Kalkine Media picks DOL to GBT: 5 TSX retail stocks to watch right now

Highlights

• The TSX Consumer Discretionary Index jumped by about 12 per cent quarter-to-date
• The TSX Consumer Staples index soared by over seven per cent during this quarter
• Dollarama scrip ticked up by almost 45 per cent in 12 months

Canadian investors focused on quality returns can explore consumer stocks related to the retail sector like Dollarama (TSX: DOL), North West Company (TSX: NWC), Aritzia (TSX: ATZ), etc.

Canada's Consumer Discretionary Index jumped by about 12 per cent quarter-to-date (QTD) amid the volatile market environment. In comparison, the TSX Consumer Staples index soared by over seven per cent during this time. According to Statistics Canada, retail sales rose by 1.1 per cent to C$ 63.1 billion in June this year, compared to May this year. However, unofficially the agency estimated retail sales to decline by two per cent in July (actual retail sales data to be out on September 23).

Hence, Kalkine Media® brings to your attention the following five TSX retail stocks that investors can explore for long-term gains.

1.     Dollarama Inc (TSX:DOL)

Dollarama saw a double-digit spike of 18.2 per cent in its sales to C$ 1.21 billion in the second quarter of fiscal 2023, relative to Q2 FY2022. The discount retail store chain operator said that this sales growth comprised a 13.2 per cent surge in comparable store sales.

Moreover, Dollarama noted its operating profit swell by 30.3 per cent year-over-year (YoY) to C$ 287.4 million in the second quarter of this fiscal year. The net new stores opened during Q2 FY2023 were 13, the same as Q2 FY2022.

Dollarama also saw an increased net income of C$ 193.5 million in the latest quarter than C$ 146.2 million in the second quarter of FY2022. Further, on September 9,  the consumer defensive company declared a quarterly cash dividend worth C$ 0.0553, scheduled to be paid on November 4 this year.

Dollarama scrip ticked up by almost 45 per cent in 12 months. As per Refinitiv findings, the DOL scrip had a Relative Strength Index (RSI) value of 55.31 on Friday, September 9, reflecting moderate momentum.

2.     North West Company (TSX:NWC)

North West Company is a C$ 1.61 billion market capitalization company with retail footprints. The small-cap retailer said its total sales rose by 2.4 per cent to reach C$ 578.9 million in Q2 2022 compared to the same quarter a year ago.

The company revealed that a sales surge helped this sales increase in the latest quarter in International Operations. Further, the impacts of foreign exchange on the translation of International operations sales also supported sales in Q2 2022.

However, the retailer saw its gross profit reduce by three per cent in the latest quarter resulting from changes in sales blend, high freight and merchandise cost inflation.

North West's net profit shrunk to C$ 32.4 million in the second quarter this year than C$ 42.4 million in the same period last year. Despite this, North West will dole out an increased quarterly dividend of C$ 0.38 on October 14, higher than the C$ 0.37 paid previously.

North West stock decreased by almost two per cent in value. The NWC stock, however, on September 9, closed higher at C$ 33.6, denoting a single-day increase of over five per cent. The NWC stock's RSI value stood at 44.69 this day, representing a medium trend.

3.     Metro Inc (TSX: MRU)

Metro stated that its sales remained 'strong' in Q3 FY2022 and stood at C$ 5.86 billion, denoting a 2.5 per cent increase from Q3 2021.

The company said its operating profit before depreciation and amortization reached C$ 565.1 million in the third quarter this year, noting a 5.9 per cent jump over the third quarter last year.

As a result, the Canadian grocery retailer reported a net profit of C$ 275 million in the latest quarter, nine per cent higher than C$ 252.4 million in the third quarter a year ago. Metro is set for a quarterly dividend pay-out of C$ 0.275 on September 21.

Metro stock shot up by nearly 14 per cent. According to Refinitiv data, the MRU stock noted an RSI value of 58.61 on September 9, interpreting a medium-to-high trend in the stock market.

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4.     Aritzia (TSX:ATZ)

Aritzia is a C$ 5.24 billion market capitalization retailer operating in the fashion industry. The company stated that it achieved a comparable sales surge of 29.4 per cent YoY in the first quarter of 2023, which derived a net revenue growth of 65.2 per cent to C$ 407.91 million in the latest quarter C$ 246.91 million in Q1 2022.

Aritzia's net profit expanded by 85.8 per cent to C$ 33.26 million in the first quarter this year than C$ 17.9 million in the previous year's first quarter.

Aritzia stock jumped by over four per cent to C$ 47.67 at market close on September 9. The mid-cap stock zoomed by almost 37 per cent in three months. Based on Refinitiv findings, the ATZ stock had an RSI value of 66.74 on September 9, reflecting a bull trend.

5.     BMTC Group (TSX:GBT)

BMTC Group is a C$ 491.2 million market capitalization firm headquartered in Montreal, operating a retail sales network of furniture, household, and electronic appliances.

BMTC said its revenue decreased by 3.5 per cent to C$ 394.59 million in Q2 2022 than C$ 408.83 million in the same period of 2021. The small-cap retail network operator also noted a decline in net profit to C$ 15.05 million in the second quarter this year compared to C$ 39.16 million in the prior year's second quarter.

On September 9, the GBT stock recorded an RSI value of 48.98 (symbolizing a medium trend), as per Refinitiv data. BMTC Group doles out dividends on a half-yearly basis.

Bottom line

Investors looking for retail stocks can explore the TSX consumer stocks mentioned above. All these Canadian stocks, except Aritzia, declare dividends for their holders. However, changes in consumer behavior and preference, economic environment, etc. are some factors to keep in mind while exploring these retail stocks.

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.