Wal-Mart Stores, Inc. (WMT), Costco Wholesale Corporation (COST): Adding Value to Consumer’s Dollars and Investor’s Portfolios

The current stock price is about 15% lower than its 52-week high of $56.80, which leaves ample scope for an upward movement in its price. Among all the Dollar General Corp. (NYSE:DG) stores, Dollar Tree, Inc. (NASDAQ:DLTR) seems to be the best of the lot.

In a different league altogether

Specialty value retailer Five Below Inc (NASDAQ:FIVE) reported spectacular earnings recently that put it back in the spotlight. The company’s net sales surged 33% to $95.6 million compared to the same period last year. Growth on the bottom line is also great, as the company converted its year-ago deficit into a $0.05 profit, beating analysts’ estimates.

A swiftly growing retailer, Five Below sells mainly fashionable clothing, accessories, and furnishings, for $5 or less. Its business format and merchandise offerings are attracting teens and young adults to its stores by fulfilling their expectations within $5. Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT) may attract customers by being cheap, but Five Below seems to be succeeding with its cheaper chic approach.

Analysts believe that Five Below is very small in comparison to Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT), and would virtually have no effect on them, but it’s eating Target Corporation (NYSE:TGT)’s popularity among young shoppers and Wal-Mart Stores, Inc. (NYSE:WMT)’s future customers if they get too attracted to Five Below.

Five Below operates with only 258 stores at the moment, leaving plenty of scope to grow and reach its 2,000 store mark. The company has raised its guidance for the year in the range of $0.65 a share to $0.68 a share. Currently, Five Below carries a forward P/E ratio of 40, but with 28 straight quarters of same store sales growth and with an expected 30% rise in sales. all seems achievable.

Final words

All retailers have something different to offer to their customers. Costco Wholesale Corporation (NASDAQ:COST)’s deep discount model with an upfront membership fee offers stability to the company’s income stream. Dollar Tree, Inc. (NASDAQ:DLTR) and Five Below are offering select merchandise at an extremely low price point which seems to be working well for both companies. As I see it, these retailers are the best picks, keeping in mind the performance of other retailers.


tarun bachhawat has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale. The Motley Fool owns shares of Costco Wholesale.
tarun is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Adding Value to Consumer’s Dollars and Investor’s Portfolios originally appeared on Fool.com is written by tarun bachhawat.

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