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How These 3 Discount Retailers Fared The Holiday Season

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Although the holiday season turned out to be a blissful one for some retailers, there were others that did not fare well. Notably, a robust consumer environment on account of strong job picture, higher disposable income and improved consumer confidence worked in favor of retailers. However, stiff competition from e-commerce players such as Amazon (AMZN - Free Report) and a persistent struggle to cope up with rapidly changing consumer trends might have taken a toll on the performance of some retailers.

In fact, Americans were in the mood to spend, as retail sales from Nov 1 through Dec 24 increased 5.1% to more than $850 billion, per a report from Mastercard SpendingPulse. Let’s take a closer look at the performances of the three discount retailers during the festive season — Target (TGT - Free Report) , Costco (COST - Free Report) and PriceSmart (PSMT - Free Report) .

Target Posts Solid Holiday Comps

Target joined the bandwagon of retailers that have witnessed strong holiday season sales. Comparable sales for this general merchandise retailer rose 5.7% in the combined November/December period buoyed by robust traffic, favorable store comps and a surge of 29% in comparable digital sales. Markedly, comps grew across all five key merchandise categories, with Toys, Baby and Seasonal Gift products witnessing exceptional growth.

Notably, Store Pickup plus Drive Up soared more than 60% year over year, and formed nearly 25% of Target’s digital sales during the reported period. In fact, management anticipates 2018 to be the company’s fifth straight year to showcase digital sales growth of more than 25%.

Target is trying all means to rapidly adapt to the changes in the retail ecosystem, which is increasingly inclining toward digitalization. Initiatives such as the development of omni-channel capacities, coming up with new brands, remodeling or refurbishment of stores, and expansion of same-day delivery options bode well for this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Costco Reports Decent Comps Performance

Costco has been also a beneficiary of a favorable retail environment. The company’s better price management, strong membership trends and increasing penetration of e-commerce business are also leading to impressive comparable sales run that may continue in 2019. In fact, its strategy of selling products at heavily discounted prices has helped this Zacks Rank #3 company to remain on growth track.

This operator of membership warehouses continued with its decent comparable sales trend in the month of November as well December, which is the most crucial part of the year for retailers. Comparable sales rose 9.2% and 6.1% during November and December period, respectively. Meanwhile, comparable e-commerce sales for the respective months surged 46.1% and 13.6%.



PriceSmart Did Not Fare Well

PriceSmart, which owns and operates membership shopping warehouse clubs, registered net merchandise sales increase of 0.9% during the month of December, which follows a decline of 1% in the preceding month. We note that comparable net merchandise sales of this San Diego, CA-based company jumped 0.4% in December following a decline of 2.8% in the month of November.

Further, this Zacks Rank #3 company recently came out with first-quarter fiscal 2019 results, wherein earnings of 69 cents a share outpaced the Zacks Consensus Estimate of 52 cents. However, the bottom line declined 6.8% on a year-over-year basis owing to costs related with Aeropost and omni-channel development initiatives. Total sales grew 1.6% to $779.6 million but fell short of the Zacks Consensus Estimate of $795 million.

We note that shares of Target, Costco and PriceSmart have gained 6.1%, 4.4% and 4.7%, respectively, compared with the industry’s growth of 7.2% in a month.

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