16 Oct

An Overview of the S&P 500 Retailers

WRITTEN BY Rekha Khandelwal, CFA

US retail sales grew by 3.5% in the first half of 2019, which reflects the recent strong performance of US retailers. The S&P 500 Index can be considered a fair representation of the US stock markets. The market capitalization–weighted index represents the 500 largest US stocks from all sectors. The retail sector of the index includes 29 stocks representing a broad variety of retailers. Let’s take a look at the top retail stocks as represented in the S&P 500 Index.

The consumer staples, or consumer non-cyclical sector, includes essential goods and services. So, their demand does not vary much due to a change in prices or economic conditions. The S&P 500 Index includes five retail stocks in the consumer staples sector. Let’s take a look at these next.

An Overview of the S&P 500 Retailers

Food and staples

The five stocks in the food and staples category are Walmart (WMT), Costco (COST), Walgreens Boots Alliance (WBA), Sysco Corp. (SYY), and Kroger (KR). You can learn about Walmart and Costco in Why These 7 US Retailers Top the Charts. Additionally, you may also refer to Walmart and Target: The Best of the Retail Stock Plays?

With a market capitalization of around $48 billion, Walgreens Boots Alliance is the third-largest retailer in the staples sector. With more than 18,500 stores, the company is the largest drug retailer in the US. It sells health and personal care products in the US and around 11 other countries.

Notably, Sysco Corp. (SYY) is the largest food distributor, primarily serving the foodservice industry. It provides food and related products to restaurants, hospitals, schools, colleges, and lodging establishments. For example, the company sells fresh and frozen meats, canned products, and dry products. It also sells frozen fruits, vegetables, bakery, poultry, and dairy products.

Similarly, Kroger (KR) is primarily engaged in food and grocery retailing. In line with its one-stop-shopping strategy, the company offers a range of retail products, including jewelry, medicine, fuel, general merchandise, fashion, and other products.

The remaining 24 of the 29 retail stocks in the S&P 500 Index are categorized as consumer discretionary stocks. The demand for these products is more price-elastic compared to consumer staples. Notably, a fall in income levels may depress the demand for these products. However, rising income levels generally lead to higher demand growth for this segment.

Internet and direct marketing

Amazon (AMZN), Booking Holdings (BKNG), eBay (EBAY), and Expedia Group (EXPE) are generally categorized as Internet and direct marketing retailers. Amazon and eBay engage in products and services retailing.

However, Booking Holdings and Expedia focus on the leisure segment, offering online travel and related bookings. You can learn about Amazon and eBay in Must-Know: The World’s Top Online Retailers.

Booking Holdings (BKNG) offers online bookings for hotels, restaurants, flight tickets, rental cars, and other services through its websites. It operates six main brands: Booking.com, Kayak, Priceline, Agoda, Rentalcars.com, and OpenTable. Notably, the company makes money on commissions from various providers for bookings completed through Booking Holdings.

Similarly, Expedia Group (EXPE) is a travel booking company that operates through various online platforms. The company facilitates bookings of hotels, accommodations, flights, and rental cars through its various sites. It earns a commission from the various providers for its services. Its main brands include Trivago, Egencia, CarRentals, and HomeAway.

Multiline retailers

Six stocks in the S&P 500 Index can be categorized as multiline retailers. These include Target (TGT), Dollar General (DG), Dollar Tree (DLTR), Kohl’s (KSS), Nordstrom (JWN), and Macy’s (M).

Target (TGT) offers an extensive range of general merchandise at discounted prices. Its product range includes everyday essentials and food, including groceries, perishables, dairy, and frozen food items. Likewise, discount retailers Dollar General and Dollar Tree sell a broad range of general merchandise.

Department stores such as Kohl’s (KSS), Nordstrom (JWN), and Macy’s (M) are facing intense competition from discount and online players. Kohl’s sells proprietary and national brand apparel, footwear, accessories, beauty, and home products. Its proprietary brands include Apt. 9, Croft & Barrow, Jumping Beans, and Sonoma Goods for Life. Kohl’s also offers national brands such as Nike, Levis, Under Armour, Carter’s, and Dockers.

Nordstrom (JWN) is a fashion retailer offering an extensive range of branded and private-label merchandise. Its products include apparel, shoes, cosmetics, and accessories. Similarly, Macy’s (M) sells a wide range of merchandise, including apparel and accessories, cosmetics, home furnishings, and other consumer goods.

Finally, there are 14 specialty retail companies in the S&P 500 Index. These include apparel, automotive, home improvement, specialty stores, and computer and electronics retailers. Let’s take a look at these next.

An Overview of the S&P 500 Retailers

Specialty retailers

The above table lists the 14 specialty retail companies. Players in the apparel segment include TJX Companies (TJX), Ross Stores (ROST), Gap (GPS), and L Brands (LB). Notably, TJX offers apparel and home fashion at prices lower than other retailers.

Similarly, Ross Stores is an off-price apparel retailer. This retailer advertises savings of 20%–60% off department and specialty store prices. You can learn more about the two in TJX Companies or Ross Stores: Whose Sales Outlook Looks Better?

Specialty retailers in the S&P 500 Index include four auto parts retailers—O’Reilly Automotive (ORLY), AutoZone (AZO), CarMax (KMX), and Advance Auto Parts (AAP).

Tractor Supply (TSCO) is a rural lifestyle retailer targeting farmers, ranchers, and rural populations. The company offers products for the home, land, pets, and animals. Specifically, Tractor Supply sells pet supplies, tractor, and trailer parts, lawn and garden supplies. Additionally, it sells sprinklers, irrigation parts, fencing, welding, and pump supplies.

Best Buy (BBY) sells computers and electronics products in the US, Canada, and Mexico. Top home improvement retail companies Home Depot (HD) and Lowe’s (LOW) are among the largest retailers in the US.

In comparison, Ulta Beauty (ULTA) is the largest beauty retailer in the US. It sells cosmetics, fragrance, skincare products, hair care products, and salon services. Tiffany (TIF) is a luxury jewelry manufacturer and retailer. Additionally, the company sells timepieces, accessories, and fragrances.

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