The Clorox Co (CLX), Staples, Inc. (SPLS), Wal-Mart Stores, Inc. (WMT): Invest in the Bare Necessities

Always low prices, always

Wal-Mart Stores, Inc. (NYSE:WMT) is the world’s largest retailer. It boasts on the fact that nearly 60% of Americans will shop at one of its stores at least once a month. When comparing consumer staples, food is the most basic of necessities. Wal-Mart Stores, Inc. (NYSE:WMT) is the nation’s largest grocer, and makes a small profit on every transaction in its grocery business.

People buy their groceries in stores, not via the Internet. Wal-Mart Stores, Inc. (NYSE:WMT)’s massive logistics and store networks allowed the company to leverage this fact. Last year, Wal-Mart Stores, Inc. (NYSE:WMT)’s net sales increased 5% to $466 billion and the company returned $13 billion to shareholders through dividends and share repurchases.

Wal-Mart Stores, Inc. (NYSE:WMT) has a net profit margin of 3.8% in an industry with an average of 0.4%. Wal-Mart pays out nearly 60% of its earnings to support its dividend of 2.4%. Even if Wal-Mart’s sales slow, there is plenty of room for earnings to fall before the dividend becomes threatened.

Foolish bottom line

Clorox has a squeaky clean balance sheet, is slowly reducing share count and produces products that will sell no matter the state of the economy. Staples has a strong business-to-business organization, and a great online retail asset. However, this company will continue to be weighed down by its brick-and-mortar stores, and a shift away from PCs. Wal-Mart is considered the king of retail, and its giant move into groceries will continue to provide a moat for this giant.

Clorox and Wal-Mart will provide stable growth for conservative investors. If Staples can leverage its online retail sales and reduce the reliance on its physical stores, it could be a great growth opportunity.

The article Invest in the Bare Necessities originally appeared on Fool.com and is written by Wes Patoka.

Wes Patoka has no position in any stocks mentioned. The Motley Fool owns shares of Staples. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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