Despite the fact that some on Wall Street discount the effect that lower gasoline prices have on the U.S. consumer, the bottom line is we are experiencing one of the greatest wealth transfers ever posted as the discount at the pump flows straight into consumer’s wallets. While some does go to pay down debt and improve savings, much goes right back into the economy — to the top retailers.
A new Deutsche Bank research report is very bullish on three top companies in the retail space, and while the analysts agree that the consumer is in much better shape, they remain very selective due to current higher than normal valuations. Their best ideas are proven winners in the sector, and each one is outperforming its peers on the top line. All are rated Buy at Deutsche Bank.
Costco
This has become the ultimate destination for the American consumer regardless of the economy. Costco Wholesale Corp. (NASDAQ: COST) has a unique business model. It operates membership warehouses and the company buys the majority of its merchandise directly from manufacturers, essentially cutting out the middleman. Costco sells in bulk but also at a lower price, thus fueling its rapid growth. With consumers having more free cash to spend as gasoline prices have dropped, this major retailer may continue to see large revenue gains.
Costco remains one of the few conventional retailers with metrics like store traffic, market share gains and a validated model that could bode well in international growth and expansion. The company is largely unharmed by e-commerce and continues to add stores in strategically mapped out locations.
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