US retail stocks less appetizing amid stubborn inflation

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High inflation is discouraging shoppers from filling their baskets. So, how should investors trade America’s big retailers? IGTV’s Angeline Ong takes a look at Walmart, Target, Best Buy, Costco, and Dollar Tree.

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Thursday 02 March 2023 

Red hot inflation

Sky high inflation is hurting consumer's wallets and US retailers are feeling the pain. Lets take a look at where we stand, starting off with Walmart Inc (All Sessions)'s shares here. It sees a weak fiscal profit for 2024. Let's take a broader view of its shares. As you can see here, where my cursor is, we're seeing lower lows and there's a brief tick up there to the 14,680 level. But, then we are back down here seeing another low of around 13,955.

Competitors

Target seeing a similar trend there. As you can see now, Target Corp itself has been cutting prices to try to lure people in. And as a result, it is sapping its margin. So, no surprise that Target is saying that it is forecasting dull profits, in their words, not mine. Best Buy Co Inc (All Sessions) has been trying to put out those discounts to try and get people in to buy those electronics that flew off the shelves during the pandemic. As you can see from my chart and the trend line, it is firmly on a downward trend. We're seeing lower lows being achieved there as well. This pain isn't actually something that is being seen just in the United States. It's somewhat of a global trend driven by high inflation, sticky red hot inflation, which is then forcing people to hunt for bargains. So where is the salad dressing?

Adapt to survive

Look out for those retailers that are adapting. Grocery, fresh food and fuel offerings tend to do well. Have a look at Costco Wholesale Corp, its probably not affected as much as its other peers and has seen less of a fall. But also look out for those discounters like Dollar Tree, because Dollar Tree Inc has also had to adapt. If you remember, it's dropped its longstanding $1 policy back in November 2021, but it said it's going to focus more on $3 to $5 items. And just to underline how tough this entire industry is for retailers out there in the US, Dollar Tree, which is like Poundland in the U.K., is suffering so much so that it too, has had to forecast annual profit that is well below estimates.