50 and thrifty: Big birthday for big-box triplets

Target, Wal-Mart and Kmart have transformed shopping in the past half-century.

By InvestorPlace Sep 17, 2012 10:38AM
Target store in San Bruno, California , Justin Sullivan, Getty Images By Alyssa Oursler

iplogoSeeing big-box discount retailers lining the roads has become common. Fifty years ago, it was just a novel idea -- although still a popular one.

In fact, this year marks half a century since three of the biggest names in the business -- Target (TGT), Wal-Mart (WMT) and Sears Holdings' (SHLD) Kmart -- opened their doors.

The rest, as they say, is history. As USA Today reports, discount stores were responsible for only 42% of retail sales back in 1967. By 2010, that share had more than doubled to 87%.

The segment is still growing. Since things kicked off in 1962, Wal-Mart has added Sam's Club, Costco (COST) debuted years later, and Amazon (AMZN) began taking advantage of the trend online. Even now, the original brick-and-mortars Target and Wal-Mart are still looking to move into even more areas by opening stores in Canada, for example, and squeezing into cities.

Add the Great Recession and it's no wonder such stores have essentially become a way of life for countless cash-conscious consumers -- and thus greatly profitable for countless investors.

Target has seen gains of more than 26% so far this year, thanks to growing profits from discounting incentives and added grocery offerings, on top of its usual mix of designer styles and affordable prices. It also offers investors steady income in the form of a 2.23% dividend yield.

The company barely edges out longtime rival Wal-Mart in terms of year-to-date gains -- and just won the title of "cheapest" last month. Still, Wal-Mart boasts a penny-pinching reputation and downright massive size that draw in plenty of investors. Plus, the blue-chip is a member of InvestorPlace's Real America Index, representing the state of Arkansas.

These stores have plenty of reason to celebrate beyond the big 5-0, as their upward movement sure looks poised to continue. Retail was strong in the second quarter despite the slow recovery, and the always-busy holiday season is approaching fast.

This year in particular, the period for holiday shopping is two weekends longer than normal, giving customers even more time to throw around some cash before Christmas -- on top of the fact that many analysts believe consumer spending is set to explode as it is.

Looking longer term, though, the real question is what the next 50 years will hold. Just because Wal-Mart and friends are seasoned veterans doesn't mean they can keep cruising. In fact, if e-commerce indeed begins to gain more traction, they will have to find ways to adapt.

But let's not get ahead of ourselves. For now, it's a big birthday for these big names and their big gains -- and that warrants a celebration.

As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.

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4Comments
Sep 17, 2012 3:02PM
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While its true that Kmart, Target, and Walmart opened their first stores in 1962 -- it would have been nice if the author would have given credit for Kresge and Kmart being the first. This one great company was the first, and for a long time largest, player in the space. It was Kmart that ultimately killed Woolworth, TG&Y, Ben Franklin, and all the others that were in the five and dime space -- particularly in the cities, where Walmart would not venture.  As the Kmart name fades (and the blue light dims), it should get one last tip of the hat for being first. 
Sep 17, 2012 2:29PM
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The Big Box store pre-dates 1962.  But most of the forerunners are long gone. 
Sep 17, 2012 5:05PM
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Tony...Most people can't even remember the 5 and dimes..

Kresge coming out of Troy, MI. and Morphing into KMart, Should still be around as a powerhouse, but is drying up in many places; Maybe because of Sears Holding? Too bad..

Sep 17, 2012 4:53PM
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Hi,   Wal-Mart is doing good it now supports over 2 millon Americans with a  job, next to the Federal Government there is no larger employer in the United States !
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