by Alyssa Oursler | September 17, 2012 11:02 am
Seeing big-box discount retailers lining the roads has become commonplace, but 50 years ago it was a novel idea — although still a popular one.
In fact, this year makes it exactly a half-century since three of the biggest names in the business — Target (NYSE:TGT), Wal-Mart (NYSE:WMT) and Sears Holdings‘ (NASDAQ:SHLD) Kmart — all opened their doors.
The rest, as they say, is history. As USA TODAY reports, discount stores were only responsible for 42% of retail sales back in 1967. By 2010, that number had more than doubled to 87%.
And the segment is still growing, too. Since things kicked off in 1962, Wal-Mart added Sam’s Club stores, Costco (NASDAQ:COST) debuted years later, and Amazon (NASDAQ:AMZN) began taking advantage of the trend online. Even now, the original brick-and-mortars Target and Wal-Mart are still looking to move into even more areas, by opening stores in Canada, for example, and squeezing into cities.
Add in the Great Recession, and it’s no wonder that such stores have essentially become a way of life for countless cash-conscious consumers — and thus greatly profitable for countless investors.
Target, for one, has seen gains of more than 26% so far this year thanks to growing profits from discounting incentives and added grocery offerings, on top of its usual mix of designer styles and affordable prices. Plus, it also offers investors steady income in the form of its 2.2% dividend yield.
The company barely edges out long-time rival Wal-Mart in terms of year-to-date gains — and just won the title of “cheapest” last month. Still, Wal-Mart boasts a penny-pinching reputation and downright massive size that draws in plenty of investors. Plus, the blue-chip is a member of InvestorPlace’s Real America Index, representing the state of Arkansas.
And such stores have plenty of reason to celebrate beyond the big 5-0; their upward movement sure looks poised to continue. Retail was strong in the second quarter despite the slow recovery, and the always-busy holiday season is also approaching fast.
This year in particular, the period for holiday shopping is two weekends longer than normal, giving customers even more time to throw around some cash before Christmas — on top of the fact that many believe consumer spending is set to explode as it is.
Looking longer term, though, the real question is what the next 50 years hold. Just because Wal-Mart and friends are seasoned veterans doesn’t mean they can just keep cruising. In fact, if e-commerce indeed begins to gain more traction, they will have to find ways to adapt to make sure the coming fifty years are as successful as the past ones.
But let’s not get ahead of ourselves. For now, it’s a big birthday for these big names and their big gains — and that warrants a celebration.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.
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