Kalkine Media explores 5 TSX retail stocks to watch before Christmas

Canada’s retail sector forms a crucial part of the economy. Even during the pandemic, the sector was catering to consumer needs. Rather, retail chains are becoming adaptive to the changing internet trends.

The economic situation is continually evolving. Reportedly, in September 2022, retail sales decreased by 0.5 per cent and were reported at C$ 61.1 billion. However, retail sales increased by 1.5 per cent in October, according to a Statistics Canada report. Amid the rise, some companies may thrive to sustain themselves while some of them may surrender. The investor must work on the overall factors to select the right stock. With opportunities, there may be challenges too.

Prepare yourself and move ahead with proper research. Even before the uncertainty arrives, safeguard your portfolio with substantial research and analysis. Look for the existing as well as the past market trends. Moreover, focus on changing consumer behaviours. Analyzing all the factors may provide clear insights for your future investment strategy.

Amid the sales rise, here are five retail stocks to assess along with their recent financial highlights:

1. Aritzia Inc. (TSX: ATZ)

As a fashion brand house, Aritzia Inc. offers several products such as jackets, coats, sweaters, skirts, trousers, blouses, jumpsuits, shorts, and accessories. The company sells these products under its Aritzia banner and has a presence in the US and Canada.

In Q2 FY 2023, Aritzia’s gross profit soared to C$ 220.27 million from C$ 156.19 million in the year-ago quarter. The net income increased and was posted at C$ 46.26 million versus C$ 39.84 million for the same comparable period. The company’s revenue also increased to C$ 525.52 million from C$ 350.06 million. The EBITDA jumped to C$ 82.56 million from C$ 72.89 million. The company’s EPS is C$ 1.62.

2. Dollarama Inc. (TSX: DOL)

Dollarama Inc. offers general merchandise, seasonal items, and everyday consumer products as a discount retail store. The company is Canada-based and operates with a total employee strength of 24,190. The company’s major revenue comes from consumer products and general merchandise.

Dollarama’s sales in Q2 FY 2023 rose to C$ 1,217.06 million from C$ 1,029.34 million in the year-ago quarter. The gross profit increased to C$ 530.03 million from C$ 446.66 million for the same comparative period. Meanwhile, the operating income increased to C$ 287.4 million from C$ 220.48 million. The company’s net earnings grew to C$ 193.47 million from C$ 146.22 million for the reported quarter. The EBITDA increased and was noted at C$ 369.38 million versus C$ 293.66 million.  

Dollarama distributes a quarterly dividend per share of C$ 0.055 and reported a dividend yield of 0.277 per cent. The company’s past five-year dividend growth was noted at 8.71 per cent. The EPS is C$ 2.52.

On November 23, 2022, Dollarama’s stock price was at C$ 79.86 and witnessed an increase of 79.86 per cent within 12 months. 

3. George Weston Limited (TSX: WN)

George Weston Limited operates in real estate and retail through its subsidiaries- Choice Properties (real estate investment trust) and Loblaw (Canada-based grocer). The company has 53 per cent and 62 per cent controlling stakes in Loblaw and Choice properties, respectively.

In Q3 2022, George Weston’s revenue grew to C$ 17,520 million from C$ 16,192 million in Q3 2021. The operating income soared to C$ 1,474 million from C$ 1,125 million for the same comparable period. The adjusted EBITDA rose to C$ 1,951 million from C$ 1,780 million. With an EPS of C$ 9.11, the company paid a quarterly dividend per share of C$ 0.66.

On November 23, 2022, George Weston’ stock price was C$ 165.9 and jumped by 18.1 per cent within 12 months.

4. Alimentation Couche-Tard Inc. (TSX: ATD)

Alimentation Couche-Tard Inc. offers tobacco, beverages, groceries, fresh food, car wash services, retail products, marine fuel, etc. through its network of convenience stores. The company’s a presence in is in Russia, North America, Poland, Ireland, and Scandinavia. In addition, the company operates under Circle K banner in Malaysia, Egypt, and China.

In Q2 of FY 2023, Alimentation’s total revenue increased to US$ 16.87 billion from US$ 14.21 billion in Q2 2022. The total gross profit rose to US$ 2,860.2 million from US$ 2,588.2 million for the same comparative period. Meanwhile, the operating income jumped to US$ 1,093.7 million from US$ 938 million.

The company’s net earnings also increased and were reported at US$ 810.4 million compared to US$ 694.8 million for the reported quarter. The EBITDA rose to US$ 1,449.7 million from US$ 1,275.3 million. Alimentation distributed a quarterly dividend of 0.11 per share to its shareholders.

5. Loblaw Companies Limited (TSX: L)

The Canada-based Loblaw Companies Limited is engaged in pharmacy, grocery, and general merchandise retailing. It has its presence in Quebec, British Columbia, and Ontario. Additionally, Loblaw operates in the financial services business and provides guaranteed investment certificates and credit card services.

In Q3 2022, Loblaw’s operating income rose to C$ 991 million from C$ 863 million in the year-ago quarter. The revenue jumped to C$ 17,388 million from C$ 16,050 million for the same comparable period.

Meanwhile, the adjusted EBITDA grew to C$ 1.84 billion from C$ 1.67 billion. The company reported a dividend yield of 1.383 per cent and its EPS is C$ 6.4.

Loblaw’s Gross profit in two different quarters:

Bottom Line

Every investor is striving to attain stability. The investment strategy may differ from investor to investor, but the goal remains the same. While operating in the market, look for the stocks that suffice your portfolio purpose and lead to its stability. You may work on risk mitigation strategies to have lesser impacts.

Diversification is one of the options to minimize risk and pave the way for a well-balanced portfolio. But it is crucial to calculate the risk for an effective stock selection.

In addition to this, giving weightage to portfolio repositioning is also important. Align your stocks with your goals regularly to stay updated with the changing trends. 

Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.