

Performance during key times of the year

Much retail business is seasonal, and many retailers do a large part of their annual business during the holiday season in November and December. Strong holiday sales can make up for weaker business conditions at other times of the year. Many retailers also offer lucrative promotions to shoppers during the holidays to further boost their seasonal sales.

Although the end of the calendar year is most commonly the high season for retailers, it's not the only one. For instance, retailers that focus on younger shoppers typically see big spikes in sales during the back-to-school season.

Examining sales trends can help you understand the degree to which a retail business is seasonal. Strong performance by a retailer during a key season can indicate that the company is outcompeting its rivals.

Size of store network and real estate holdings

In addition to knowing a retailer's number of stores and its locations, investors can pay attention to retailers' real estate holdings. Retailers that maintain networks of physical stores may have extensive real estate assets.

While maintaining and improving stores can be costly, the retail floor, backrooms, and other spaces that retailers own or lease have value. Even when a company's retail operations aren't particularly profitable, the value of its underlying real estate can comprise a huge portion of the company's overall worth.

Investors can also evaluate how efficiently a retail company uses its real estate. Computing metrics such as sales per square foot can indicate how profitably a retailer leverages the space it owns to sell its products.

Strength of e-commerce sales

Retail companies previously had either physical stores or sold their goods online but rarely both. Today, many companies have both e-commerce portals and brick-and-mortar locations.

As e-commerce has increasingly gained popularity, many retailers' online sales are growing much faster than their overall sales. The best retailers use their network of stores to their advantage by offering services such as in-store pickup and local delivery. Retail businesses without a strong online presence are likely to have increasing difficulty competing with their peers.

Balance sheet strength

When considering investing in a retailer, look for plenty of cash and manageable debt on its balance sheet. The pandemic caused steep sales declines and big losses for portions of the retail sector, and retail businesses that were financially fragile before the crisis have not fared well. Major retailers such as JCPenney and Neiman Marcus were forced to declare bankruptcy, unable to cope with the sudden drop in demand for in-person shopping.

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Costco - >>> Billionaire Charlie Munger on Costco stock: 'I'm a total addict'

99-year-old billionaire and Warren Buffett associate Charlie Munger reiterated his love for Costco stock on Wednesday.


Yahoo Finance

Brian Sozzi

February 15, 2023


https://finance.yahoo.com/news/billionaire-charlie-munger-on-costco-stock-im-a-total-addict-204124054.html


Billionaire investor Charlie Munger reaffirmed his love for one of the world's most well-known value retailers and Yahoo Finance's 2022 Company of the Year — Costco (COST).

"I love everything about Costco," Munger said during The Daily Journal's annual shareholder meeting on Wednesday. "I'm a total addict, and I'm never going to sell a share."

Munger serves as chairman of The Daily Journal and vice chairman of his longtime friend Warren Buffett's Berkshire Hathaway (BRK-A, BRK-B).

The 99-year-old Munger, known for his quick wit on everything from crypto to Elon Musk, has maintained a longstanding relationship with Costco and has repeatedly spoken favorably about the big-box retailer.

Munger has also served as a director at Costco since 1997.

"I wish everything else in America was working as well as Costco does," Munger said at The Daily Journal's annual meeting in early 2022. "Think what a blessing that would be for us all."

Berkshire Hathaway exited its stake in Costco in late 2020 after selling 4.3 million shares, but Munger has retained a personal stake in the company. As of Nov. 2022, Munger directly owned about 187,180 shares of the company worth about $95 million today.

Munger's ownership is second from an individual holder perspective behind longtime Costco CEO Craig Jelinek's 196,095 shares.

Jelinek says Munger has been a huge asset to Costco through the years and not just because of his legendary quick wit — though that has been appreciated too.

"I could share many stories with Charlie," Jelinek told Yahoo Finance Live in December (video above). "Charlie's got a photographic memory."

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Winmark - >>> These 3 Dividend Payers Are Outpacing the S&P 500


Motley Fool

By Collin Brantmeyer

Nov 9, 2022


https://www.fool.com/investing/2022/11/09/these-x-dividend-payers-are-outpacing-the-sp-500-c/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Costco has a history of paying special cash dividends and beating the market.

PepsiCo recently became a Dividend King and has a current yield of 2.5%.

Winmark Corporation is set to pay its third special cash dividend in three years.


In a down year for the market, these three dividend stocks are topping the S&P 500.

It's no secret that investors are disappointed with their returns in 2022, with the S&P 500 down about 20% year to date. For investors looking to beat the market, there's evidence that consistent dividend-paying stocks are likelier to produce higher returns with lower volatility than non-dividend-paying stocks.

