Signs of an impending economic recession continue to build. Yesterday, the American release showed that the sector was contracted in August, the first time this has happened in more than three years. Underlying concerns about a weakening economy, plus the US-China trade war – now entering its second year – continue to weigh on markets and economic activity.
Meanwhile, the yield on the US Treasury note benchmark continues to slip and has been repeatedly underperformed since August – a bond market phenomenon that has historically preceded recessions.
Even if a recession were to take place, there is a wide range of shares available to increase your portfolio. In our opinion, the three names below offer a purchase option if the US economy ends up in a recession.
1. Dollar General: Recession Resistant Discount Retailer
Shares from Dollar General (NYSE :), the largest discount retailer in the US, have risen nearly 44% this year. The stock closed at $ 155.63 on Tuesday, in view of a record high of $ 158.90 on August 30, yielding a market capitalization of $ 40 billion.
The recession-proof status of the company makes sense. After all, when money gets tight, consumers look for more economically priced store alternatives, a candy jar for discounters.
Dollar General, which operates more than 15,000 stores in 44 states, primarily sells groceries, household items, and personal care products at rock bottom prices. It has publicly described its core customers as households earning less than $ 35,000.
The Goodlettsville, Tenn-based chain achieved surprisingly strong results on August 29, despite rising rates on goods it imports from China.
Dollar General reported earnings per share of $ 1.74, exceeding EPS expectations of $ 1.57. Sales were $ 6.98 billion in the quarter, an increase of more than 8% compared to the same period a year earlier, and just above the forecast for sales of $ 6.89 billion.
Sales in the same store, an important measure in retail, which measures sales performance per store, increased by 4% and exceeded expectations for a profit of 2.5%.
The strong results have prompted retailers to increase their fiscal guidelines for the entire year 2019. It now expects sales growth of 8% compared to previous expectations of 7%, and sales growth in the same store in the range of 3% to middle 3%, compared to previous expectations of around 2.5%.
2. Planet Fitness: Low-Fee Health Club Chain
As the evidence begins to show that the US economy is hit by a weak spot, Planet Fitness (NYSE 🙂 should also pay attention to your radar. The fitness center operator, which offers $ 10 membership options, now has 14 million subscribers at 1,859 locations, making it one of the largest US fitness club franchises based on the number of members and locations.
The Planet Fitness membership-based company, driven by low monthly costs, makes it one of the best recession-proof names to consider. The company is also likely to benefit from the lack of exposure to China, reducing the risk of trade between the US and China.
Planet Fitness shares, which have risen nearly 25% since early 2019, ended last night at $ 67.08, giving it a market capitalization of $ 6.18 billion.
The Hampton, New Hampshire-based company easily defeated estimates on both the top and bottom line when it was for its fiscal second quarter on August 6. Earnings per share were $ 0.45 in the quarter ended June 30 and exceeded expectations for earnings per share of $ 0.41 and up from $ 0.34 in the same period a year earlier. Sales increased 29.3% to $ 181.6 million and exceeded the forecasts of $ 167.8 million.
The strong quarterly results were driven by a 8.8% increase in revenue growth in the same store.
The company has also improved full year earnings and sales prospects. It now expects earnings per share to increase by 26% throughout the year, while revenue is expected to increase by 18% compared to earlier expectations of a 25% increase in earnings per share and revenue growth of 15%.
3. TJX Companies: Off-Price Retailer
The last name to consider is another citizen of the retail sector. Off-price retailer TJX Companies (NYSE :), which owns T.J. Maxx, Marshalls and Home Goods brands are likely to benefit from an economic downturn as consumers migrate to discount retailers as spending contracts.
The price-conscious chain, with a total of 4,412 stores in nine countries, including the US, Canada, the UK, Ireland, Germany, Austria, the Netherlands, Poland and Australia, offers a wide selection of well-known brand brands with a large discount, allowing consumers what management calls "a treasure hunt" shopping experience.
The share, which amounted to $ 54.28 last night, won nearly 21% in 2019, giving it a market capitalization of $ 65.5 billion.
Framingham, Massachusetts-based discount clothing and home decoration chain per share of $ 0.62 on August 20, in line with expectations. Sales increased to $ 9.78 billion, an increase of 5% compared to the $ 9.33 billion it received a year earlier in the same period.
Comparable sales increased 2%, thanks to an increase in foot traffic with his T.J. Maxx and Marmaxx brand stores. The company also enjoyed revenue growth of 1% in the TJX Canada segment and 6% at TJX International.
"This quarter marks the 20th consecutive quarter of increased customer traffic at T.J. Maxx and Marmaxx," said CEO Ernie Herrman in a statement. "This speaks to the consistency and fundamental strength of our treasure hunt experience through many types of retail and economic environments."