Food retail stocks surge in Q1

Several food retailing stocks saw their share prices surge in the first quarter, after the industry mostly sat out last year’s fourth-quarter market rally.

Through March 28, shares of BJ’s Wholesale, Costco, Dollar General, Kroger, Natural Grocers by Vitamin Cottage, Sprouts Farmers Market, Target, and Walmart were all up in double digits, as companies reported strong financial results and the economic outlook remained mostly positive.

The Dow Jones Industrial Average, meanwhile, was up 5.6% in Q1, and the S&P 500 Index was up about 10.2%.

Kroger’s 25% share-price increase in Q1 came mostly after the Federal Trade Commission sued on Feb. 28 to block its planned merger with Albertsons. After starting 2024 trading at $45.71, Kroger’s share price closed on March 28 at $57.13, which included a 15.2% gain in the month of March. The company’s stock jumped following a Q4 earnings report in early March that beat analysts’ expectations for earnings per share.

Sprouts, meanwhile, following share-price growth of more than 50% in 2023, continued to show gains in Q1, as its stock shot up another 34%, to close the quarter at $64.48. The shares soared after a strong Q4 report on Feb. 22, which included earnings per share growth of 17% for the quarter and 19% for the year, along with sales growth projections of 5.5%-7.5% for the full year and plans to open 35 new stores. The results prompted Bank of America analysts to issue a double upgrade on the stock, to “buy” from “underperform,” with a price target of $70.

The stocks of big-box food retailers, including both club stores and supercenter operators, also had strong Q1 performances.

BJ’s Wholesale rose 13.5%, closing at $75.65, and Costco was up 11%, closing the quarter at $732.63. Costco’s Q1 gains followed a share-price increase of more than 35% in 2023, and came despite missing analysts’ expectations for 2023 holiday sales growth. BJ’s, which saw its stock languish in 2023, enjoyed a share-price surge after reporting mixed results for Q4 on March 7.

Target, meanwhile, saw its stock price rocket up after the company’s Q4 earnings report on March 5 showed margin improvements and a stable outlook for the year ahead. The company closed the quarter up 24.4%, including 15.9% in the month of March.

Walmart continued to gain traction in Q1 as the company reported strong Q4 sales and margins. Its share price rose 14.5% in Q1, to close at $60.17.

The stock of low-price operators Dollar General and Dollar Tree moved in opposite directions from each other, however, with the former notching gains of 14.8% for the quarter, and the latter seeing its share price fall 6.3%. Dollar General beat sales and earnings expectations in its Q4 report on March 14, while Dollar Tree on March 13 said it planned to close another 1,000 stores, mostly operating under its struggling Family Dollar banner.

Among other industry stocks that fell in Q1 was United Natural Foods Inc., which saw its share price lose nearly a third of its value, falling 29.2%, to close the first quarter at $11.49.