Therefore, it may be worth adding these three reliable dividend-paying stocks, which have outperformed the market in 2022, to your portfolio.

1. Costco

Most price-conscious consumers are familiar with Costco (COST -0.45%), the membership-only big-box retailer. Its stock is a favorite among long-term investors for its ability to beat the market and pay dividends consistently. Over the past five years, Costco stock is up 194%, compared to the S&P 500's 47%.

Despite a lackluster 2022 with a negative 14% return, Costco stock is still beating the S&P 500 by about 6%.

On the surface, Costco's quarterly dividend of $0.90, which represents a dividend yield of 0.76%, isn't overly impressive. However, the third-largest retailer in the world is known for paying a special cash dividend about every three years. Its last one came in 2020 at $10 per share.

Costco's balance sheet is also one of the strongest in the retail industry. As of Aug. 31, the company had more than $11 billion in cash and short-term investments, compared to just $6.48 billion in long-term debt. As a result, Costco has a rare negative net debt (cash and short-term investments minus long-term debt), which equates to roughly negative $4.5 billion. By comparison, Costco competitors Target and Walmart have a net debt of approximately $14 billion and $35 billion, respectively.

If Costco stock has a downside, it's unquestionably its valuation. Using the common valuation metric price-to-earnings (P/E) ratio, Costco's P/E ratio is roughly 37, whereas its competitors, Target and Walmart, are 18 and 28, respectively. Still, there's a reason Costco deserves a high valuation: Over the past three, five, and 10-year periods, Costco stock has handily beaten Target, Walmart, and the S&P 500.

Overall, Costco has proven to be one of the safest stocks an investor can own. With an unmatched balance sheet, it should continue paying dividends for years to come.


2. PepsiCo

While PepsiCo's (PEP 0.64%) 4% year-to-date returns wouldn't be impressive in a bull market, the stock is outperforming the overall market by about 25% in 2022. The multinational food, snack, and beverage giant became a Dividend King -- an S&P 500 company that has paid and raised its dividend annually for at least 50 consecutive years -- earlier this year. At that time, it raised its quarterly dividend from $1.075 to $1.15 per common share. The stock's current dividend yield is about 2.5%, considerably higher than the S&P 500's 1.6% dividend yield.

Pepsico is a mature business, and its management focuses on returning cash to its shareholders. In 2022, it will pay cash dividends of $6.2 billion and repurchase $1.5 billion worth of shares, for a combined $7.7 billion.

Beyond PepsiCo's dividend and share repurchases, the company posted revenue of $58.3 billion during the first three quarters of 2022, which represented 7.7% growth year over year. Better yet, the company posted net income of $8.4 billion during that same time period, representing a 33% year-over-year increase from $6.3 billion.

These results show that PepsiCo's snacks and sugary beverages will always be in demand whether the economy is booming or struggling. And as a market leader in the food and beverage industry, PepsiCo stock makes an excellent addition to any investor's portfolio.


3. Winmark Corporation

Winmark Corporation (WINA) is a small-cap stock with a market capitalization just shy of $1 billion. Consumers are likely aware of its franchise-based retail companies that specialize in buying and selling used goods: Music Go Round, Once Upon a Child, Plato's Closet, Play It Again Sports, and Style Encore.

Its stock is essentially flat in 2022, which is still a commendable 20% higher than the S&P 500. Winmark currently pays a quarterly dividend of $0.70 per share, which represents a dividend yield of 1.12%. The company has a history of paying and raising its quarterly dividend each year, dating back to 2010, with the exception of one quarter in 2020 when the COVID lockdowns occurred in the U.S and Canada.

Like Costco, Winmark also has a history of paying special cash dividends. In fact, Winmark is paying $3 per share on Dec. 1, 2022 to all shareholders at the close of business on Nov. 9, 2022. Prior to this-year's special dividend, Winmark last paid a special dividend of $3 per share and $7.50 per share in 2020 and 2021, respectively.

Winmark is incentivized to open more franchises because the company's revenue comes from franchise fees and royalty fees. To open one, a franchisee must pay an initial franchise fee of about $25,000 in the United States and pay 4% to 5% of weekly gross sales.

As a result of Winmark's capital-light business model, the company generated $21.1 million in revenue and $10.3 in net income during its latest quarter. Those figures led to an impressive net profit margin -- net income divided by sales -- of 48%. For comparison, Costco had a net profit margin of 2.5% for its most recent quarterly earnings.

