When you think of core items that every family needs: household goods, food, beverages, hygiene products and other items we can't live without no matter what's going on in the world and no matter how high inflation gets, grocery store stocks may come to mind.
Goldman Sachs NYSE: GS has projected a 6% leap in food commodity prices and increasing costs of some farming inputs. Grocery prices in the consumer price index have gone up a whopping 11% over the past two years.
Why buy grocery store stocks? Consumer staples can maintain a steady presence as other sectors of the market suffer. Let's go over why you might want to buy them and three stocks to choose from this month.
Why Buy Grocery Store Stocks?
Consumer staples, including grocery store stocks, can boost portfolio diversification, offer steady growth, give you solid dividends and low volatility. Grocery stocks offer a built-in natural bear market defense due to strong demand. Grocery stores' currently inflated grocery prices means you can also capitalize on costs passed on to consumers. Look for grocery store stocks with competitive advantages over competitors and growth-oriented trajectories.
4 Grocery Store Stocks to Boost Your Portfolio
So, which grocery store stocks might you want to add to your portfolio? Let's throw four options into the hat so you can see whether they might work for you.
Albertsons Companies Inc., headquartered in Boise, Idaho, operates food and drug stores that offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other services. The company operates over 2,000 stores, including the following:
- Albertsons
- Safeway
- Vons
- Pavilions
- Randalls
- Tom Thumb
- Carrs
- Jewel-Osco
- Acme
- Shaw's
- Star Market
- United Supermarkets
- Market Street
- Haggen
- Kings Food Markets
- Balducci's Food Lovers Market
The company operates over 1,500 pharmacies, 1,200 in-store branded coffee shops, 400 adjacent fuel centers, 22 distribution centers and 20 manufacturing facilities.
In Q3 of fiscal 2021, identical sales increased 5.2% and digital sales increased 9%. On a two-year stacked basis, the company reported digital sales growth of a whopping 234%. Net income was $425 million and adjusted net income was $457 million.
Net sales and other revenue amounted to $16.7 billion during the 12 weeks ended December 4, 2021 compared to $15.4 billion in 2020. The company said retail price inflation and COVID-19 vaccines contributed to the increase.
Adjusted net income was $457.2 million during Q3 of fiscal 2021 compared to $386.6 million during Q3 of fiscal 2020. Adjusted EBITDA was $1,051.2 million, or 6.3% of sales, during the Q3 of fiscal 2021 compared to $967.7 million, or 6.3% of sales, during Q3 of fiscal 2020.
Target Corporation, headquartered in Minneapolis, Minnesota, operates and owns general merchandise stores across the country, including food assortments including perishables, dry grocery, dairy and frozen items.
In Q4 2021, Target Corporation's comparable sales grew 8.9%, on top of 20.5% in Q4 2020.
Target delivered $106 billion in total revenue in 2021, after growing nearly $28 billion, or more than 35% over the past two years. Comparable sales for the full year grew 12.7% on top of 19.3% in 2020.
Target's total sales have grown more than $27 billion since 2019, which amounts to $14 billion of additional store sales and digital sales growth of nearly $13 billion. All five core merchandise categories delivered double-digit comparable sales growth in 2021.
Costco Wholesale Corp., headquartered in Issaquah, Washington, operates membership warehouses and sells food and sundries, fresh foods and more through its United States operations, Canadian operations and other international operations segments.
Recent results reflect the following: For the second quarter and the first 24 weeks of fiscal 2022, net sales for the quarter increased 16.1% to $50.94 billion, from $43.89 billion last year. Net sales for the first 24 weeks increased 16.4%, to $100.35 billion, up from $86.23 billion last year.
Net income for the quarter was $1,299 million compared to $951 million. This was $246 million pretax and $0.41 per diluted share in costs incurred primarily from COVID-19 premium wages.
In February, Costco reported net sales of $16.29 billion, an increase of 15.9% from $14.05 billion last year. For the 26-week period ended February 27, 2022, net sales were $108.39 billion, an increase of 16.3% from $93.16 billion last year.
While not technically a grocery store, we're adding on DoorDash Inc. for good measure.
DoorDash Inc., headquartered in San Francisco, is a platform that connects merchants, consumers and dashers. It offers customer acquisition, delivery, insights and analytics, merchandising, payment processing, and customer support. The company ultimately offers consumers on-demand access to e-commerce.
DoorDash showed Q4 key financial metrics of revenue that grew 34% year-over-year to $1.3 billion. Total orders grew 35% year-over-year to $369 million and marketplace GOV grew 36% to $11.2 billion.
GAAP gross net profit of $637 million obscured last year's reports of $477 million. However, there was a GAAP net loss of $155 million compared to net loss of $312 million in Q4 2020. Adjusted EBITDA was $47, a decline of $94 million in Q4 2020.
Put Grocery Store Stocks into Your Portfolio
When you're combing through staples to add to your portfolio, don't overlook the stores that actually provide the consumer staples.
Expect to see continued technological changes in grocery stores, such as cashier-free stores and advanced AI technology. Also, don't forget to look for strong dividend growth and competitive advantages among the grocery stores you think you might want to add to your list. Noticing potential upsides will only increase your advantages over the long term.
Before you consider Costco Wholesale, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Costco Wholesale wasn't on the list.
While Costco Wholesale currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Need to stretch out your 401K or Roth IRA plan? Use these time-tested investing strategies to grow the monthly retirement income that your stock portfolio generates.
Get This Free Report
