Barring any unexpected dividend hike or some other catalyst, shares of Wal-Mart could be the most vulnerable to the recent payroll tax in that the stock may be flat in the near term. The average income for Wal-Mart shoppers is in the $40,000 range, and the 2% tax hike from 4.2% to 6.2% is likely to hit at the heart of these households, which could in turn hurt Wal-Mart's sales. Meanwhile, shares of Wal-Mart are more pricey than Target on a trailing EPS basis.
Show Me the Growth
Consumers at Target and big-box retailer Costco Wholesale Corporation (NASDAQ:COST) have higher average incomes, which suggests that the higher tax might not hurt top-line growth as much at these retailers. For its part, Costco reported a 7% increase in its January net sales to $9.35 billion. Comparable store sales increased 3% and 4% for U.S. and international operations, respectively.
Costco recently expanded into Gwangmyeong, Korea where it opened up a new location in mid-December. By law, big box retailers are required to close the brick-and-mortar locations two Sundays each month. Based on an update provided by Costco Today on Twitter, sales on the opening day for this location were $1.4 million.
In all of fiscal 2013, Costco plans to open a total of 30 new retail locations, approximately half of which are in the U.S. with the other locations spread across Canada, Australia, Mexico and throughout Asia. Over the past three months, the stock has advanced approximately 6%.
For its part, Costco seems to be rolling with the economic punches rather well. That doesn't take away the fact that in addition to a higher payroll tax, Americans are also paying more for gasoline these days. The price for gas has increased 7% year-to-date to an average of $3.54 per gallon, according to The Wall Street Journal, which represents yet another headwind for consumers and retailers alike.
The article Retailers Roll With the Punches originally appeared on Fool.com and is written by Gerelyn Terzo.
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