One negative for the otherwise glowing company is Winmark's slow franchise growth. Currently, the company has 1,291 franchises and only opened a net of 22 stores over the past 12 months, representing 1.7% growth. If the company can add more franchises at a faster pace, the stock should continue beating the S&P 500 -- just as it has done for years.

Are these dividend stocks buys?

In uncertain market conditions, dividend stocks can provide some comfort when you see payments hit your portfolio each quarter. Beyond that, if executives know that shareholders expect them to raise the stock's dividend each year, the company may take on less risk.

These three stocks, in particular, have established histories of beating the S&P 500 and should continue doing so -- all while paying you quarterly to hold them in your portfolio.

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>>> Charlie Munger says Costco 'has one thing that Amazon does not'


Yahoo Finance

Emily McCormick

February 24, 2021


https://finance.yahoo.com/news/this-the-the-one-thing-costco-has-that-amazon-lacks-according-to-charlie-munger-200739515.html


Costco (COST) has a leg up on e-commerce behemoth Amazon (AMZN) on at least one measure, according to Charlie Munger, vice chairman of Berkshire Hathaway.

"Costco, I do think, has one thing that Amazon does not," the billionaire investor said during the Annual Meeting of Shareholders of the Daily Journal Corporation (DJCO) in Los Angeles on Wednesday. "People really trust Costco to be delivering enormous values."

"That is why Costco presents some danger to Amazon — because they've got a better reputation for providing value than practically anybody including Amazon," he added.

Munger's comments came shortly after Berkshire Hathaway revealed in November that it had exited its stake in Costco, with the move taking place during a year when Costco's stock price soared to record levels as consumers stocked their pantries during the COVID-19 pandemic. Previously, Berkshire Hathaway had invested in Costco for two decades. The firm sold 4.33 million shares valued at $1.31 billion.

However, Munger has maintained ongoing ties to Costco. Munger has served as a director at Costco since 1997, and has praised the company for its corporate culture over the years. And a filing showed he personally owned more than 186,000 shares of the company as of December.

"It's quite important," Munger said in response to a later inquiry over the importance of evaluating a company's culture in making investment decisions. "Part of the success of a company like Costco — and it's been amazing that one little company, starting up not all that many decades ago could become as big as Costco did as fast as Costco did. And part of the reason for that was cultural. They have created a strong culture of fanaticism about cost and quality and so forth, and efficiency and honor, all the good things. And of course, it's all worked. And so, of course culture is very important."

Munger still had plaudits for Amazon's CEO Jeff Bezos, who is set to depart from the company he founded later this year. However, Munger added that he was not planning on investing in any of Bezos's new, post-Amazon endeavors.

"I'm a great admirer of Jeff Bezos, whom I consider one of the smartest businessmen who ever lived," Munger said. "But I won't be following him. We have our crotchets. And I just don't know enough about it to want to go into that activity."

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[schemingscientist]

From customers' point of view, they are up to date with the latest trends and technologies, since 2019 they offer digital membership cards within the Costco app with a specialized QR code to scan every time you check out. That is great since many buyers were already used to paying like this.

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>>> Amazon Aims to Sublet, End Warehouse Leases as Online Sales Cool

Company wants to shed at least 10 million square feet of space

Amazon spooked investors last month after saying it overbuilt


Bloomberg

By Spencer Soper

May 21, 2022


https://www.bloomberg.com/news/articles/2022-05-21/amazon-aims-to-sublet-end-warehouse-leases-as-online-sales-cool?srnd=premium


Amazon.com Inc., stuck with too much warehouse capacity now that the surge in pandemic-era shopping has faded, is looking to sublet at least 10 million square feet of space and could vacate even more by ending leases with landlords, according to people familiar with the situation.

The excess capacity includes warehouses in New York, New Jersey, Southern California and Atlanta, said the people, who requested anonymity because they’re not authorized to speak about the deals. The surfeit of space could far exceed 10 million square feet, two of the people said, with one saying it could be triple that. Another person close to the deliberations said a final estimate on the square footage to be vacated hasn’t been reached and that the figure remains in flux.

Amazon could try to negotiate lease terminations with existing landlords, including Prologis Inc., an industrial real estate developer that counts the e-commerce giant as its biggest tenant, two of the people said.

In a sign that Amazon is being careful not to cut too deeply should demand quickly rebound, the 10 million square feet the company is looking to sublet is roughly equivalent to about 12 of its largest fulfillment centers or about 5% of the square footage added during the pandemic. In another signal that Amazon is hedging its bets, some of the sublet terms would last just one or two years.

The company declined to say which space it plans to sublet or confirm the amount.

