3 US Value Stocks To Watch As Higher Rates Pressure Household Budgets

Rising Treasury yields near 4.8%, war-driven oil shocks and questions around a US$40b debt pile have pushed investors back to basics. Cash flow, pricing power and customer loyalty matter more when borrowing costs bite and inflation stays in the conversation. This article walks through three US discount and value-focused retailers that are closely tied to this news backdrop. It is designed to help you decide which stories deserve closer attention now.

The stocks covered below are only a small sample of this discount and value-focused theme, and the full screen surfaced 10 more US-listed retailers and consumer staples groups with equally compelling narratives that are not unpacked here. To identify and analyze the ideas that fit your own risk and return preferences most closely, head straight to the US Discount Retailers and Value-Focused Consumer Staples screener.

BJ's Wholesale Club Holdings (BJ)

Overview: BJ's Wholesale Club Holdings runs membership warehouse clubs across the eastern US, selling bulk groceries, fuel and everyday essentials at value prices.

Operations: BJ's generates about US$22.8b in club retail operations revenue, with all of it coming from its United States footprint.

Market Cap: US$11.3b

BJ's Wholesale Club taps straight into the discount and bulk-buy theme, giving budget-conscious shoppers a way to stretch paychecks when prices and borrowing costs stay elevated. The strength of that proposition shows up most clearly in how members are behaving.

"Membership fee income growth of 9.9% on $136 million, an all-time milestone of 8.5 million members, with higher-tier penetration at 43% and auto-renewal participation at record levels."

What happens to that membership engine if a single unseen pressure starts to squeeze how much room there is to invest in prices?

If that pricing squeeze is what worries you, the full narrative for BJ's Wholesale Club Holdings shows how BJ's Wholesale Club Holdings could keep the membership engine accelerating or risk it stalling.

ARKO Petroleum (APC)

Overview: ARKO Petroleum distributes fuel across North America through wholesale networks, fleet cardlock sites and by supplying its own convenience retail locations.

Operations: ARKO Petroleum generates about US$5.4b from GPMP, US$3.0b from Wholesale and US$551 million from Fleet Fueling, almost entirely in the United States.

Market Cap: US$892 million

ARKO Petroleum fits into the discount and value theme through its convenience retail channels. Its main engine is fuel distribution funded by higher-risk liabilities and a dividend yield around 10.48% that is not covered by free cash flow. Rising oil prices and borrowing costs make this a value-flavoured income story that depends heavily on what happens if a single coverage assumption breaks.

If that coverage assumption is your pressure point, start with the 2 key rewards and 2 important warning signs (1 is major!) to see where ARKO Petroleum’s income story could hold up or crack.

O'Reilly Automotive (ORLY)

Overview: O'Reilly Automotive runs auto parts stores across North America, helping cost-conscious drivers keep cars on the road with affordable maintenance.

Operations: O'Reilly Automotive generates about US$18.6b in revenue from automotive aftermarket parts, all from its United States operations.

Market Cap: US$69.5b

O'Reilly Automotive fits this value-focused screen as a parts retailer that often becomes the first stop for drivers trying to repair instead of replace their vehicles when rates, fuel and everyday bills are all climbing.

"The company's commitment to store expansion, with the opening of 38 net new stores across the U.S. and Mexico in the first quarter, supports long-term revenue growth potential by increasing market presence and customer reach."

What happens to that trade down appeal if a single unseen pressure starts to squeeze how far everyday repair budgets can stretch?

When repair budgets feel tight, the full narrative for O'Reilly Automotive shows how O'Reilly Automotive could keep that trade down engine accelerating or risk it quietly stalling.

Seeking Alternatives Before Momentum Flies

Fresh ideas move first. Once momentum builds, the cleanest entry points get snapped up and the best stories stop looking cheap. Scan these under-the-radar sets now and get in early.

• Spot durable cash generators by running a quick pass over the list of solid balance sheet and fundamentals (24 results) that filters for strong finances before the crowd fully catches on.
• Target dependable income by zeroing in on the 6 dividend fortresses that focuses on payout strength while yields are still flying under most radars.
• Press your curiosity into future tech by scanning the 37 robotics and automation stocks that tracks automation players before fresh breakthroughs get fully priced in.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com