Which TSX retail stocks to buy as sales in Canada spike 2.2% in May?

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Which TSX retail stocks to buy as sales in Canada spike 2.2% in May?

 Which TSX retail stocks to buy as sales in Canada spike 2.2% in May?
Image source: © Ipopba | Megapixl.com

Highlights

  • Retail sales grew by 2.2 per cent in May 2022, said Statistics Canada
  • ATD stocks rose by over nine per cent in six months
  • DOL stocks shot up by over 38 per cent in nine months

Retail sales grew by 2.2 per cent to C$ 62.2 billion in May 2022 compared to May 2021, said Statistics Canada in its retail trade report on Friday, July 22. This growth in retail sales figures could spark some interest in TSX retail stocks like Alimentation Couche-Tard (TSX: ATD) and Dollarama (TSX: DOL).

The national data agency pointed that higher sales at gasoline stations, motor vehicles and part dealers largely accounted for this sales growth. Core retail sales, excluding gasoline, vehicles and parts sales, jumped slightly by 0.6 per year-over-year (YoY) cent in May this year. In addition, the report included an advance estimate of 0.3 per cent sales growth in June 2022.

Let us discuss these two TSX retail stocks in detail.

Alimentation Couche-Tard Inc (TSX: ATD)

Alimentation reported total merchandise and service revenues of US$ 3.76 billion in the last quarter of FY2022, noting a one per cent growth relative to the same quarter of 2021. The large-cap retailer said that its total road transportation and fuel revenues climbed 48.2 per cent to US$ 12.37 billion in Q4 FY2022 compared to Q4 2021.

Alimentation added that its total other revenue across all geographies (Canada, US, Europe and other regions) spiked notably by 81.6 per cent YoY to US$ 295.4 million in the latest quarter.

As a result, the retail giant saw its total revenues increase by 34.3 per cent YoY to US$ 16.43 billion in Q1 2022 in the fourth quarter of FY2022.

Retail sales spike by 2.2% in May, says StatCan. ATD and DOL a buy?©Kalkine Media®; @rizelleannegalvez via Canva.com

Now coming to Couche-Tard’s stock performance, ATD stocks rose by over nine per cent in six months and was up by roughly 18 per cent from a 52-week low of C$ 45.23 (March 8). According to Refinitiv findings, this large-cap stock seems to be on a mixed trend since April and recorded a Relative Strength Index (RSI) of 50.56 as of writing on July 22, which denoted a moderate trend.

Dollarama Inc (TSX: DOL)

Dollarama is a C$ 22-billion market cap company that sells general merchandise, consumables and other seasonal products online and offline through a network of discount retail stores. The large-cap retail company said its sales improved to C$ 1.07 billion in Q1 FY2023, denoting a 12.4 per cent surge compared to Q1 2022.

DOL stocks shot up by over 38 per cent in the past nine months, noting a year-to-date (YTD) gain of almost 23 per cent. According to Refinitiv data, DOL stocks seem to be on an upward trajectory, with an RSI of 60.58 on July 22, which shows moderate-to-high momentum.

Bottomline

Investors looking for retail stocks can consider Alimentation and Dollarama for the long run. Alimentation can also offer growth exposure as it recently opened its first electric vehicles (EV) charging site and plans to open more in the future. On the other hand, Dollarama belongs to the consumer defensive sector and could help offset inflationary effects in the long run.

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. 

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