Despite the resurgence of COVID-19 cases, rising inflation, a slowdown in third-quarter GDP growth, and supply chain logjams, retail sales rose 0.9% month-over-month in August, 0.7% in September, and 0.9% in October.

With declining jobless claims each week and rising consumer spending ahead of the holiday season, the retail industry is expected to continue registering sales growth in the coming months. Indeed, the National Retail Federation (NRF) forecasts holiday retail sales to rise between 8.5% -10.5% during November and December.

Considering the fundamental strength of prominent retail companies Best Buy Co., Inc. (BBY), The Kroger Company (KR), Casey's General Stores, Inc. (CASY), and PriceSmart, Inc. (PSMT), we think their stocks look undervalued at their current price levels. Therefore, these stocks could be solid bets to capitalize on the holiday-season sales growth.

Click here to checkout our Retail Industry Report for 2021

Best Buy Co., Inc. (BBY)

BBY, which is headquartered in Richfield, Minn., offers technology products, services and solutions, and a range of merchandise worldwide. The company also provides consultation, delivery, design, installation, memberships, protection plans, repair, set-up, technical support services, and connected health services for aging consumers. As of January 30, 2021, it had 1,126 large-format and 33 small-format stores.

On September 09, 2021, BBY and Amazon Inc. (AMZN) announced a new lineup of smart TVs with AMZN’s Fire TV built-in from Pioneer Corporation and a forthcoming Toshiba series featuring far-field voice. Both series are optimized for Fire TV’s content-forward approach to entertainment and the always-available intelligence of Alexa to deliver a truly smart TV experience for the living room. BBY is looking forward to seeing high demand for this new lineup of smart TVs this holiday season.

For its fiscal first quarter, ended July 31, 2021, BBY’s revenue increased 19.6% year-over-year to $11.85 billion. The company’s non-GAAP gross profit came in at $2.81 billion, up 23.8% from the year-ago period. Its non-GAAP operating income came in at $821 million, indicating a 39.6% rise from the prior-year period. BBY’s net earnings were $734 million for the quarter, marking a 69.9% year-over-year improvement. Its non-GAAP EPS improved 74.3% year-over-year to $2.98. The company had $4.34 billion in cash and cash equivalents as of July 31, 2021.

Analysts expect the stock’s EPS to improve 23.6% year-over-year to $9.78 in the current year. A  $51.33 billion consensus revenue estimate  for the current year represents an 8.6% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a 7.2% rate per annum over the next five years. Over the past year, the stock has gained 19.8% in price and closed yesterday’s trading session at $132.94.

BBY’s 0.63x forward Price/Sales is 52% lower than the 1.32x industry average. In terms of forward EV/Sales, BBY is currently trading at 0.61x, which is 58.5% lower than the 1.48x industry average.

BBY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an A grade for Momentum, and a B grade for Value, Sentiment, and Quality. Click here to see the additional ratings for BBY’s Growth and Stability. Of the 43 stocks in the B-rated Specialty Retailers industry, BBY is ranked #7.

Note that BBY is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

The Kroger Company (KR)

KR operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses that offer natural food and organic sections, pharmacies, general merchandise, fresh seafood, apparel, home fashion and furnishings, electronics, and automotive products. The Cincinnati, Ohio-based company also sells fuel through 1,596 fuel centers. As of January 30, 2021, the company operated 2,742 retail food stores.

On November 2, 2021, KR and Bed Bath & Beyond Inc. (BBBY), a leading omnichannel retailer for home, baby, and wellness products, announced a strategic collaboration to directly offer BBBY’s selected home and baby products through Kroger.com as well as a small-scale physical store pilot at select KR’s family of stores beginning in 2022.

KR’s sales rose 3.9% year-over-year to $31.68 billion for its fiscal second quarter, ended August 14, 2021. The company’s operating profit came in at $839 million, indicating a 2.3% increase from the prior-year period. The company had $339 million in cash as of August 14, 2021.

Analysts expect KR’s EPS to improve 2.5% year-over-year to $135.78 billion for the current year. The stock has surpassed consensus EPS estimates in each of the trailing four quarters. And analysts expect the stock’s EPS to grow at a 6.9% rate per annum over the next five years. Over the past year, KR gained 35.2% in price and ended yesterday’s trading session at $41.93.

