When Donald Trump announced tariffs on China, Canada, and Mexico, stocks of most of the retail stores went down. The tariffs are likely to increase inflation and hurt the country’s economy if they continue for the duration of Trump’s term.
For investors, it is vital to keep an eye on companies that are either taking a hit on revenue directly through tariffs or losing popularity among consumers in the foreign countries involved. Some companies can take a financial hit better than others. Take for instance a company that makes branded clothing. Such a company can raise the prices of its products and its loyal consumers won’t mind. Now imagine a retail store that sells the same product. When consumers see a 10% rise in the price of the product, they blame the store, not the brand. It is the retail store that loses value in this case and that’s why the tariffs hurt them, even if they aren’t directly exposed to China.
We decided to take a look at 8 discount stores as investments in 2025. To come up with our list of 8 discount stores as investments in 2025, we only considered stocks with a market cap of at least $2 billion.
8. BJ’s Wholesale Club Holdings Inc. (NYSE:BJ)
BJ’s Wholesale Club Holdings Inc. manages a membership-based warehouse club chain that offers a wide range of products including general merchandise, groceries, gasoline, and other services. It sells its products through mobile apps and websites, BerkleyJensen.com, BJs.com, and Wellsleyfarms.com.
The company’s stock is trading at all-time highs. The Q3 results showed a 3.7% revenue surge with expanding margins, resulting in an 18% YoY increase in profitability. The strong performance in the first three quarters has meant that the full fiscal 2024 growth targets are now between 2.5% to 3% compared to the previous 1% to 2%. It is this exceptional performance that has seen the stock gain 60% in a year.
On top of the financial performance, the company continues to reward shareholders with buybacks. In November, the company authorized a $1 billion buyback, which was 10% of its market cap at that time. No wonder the stock’s trading at all-time highs. Even the threat of tariffs and inflation hasn’t dented the stock price!
7. Costco Wholesale Corporation (NASDAQ:COST)
Costco Wholesale Corporation operates a membership warehouse club chain that provides private-label and branded products in various merchandise categories. The company offers electronics, hardware, sporting goods, health & beauty aids, and other products.
The stock is already up 13.82% this year and has more than doubled in a year and a half. A stock that has always been considered overvalued is now proving why that’s so. The company commands respect as a stable investment and the stock valuation reflects that.
If investors are waiting for a correction in the stock, they need to think again. After 7 straight sessions of gains, the stock continues to make new all-time highs. The hype isn’t without reason. On February 5th, the company announced its January comparable sales figures and they came in at 7.5%, way ahead of the Bloomberg estimates of 4.9%! If we exclude the negative impact of forex and higher gasoline prices, the figure is even more impressive at 9.8%.
Costco continues to attract significant institutional investment and with a solid business model with a high-margin recurring revenue, it continues to be a great investment for retail investors as well.
Hedge Fund Resource Center