With the holiday season just around the corner, investors are on the lookout for the best retail picks to bet on even as they remain cautious of the overall retail landscape where margins remain squeezed by cut-throat competition.
Over 60 retail giants have gone bust in the past three years and hundreds of underperforming stores are getting shuttered each quarter. Therefore, the filtering process can turn out to be quite cumbersome.
However, there are two retail winners that you can definitely bet ahead of the earnings season. The two companies have also gained the trust of rating firm Moody’s, which expects them to outperform in 2019 as well.
Walmart
If there is one retailer that is best competing against the e-commerce mammoth Amazon (AMZN), it’s Walmart (WMT). To ward off competition from Amazon, the big box retailer had rolled two-day shipping as well as buy-online-get-offline facilities.
With the annexation of Flipkart and Jet.com, Walmart has upped its ante in the digital space with more success than any of its peers. Walmart is also the retailer that is offering items at the shortest price gap with Amazon on its online store. In the home storage and baby categories, Walmart even scores better than Amazon, according to a study by analytics firm Profitero.
In the recent second quarter results, Walmart reported 40% growth in e-commerce sales, which is incredible. What is better is that the retailer expects to post 40% growth for the who year also. Keeping aside these factors, Walmart also makes up a good dividend stock, with a current yield of 2.2%.
Costco
Thanks to its membership-based model, Costco (COST) looks healthier than its peers in the current retail landscape. Somewhat similar to Netflix (NFLX), Costco has managed to build a loyal customer base who are ready to pay higher for its subscription.
Despite raising its subscription fees, Costco improved renewal rates to over 90% in the most recently reported quarter. Customer footfall, meanwhile, increased 5%. In the trailing four quarters, Costco has reported comparable sales growth of over 6%, hitting double-digits twice – a milestone.
As other retailers squeeze their margins to give more discounts, Costco sits comfortably on top of a hiked membership revenue, targeting a higher market share, as the holiday season ushers.