“Subleasing is a very common real estate practice,” spokeswoman Alisa Carroll said. “It allows us to relieve the financial obligations associated with an existing building that no longer meets our needs. Subleasing is something many established corporations do to help manage their real estate portfolio.”

Prologis declined to comment.

Amazon spooked investors last month after reporting slowing growth and a weak profit outlook that it attributed to overbuilding during the pandemic when homebound shoppers stormed online. At the end of 2021, Amazon leased 370 million square feet of industrial space in its home market, twice as much as it had two years earlier.

In the April earnings report, the company said it expected the excess space to contribute to $10 billion in extra costs in the first half of 2022. The company didn’t divulge how much over-capacity it had, where it was located or what it planned to do with it. Subleasing surplus space is one way for Amazon to trim costs on space it no longer needs.

Amazon tasked the real estate firm KBC Advisors to evaluate the warehouse network and determine where to sublet and where to terminate leases, two of the people said. Both options carry costs. Subletting warehouse space requires Amazon to remove all of its equipment so the new occupant can tailor it to their own needs. Lease terminations typically require the tenant to pay a percentage of the rent that would be due over the full term of the agreement.

It shouldn’t be hard to find tenants. The vacancy rate for industrial space is below 4%, an all-time-low, and rents were up 17.6% at the end of 2021, according to a February report from Prologis.

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>>> Here's Why Costco's Competitive Advantage Is So Powerful


Motley Fool

By Neil Patel

May 8, 2022


https://www.fool.com/investing/2022/05/08/why-costcos-competitive-advantage-is-so-powerful/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


The thriving retailer's success can be attributed to one single factor.

When legendary investor Warren Buffett looks for stocks to own, he emphasizes businesses that possess some sort of competitive advantage. This key characteristic is important for long-term investors because it signifies a company does things better than its rivals, resulting in improved financials, faster growth, and hopefully a rising stock price.

Taking a look at Costco (COST 0.36%), we'll see a successful business that has gotten even stronger over time. The operator of warehouse clubs has one critical advantage that has allowed it to thrive throughout its history: its scale.

Let's take a closer look at what makes this company so special.

Costco is a massive business

For the second quarter of fiscal 2022 (ended Feb. 13), Costco posted net revenue of $50.9 billion. This is a gargantuan amount, and it makes the business, which today has 829 warehouses worldwide, the third-largest retailer in the world. Costco's sheer scale is why it has been such an outstanding investment.

Because a Costco location carries fewer than 4,000 stock-keeping units (SKUs) -- compared to tens of thousands at typical general retailers -- it is able to place bigger orders with its vendors. This bargaining power results in favorable inventory costs. A smaller retailer that sells toilet paper, for example, would pay more to its supplier on a per-unit basis than Costco does. This is a huge advantage.

"Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing, and accounts receivable," said CEO Craig Jelinek. "We run a tight operation with extremely low overhead, which enables us to pass dramatic savings to our members."

In summary, higher revenue translates to greater buying power with suppliers. And these savings attract more members, which ultimately results in higher sales. This virtuous cycle is unstoppable, and it's what makes Costco a one-of-a-kind business.

Focusing on the customer

Amazon founder Jeff Bezos built his company with a focus on customer obsession. I think Costco operates with the same playbook. The mentality is to always be trying to find ways to add more value.

As of Feb. 13, Costco counted 114.8 million memberships. In the U.S. and Canada, the renewal rate of 92% last fiscal quarter is excellent. This underscores the unquestionable value that consumers see in being a Costco shopper. Especially throughout the past couple years, having a membership during the pandemic has been a no-brainer, as people could purchase all of their necessities, like cleaning products and groceries, in one stop.

The company offers up a treasure-hunt atmosphere, where shoppers can find rare, unique deals on items that encourages visiting frequently, walking the entire store, and purchasing urgency. Costco is also known for its superb customer service, helping to drive more revenue.

Costco's relentless focus on the customer is clear by the fact that the average markup on merchandise is just 11%, far lower than 24% at Walmart and 35% at Home Depot. Because most of the profit comes from membership fees, which totaled $4 billion over the trailing 12 months, the business is able to keep a lid on prices. Again, it all goes back to Costco's colossal size.

This scenario has resulted in an unmatched customer value proposition. And when shoppers form habits around a business and what it offers, it's hard for that momentum to stop. Costco's massive scale has allowed the company to take care of its employees, customers, and shareholders. This powerful situation is why the stock has climbed 500% over the past decade.

While I think Costco shares are currently on the expensive side, with a price-to-earnings ratio of 40, it still remains one of the most outstanding businesses out there. Investors should keep the stock on their watch lists for now.

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