3 Grocery Stocks to Fill Your Cart With Steady Gains


  • Here’re three grocery stocks that offer stability and growth potential in the second half of 2024.
  • BJ’s Wholesale Club (BJ): A niche player with a loyal customer base and a focus on value, it has successfully capitalized on the increasing popularity of warehouse club shopping.
  • Walmart (WMT): Management has been successfully navigating the retail landscape, leveraging its e-commerce capabilities and diversifying its business model to drive growth.
  • iShares U.S. Consumer Goods ETF (IYK): In addition to offering a solid dividend yield, this ETF offers instant diversification through top consumer goods stocks.
Grocery Stocks - 3 Grocery Stocks to Fill Your Cart With Steady Gains

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Today, we spotlight three grocery stocks to buy. These Wall Street shares benefit from their defensive nature, providing stability during market volatility. Over time, sales of groceries have consistently grown, even as other household expenditures have declined in terms of economic uncertainty.

From 2019 to 2023, the food and grocery retail market saw a 5.3% compound annual growth rate (CAGR). Changing consumer preferences, population growth and new shopping habits have all contributed to this increase. Meanwhile, the rise of e-commerce has significantly boosted the grocery sector. U.S. online grocery sales in April reached $8.5 billion, up over 4% from the previous year. Elsewhere, the global grocery market, valued at $12.4 trillion in 2024, will likely exceed $17 trillion by 2034. With that information, here are the top three grocery stocks in June.

BJ’s Wholesale Club (BJ)

BJ Wholesale (BJ) storefront with red BJ logo on front
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Among the first grocery stocks for today is BJ’s Wholesale Club (NYSE:BJ). It operates a chain of membership warehouse clubs, offering products at competitive prices. As a potential addition to your portfolio searching for grocery stocks to buy, BJ’s could be an interesting option due to its membership model, value focus and growth potential.

BJ’s Wholesale’s most recent earnings report painted a positive picture. The company reported robust top-line growth, with total revenue climbing 4.1% year-over-year (YOY) to $4.9 billion. This growth was fueled by a combination of factors, including a 1.6% increase in comparable club sales and a 21% surge in e-commerce sales.  Diluted earnings per share (EPS) stayed at $0.85.

Analysts note that the membership club’s future holds several promising avenues for growth, including the store expansion strategy. Management plans to open 12 new clubs in 2024, primarily along the East Coast. Additionally, the company’s recent expansion into gas stations provides an attractive revenue stream and further incentivizes membership.

Another exciting growth prospect lies in soaring e-commerce sales, reflecting the growing consumer preference for online grocery shopping. The company invests heavily in its digital platform, improving its fulfillment capabilities and user experience. This focus on e-commerce positions BJ’s Wholesale to capture a larger share of the online grocery market, which is expected to continue its rapid expansion.

As a result, BJ stock is up 32% year-to-date (YTD). Meanwhile, the shares are trading at 22.5 times forward earnings and 0.6 times sales. Interested readers may look to buy the dip in BJ shares.

Walmart (WMT)

An image of a Canoo, Inc. (GOEV) Walmart electric delivery vehicle

As the world’s largest retailer by revenue, Walmart (NYSE:WMT) offers a strong value proposition among grocery stocks. Over the years, budget-conscious consumers and its grocery segment have driven Walmart’s overall success. The company boasts a massive physical footprint and is aggressively expanding its e-commerce grocery presence, making it a well-rounded option for investors seeking exposure to the grocery sector.

Walmart’s latest earnings report for the first quarter of fiscal 2025 paints a promising picture. The company reported total revenues of $161.51 billion, with Walmart U.S. contributing $108.67 billion, Walmart International $29.83 billion, and Sam’s Club $21.44 billion. The company’s gross profit margin stood at 24.5%, while the net profit margin was 2.88%. Walmart’s adjusted EPS for the quarter was $0.60, reflecting a significant growth of 22.4% year-over-year.

On 16 May, Walmart announced the global launch of Walmart Luminate, a cutting-edge data analytics platform designed to provide suppliers with actionable insights into customer behavior and market trends. This initiative aims to enhance supply chain efficiency, optimize inventory management and drive sales growth by leveraging advanced analytics and real-time data.

WMT stock has advanced 24% YTD, and the dividend yield is 1.3%. The shares are changing hands at 27.8 times forward earnings and 0.8 times sales. Finally, the 12-month median price forecast for WMT stock stands at $70. They suggest an upside potential of 7%.

iShares U.S. Consumer Goods ETF (IYK)

Couple shopping at grocery store together. Consumers. Consumer stocks.
Source: Prostock-studio / Shutterstock

Next on our list of grocery stocks is the iShares U.S. Consumer Goods ETF (NYSEARCA:IYK). Although not exclusively focused on grocery retail, IYK is still a close approximation for investors interested in the segment. This ETF provides broad exposure to the U.S. consumer staples sector, including various consumer goods like food and household items.

Launched in June 2000, IYK currently comprises 55 stocks, while the top ten holdings represent almost two-thirds of the net assets, which are $1.3 billion. Sector-wise allocation is diversified, with the majority invested in Food, Beverage and Tobacco (57%), followed by Household & Personal Products (27%), Health Care Equipment & Services (8%), Consumer Staples Distribution & Retail (6%), and Materials (2%).

Among its leading holdings are household names such as Procter & Gamble (NYSE:PG), PepsiCo (NASDAQ:PEP), Coca-Cola (NYSE:KO), Philip Morris International (NYSE:PM) and Mondelez International (NASDAQ:MDLZ).

Since January, IYK has gained over 4%. Currently trading at 21 times trailing earnings and four times book value, the ETF deserves your attention. With an expense ratio of 0.4% and a dividend yield of 2.6%, IYK presents an attractive option for investors seeking to capitalize on the defensive consumer goods sector growth.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/3-grocery-stocks-to-fill-your-cart-with-steady-gains/.

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