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July 27, 2020 08:29 PM AEST | By Hina Chowdhary
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Summary

  • Dollarama Inc and Walmart Canada has captured investor’s attention this week.
  • Dollarama stocks surged after the company released its stellar latest quarter financial report on Tuesday.
  • Walmart Canada stocks trended after it shared the pre-order registration link for PlayStation 5.
  • Both the retail companies emerged victorious in the first half of 2020, even as the overall Canadian retail industry struggled to stay afloat in the pandemic.

Dollarama (TSX: DOL) and Walmart Canada (WMT: US) are two retail stocks that has captured investor’s attention this week. The two retail giants have managed to hush critics with their better than expected earnings and soaring sales in their latest quarters. While the overall retail industry has taken a beating in the ongoing pandemic crisis, these consumer retail chains have managed to emerge victorious in the first half of 2020.

Without any further ado, let us delve right into why these two stocks are trending:

Dollarama Inc. (TSX: DOL)

Dollarama has already earned the precious title of a ‘recession-proof’ or ‘COVID-proof’ stock. This consumer good retail store chain reaped profits in the pandemic and distributed dividends, even as other companies slashed their payout due to the COVID crisis

Dollarama has three wings – Dollarcity (based in Latin America), Dollarama L.P and Dollarama International Inc. Consumers’ rush to stash essential supplies and groceries at home helped the discount stores’ stock surge in value this year. The company’s online wing has also seen significant growth in the COVID period.

Read: 4 Recession Proof Stocks To Build Your Portfolio

Dollarama stocks surged by 1.5 per cent after the company released its stellar latest quarter financial report on Tuesday. The second quarter sales surged by over 7 per cent year-over-year to C$ 1 billion. It reported a profit C$ 142.5 million for the quarter ending August 2, as compared with a profit of C$ 143.2 million in the same quarter last year.

The company also announced the opening of 13 new stores in the latest quarter, taking the overall store count in Canada to 1314.

Dollarama also announced quarterly cash dividend of C$ 0.044 per common share, which is payable on November 6, 2020.

The discount store is currently valued at C$ 15.7 billion. Its shares surged by 1.5 per cent in a day after the financial results went public. The stocks are up nearly 4 per cent month-to-date and 9 per cent quarter-to-date. Dollarama stocks have yielded over 14 per cent returns this year.

It has a current dividend yield of 0.34 per cent, price-to-earnings (P/E) ratio of 29.30 and price-to-book (P/B) ratio of 1699.33. The three- year dividend growth stands at 8.04 while five- year dividend growth is 9.46.

The company recently faced criticism from employee unions, demanding better wages and better working conditions after it stopped the temporary COVID pay.

Walmart Canada (NYSE: WMT)

Walmart needs no introduction. The C$ 414.7-billion retail behemoth is the world’s largest retailer. Its shares are currently trading at C$ 146.44, up over 23 per cent in this year. The shares have advanced by 18 per cent in a quarter and 13 per cent month-to-date.

In its second-quarter earnings, Walmart’s top line surged by 5.6 per cent year-over-year (YoY) to US$ 137.7 billion while operating income went up 8.6 per cent YoY to US$ 6.1 billion.

(Source: Walmart Inc)

Read: Walmart Canada & Canadian Tire- 2 Retail Stocks Investors Are Eyeing in 2020

Walmart distributed US$ 0.54 quarterly dividends while its dividend yield is 1.65 per cent. The current P/E ratio is 22.1, P/B ratio is 5.51 and price-to-cash flow is 12. The return on equity stands at 24.57 per cent while return on assets 7.58 per cent. The three-year dividend growth is 1.62 while five- year dividend growth is 1.82.

Sales in the company’s e-commerce wing grew significantly amid pandemic, while the physical retails stores chains operated with reduced staff.

The retail giant has made substantial investments in the Canadian markets. Earlier this year, Walmart announced US$ 3.5-billion investment, which was in addition to US$ 1 billion investment earlier. The company aims to renovate its stores and enhance the digital and in-store experience for shoppers over the next five years. It is also constructing two massive distribution centers in Vaughan and Surrey and renovating another center in Cornwall.

Read: Walmart Canada Invests $3.5 Billion To Digitize Shopping, Launch New & Upgraded Stores

Walmart Canada was recently recognized by the Council for Supply Chain Management Professionals (CSCMP) as a finalist in the Supply Chain Innovation Award over implementation of world’s largest full production blockchain solution in retail industry. This has led to 97 per cent reduction in invoice disputes and discrepancies between Walmart and its carriers and fully automated back-office functions.

Investors’ interest in Walmart Canada further peaked after its revealed the pre-order registration link for gaming console PlayStation 5. The hype over PS5 has been massive, especially amid pandemic, and Walmart teaming up for the third-party online sale is a move in the right direction.


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