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These Club consumer stocks stand to gain as customers economize
Cost-conscious shoppers continue to seek discounts amid the ongoing economic uncertainty, which bodes well for three Club retailers that offer a high-value proposition to shoppers. Consumers looking to save money are scaling back on big-ticket discretionary purchases, while spending at Club name Costco Wholesale (COST) continues to thrive. Jim Cramer on Thursday described the membership-only retailer as “one of our strongest stocks” in the portfolio. Costco’s net sales for July increased 4.5% year-over-year, to $17.6 billion, the company reported on Wednesday. Excluding impacts from changes in gasoline prices and foreign exchange, total company core-comparable sales were up 5% on an annual basis last month. That’s lighter than Telsey Advisory Group’s 7.2% projection but still “solid in this tough economic environment,” the analysts said in a note Thursday. While on-site traffic remained robust at Costco stores, comparable sales were held back by fewer discretionary purchases, lower gas prices and slower inflation for food and sundries compared with the month prior. Still, Costco “should remain a market share gainer with its value-focused merchandising and high member loyalty,” according to analysts at TAG. Analysts at UBS believe the wholesale retailer’s monthly sales were stable given the “greater degree of competitive pressure” from recent big sales events like Amazon ‘s (AMZN) Prime Day and Target ‘s (TGT) Circle Week. Costco’s “stronger than expected results are a signal it continues to take share in this difficult consumer environment,” analysts at UBS wrote in a note. Meanwhile, the Club’s alcoholic beverage maker, Constellation Brands (STZ), has been a favorite among consumers lately, with Modelo Especial rising to the No. 1 beer slot in the U.S. Quarterly results from rivals Anheuser-Bush Inbev (BUD) and Molson Coors (TAP) this week showed consumer demand for beer in the warm summer months remains strong, which likely spells good news for Constellation and its stock price. Constellation delivered a strong fiscal first quarter on June 30 with a compelling outlook that prompted us to raise our price target on the stock to $270 a share, from $260. Elsewhere, multinational consumer staples giant Procter & Gamble (PG) delivered a solid fiscal fourth-quarter last week, with resilient organic sales growth and narrowing volume declines. This “improved execution on delivering balanced growth,” is the result of the company’s strategy to meet consumer demand, while maintaining premium prices for its products, analysts at Raymond James said in a recent research note. P & G has been able to successfully execute on its pricing power by continuously innovating around its core consumer products like Tide and Gillette, according to Atlantic Equities. This strategy offers higher value proposition to customers, allowing the company to raise prices while still maintaining customer engagement. P & G’s has “cracked the code on how to deliver reliable and consistent growth,” analysts at Atlantic Equities wrote in a note. Bottom line Costco’s monthly sales results show that the consumer is still pulling back on larger discretionary purchases, which is expected given persistent inflation. At the same time, rising traffic means the wholesale retailer continues to gain market share. Readthroughs from Constellation’s competitors Anheuser Bush and Molson Coors offered further insight into the latest beer trends. Constellation’s beers continue to be at he top of the list for consumers, allowing the company to maintain its spot as the No. 1 high-end beer supplier and share gainer in the U.S. beer market. The key to the next leg in an STZ rally is seeing what activist investor Elliott Management can do to help the company create more shareholder value. Procter & Gamble, meanwhile, has consistently executed on its innovation strategy contributing to its impressive momentum during a time when consumers are paying close attention to prices. (Jim Cramer’s Charitable Trust is long COST, STZ, PG. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Customers wait in line to check out purchases at Costco store on June 28, 2023 in Teterboro, New Jersey. Costco is cracking down on membership card sharing at its stores.
Kena Betancur | Corbis News | Getty Images
Cost-conscious shoppers continue to seek discounts amid the ongoing economic uncertainty, which bodes well for three Club retailers that offer a high-value proposition to shoppers.
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