The grocery market is anticipated to grow in 2024, driven by increased retail media ad spend, innovative ad formats, and a flourishing online market. Therefore, investors could consider exploring quality grocery stocks Jerónimo Martins, SGPS, S.A. (JRONY), Natural Grocers by Vitamin Cottage, Inc. (NGVC), and Marks and Spencer Group plc (MAKSY) to safeguard their portfolios.
The stocks have an overall rating of A, equating to a Strong Buy in our proprietary POWR Ratings rating system. They also boast stable dividend payouts and robust profit margins.
In December 2023, U.S. retail sales surpassed expectations, rising by 0.6%, driven by solid performances in clothing stores and online businesses, contributing to a year-over-year growth of 5.6%.
In addition, in 2024, grocers are set to increase digital grocery budgets by 8% to 14% and AI budgets by 14% to 37%, with 83% prioritizing improving integration between brick-and-mortar operations and digital systems.
Besides, the global online grocery market is thriving post-pandemic, driven by changing preferences, e-commerce growth, diverse payment options, and contactless assurances, with grocers adopting click-and-collect and partnering for faster delivery.
The global online grocery market is anticipated to grow at a CAGR of 26.8% from 2023 to 2030.
Furthermore, the rising online sales and a shift to home cooking are transforming the global food and grocery retail market, leading to supply chain changes, new delivery models, and a focus on personalized customer experiences.
The global food & grocery retail market is expected to grow at a CAGR of 3% from 2022 to 2030.
Considering these conducive trends, let’s examine the fundamentals of three Grocery/Big Box Retailers stock picks, beginning with the third choice.
Stock #3: Jerónimo Martins, SGPS, S.A. (JRONY)
Headquartered in Lisbon, Portugal, JRONY is a multinational company specializing in food distribution and retail, with operations in Portugal, Poland, and Colombia. Its diverse portfolio includes popular stores such as Biedronka, Hebe, Ara, and Pingo Doce.
The company pays $1.19 annually, which translates to a yield of 2.58% on the prevailing price level. Its four-year average dividend yield is 2.42%. The company has raised its dividend payouts at a CAGR of 17.9% over the past three years.
JRONY’s trailing-12-month ROTA of 5.72% is 22.7% higher than the industry average of 4.66%. Its 2.52x trailing-12-month asset turnover ratio is 196.5% higher than the 0.85x industry average.
In the third quarter, which ended September 30, 2023, JRONY’s sales and services rendered grew 22% year-over-year to €7.94 billion ($8.65 billion). The company's net profit rose 24% from the prior-year quarter to €207 million ($225.56 million). Moreover, its EPS increased 28.2% from the previous-year quarter to €0.32.
As of September 30, 2023, its total assets amounted to €12.75 billion ($13.89 billion), compared to its total assets of €11.85 billion ($12.91 billion) as of December 31, 2022.
JRONY’s revenue and EPS are expected to grow 17.1% and 23.2% year-over-year to $8.79 billion and $0.63, respectively, for the first quarter ending March 2024. The company surpassed the revenue and EPS estimates in each of the trailing four quarters, which is impressive.
JRONY’s shares have gained 7% over the past three months to close the last trading session at $46.04. It gained marginally intraday.
JRONY’s POWR Ratings reflect its robust prospects. The stock has an overall A grade, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
JRONY has a B grade for Growth, Stability, and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #5 among 38 stocks.
In addition to the POWR Ratings stated above, one can access JRONY’s additional Value, Momentum, and Sentiment ratings here.
Stock #2: Natural Grocers by Vitamin Cottage, Inc. (NGVC)
NGVC is a retailer specializing in natural and organic groceries, supplements, and household items, offering science-based nutrition education programs to customers.
On December 13, 2023, NGVC paid a quarterly cash dividend of $0.10 per common share. The company pays $0.40 annually, which translates to a yield of 2.62% on the prevailing price level. Its four-year average dividend yield is 7.02%. The company has raised its dividend payouts at a CAGR of 12.6% over the past three years.
NGVC’s trailing-12-month return on common equity of 14.23% is 25.6% higher than the industry average of 11.33%. Its 1.71x trailing-12-month asset turnover ratio is 101.1% higher than the 0.85x industry average.
During the fourth quarter, which ended September 30, 2023, NGVC generated net sales of $295.08 million, up 737% year-over-year. The company's net income and net income per share of common stock rose 172.2% and 188.9% from the prior-year quarter to $5.88 million and $0.26, respectively. Moreover, its adjusted EBITDA grew 18.5% from the previous-year quarter to $16.07 million.
For the fiscal year 2024, the company expects its EPS to range between $1 to $1.10.
Analysts expect NGVC’s revenue to grow 5% year-over-year to $1.25 billion for the fiscal year ending September 2025.
The stock has gained 90.8% over the past year to close the last trading session at $15.26
NGVC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value, Stability, and Quality. Within the same industry, it is ranked #3.
To see NGVC’s additional POWR Ratings for Growth and Momentum, click here.
Stock #1: Marks and Spencer Group plc (MAKSY)
Based in London, the United Kingdom, MAKSY operates diverse retail stores, spanning clothing, home goods, and food across segments like UK Clothing & Home; UK Food; and International. Additionally, the company is involved in financial services, renewable energy, real estate, and online retail.
On January 18, 2024, MAKSY planned to invest £30 million ($38.11 million) in Scottish stores, opening and expanding locations in Aberdeen, Dundee, Edinburgh, Largs, and Linlithgow. The investment includes a £15 million ($19.05 million) expansion for the Aberdeen Union Square store, focusing on a fresh market-style food hall.
MAKSY aims to create over 6,500 jobs and bolster its omnichannel strategy in Scotland.
On January 12, 2024, MAKSY paid an interim dividend of 1 pence per share. The company pays $0.03 annually, which translates to a yield of 0.40% on the prevailing price level.
MAKSY’s trailing-12-month asset turnover ratio of 1.36x is 60.1% higher than the industry average of 0.85x%. Its $1.48 billion trailing-12-month cash from operations is 77.9% higher than the $831.14 million industry average.
In the half year ended September 30, 2023, MAKSY’s revenue grew 10.8% year-over-year to £6.13 billion ($7.79 billion). The company’s operating profit and profit for the period amounted to £315 million ($400.13 million) and £206.90 million ($262.81 million), up 83.7% and 24.1% from the previous-year period, respectively. Moreover, its adjusted EPS rose 55.8% year-over-year to 12 pence.
Street expects MAKSY’s revenue and EPS to grow 11.9% and 33.1% year-over-year to $16.51 billion and $0.58, respectively, for the fiscal year ending March 2024.
MAKSY’s shares have gained 68% over the past year to close the last trading session at $6.40.
MAKSY’s POWR Ratings reflect an optimistic outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Stability, Sentiment, and Quality. Within the same industry, it is ranked first.
Click here for MAKSY’s additional Momentum rating.
What To Do Next?
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JRONY shares were trading at $45.09 per share on Monday afternoon, down $0.95 (-2.06%). Year-to-date, JRONY has declined -11.14%, versus a 1.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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