In terms of forward Price/Sales, KR’s 0.23x is 84.7% lower than the 1.50x industry average. And in terms of forward EV/Sales, KR is currently trading at 0.37x, which is 81.8% lower than the 2.03x industry average.

KR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has a B grade for Value and Quality. Click here to see the additional ratings for KR’s Growth, Momentum, Stability, and Sentiment.

KR is ranked #18 of 40 stocks in the A-rated Grocery/Big Box Retailers industry.

Casey's General Stores, Inc. (CASY)

With its subsidiaries, CASY operates convenience stores under the Casey's and Casey's General Store names. Its stores offer a selection of food, including freshly prepared foods, beverage products, health and beauty aids, electronic accessories, housewares, automotive products, and pet supplies. The Ankeny, Iowa-based company's stores also provide motor fuel for sale on a self-service basis, gasoline, and diesel fuel. It also sells tobacco and nicotine products and runs one liquor store and one grocery store. As of April 30, 2021, it operated 2,243 convenience stores in 16 states in the Midwest.

On October 6, 2021, CASY and IRI, a data analytics and market research company focused on consumer-packaged goods, retail, and healthcare companies, expanded their point-of-sale data-sharing partnership to include frequent shopper loyalty program data from CASY’s Rewards. This will provide merchants and supplier partners with data and insights needed to create a differentiated product assortment where the right products are optimally placed, priced, and promoted to drive traffic, revenue, and profitability. This should  enable CASY to elevate its shopping experience.

For its fiscal first quarter, ended July 31, 2021, CASY’s total revenue increased 51.2% year-over-year to $3.18 billion. The company’s adjusted EBITDA came in at $243.19 million, up 2.3% from the prior-year period. CASY had $198.93 million in cash and cash equivalents as of July 31, 2021.

Analysts expect the stock’s EPS to grow 6.1% year-over-year to $8.89 in the current year. An  $11.95 billion consensus revenue estimate  for the current year represents a 37.2% rise from the prior-year period. It surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a rate of 7.4% per annum over the next five years. Over the past year, the stock has gained 6.1% in price and ended yesterday’s trading session at $201.93.

CASY’s 0.62x forward Price/Sales is 58.4% lower than the 1.50x industry average. In terms of forward EV/Sales, CASY is currently trading at 0.75x, which is 63.1% lower than the 2.03x industry average.

It is no surprise that CASY has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Momentum, Quality, and Sentiment. Click here to see the additional ratings for CASY’s Growth, Value, and Stability.

Of the 40 stocks in the Grocery/Big Box Retailers industry, CASY is ranked #17.

PriceSmart, Inc. (PSMT)

PSMT owns and operates U.S.-style membership shopping warehouse clubs that sell brand name and private-label consumer products, fresh produce, prepared foods, and fresh-baked goods, and provides optical, tire center, and other ancillary services internationally. The San Diego, Calif., company also operates Click & Go, an e-commerce platform for online ordering, curbside pickup, and delivery services. As of August 31, 2021, it operated 47 warehouse clubs.

For its fiscal fourth quarter, ended August 31, 2021, PSMT’s total revenues came in at $909.61 million, representing a 12.2% rise from the prior-year period. The company’s operating income was  $32.46 million, up 12% from the prior-year period. As of August 31, 2021, the company had $202.06 million in cash and cash equivalents.

Analysts expect PSMT’s EPS to rise 12.3% year-over-year to $3.57 in the current year. A $3.94 billion consensus revenue estimate for the current year represents an 8.9% rise from the prior-year period. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The company’s EPS is expected to grow at 15% per annum over the next five years. Over the past year, the stock has gained 5.3% in price and closed yesterday’s trading session at $76.55.

In terms of forward Price/Sales, PSMT is currently trading at 0.59x, which is 60.5% lower than the 1.50x industry average. In terms of forward EV/EBITDA, PSMT is currently trading at 0.59x, 70.9% lower than the 2.03x  industry average.

PSMT’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary rating system. PSMT has a B grade for Value and Stability. In addition to the POWR Ratings grades we have just highlighted, one can see PSMT’s Growth, Momentum, Sentiment, and Quality here.

PSMT is ranked #20 of 40 stocks in the Grocery/Big Box Retailers industry.

Click here to checkout our Retail Industry Report for 2021

BBY shares were unchanged in after-hours trading Wednesday. Year-to-date, BBY has gained 34.01%, versus a 25.22% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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