02:34 PM EDT, 06/14/2024 (MT Newswires) -- Walmart ( WMT ) , Target ( TGT ) , Costco Wholesale ( COST ) , Lowe's (LOW), Home Depot ( HD ) and Ulta Beauty ( ULTA ), (ULTA) have created the strongest loyalty among consumers, while Dollar Tree ( DLTR ) , Dollar General ( DG ) and Five Below ( FIVE ) have done the exact opposite, UBS Securities said in a note e-mailed Friday.

Walmart ( WMT ) is making "big strides" with its Walmart+ membership program that should help the retail giant extend its "already significant" brand recognition, UBS analysts, including Michael Lasser and Mark Carden, said. "Growing double digits in 2023, Walmart+ not only offers free delivery and pick up on its assortment, the retail giant is also offering services like fuel savings, auto care, and a free Paramount+ subscription, making their offering comparable to Amazon ( AMZN )."

UBS expects Target's ( TGT ) recent revamp to challenge Walmart ( WMT ) and Amazon.com ( AMZN ) , as its Target Circle loyalty program has gotten "a substantial makeover," combined with the rolling out of a paid subscription offering, the analysts said. Lowe's announced a new loyalty program earlier this year to complement its current offering, which should help the company differentiate itself from rivals, according to the note.

Costco's strong value and assortment offerings continue to help it generate "industry-best" net customer satisfaction scores, while Walmart ( WMT ), Target ( TGT ) and Ulta witnessed the most significant growth in customer satisfaction last year likely due to recent business and loyalty program investments in convenience and services, an analysis by UBS showed. "There have been no better retailers than (Costco, Ulta and Target ( TGT )) in generating peer-best traffic growth in the past (five) years," the analysts said.

Walmart ( WMT ), Home Depot ( HD ), Lowe's and Costco also have the strongest inherent brand value in UBS's coverage, while the companies ranked within the top 100 firms globally, the brokerage said, citing Kantar data. "This indicates that these brands' intangible earnings and influence over consumer behavior are robust."

The analysis showed that Walmart's ( WMT ) Sam's Club and Costco exhibit the lowest levels of cross-shopping among their peers, showing the "powerful" attachment level between member-model club retailers and their customers.

Costco, BJ's Wholesale Club (BJ) and Kroger ( KR ) have "well established" rewards programs and strong customer loyalty, while Dollar General ( DG ) and Dollar Tree ( DLTR ) are on the opposite side of the spectrum, according to UBS.

Dollar Tree ( DLTR ) and Five Below ( FIVE ) have generated low net customer satisfaction scores in the past couple years, partly because of the absence of clear loyalty programs or incentive-based offerings, the analysts said. Dollar Tree's ( DLTR ) comp traffic has been weaker than the brokerage's average peer-set of 10 retailers over the last five years. However, as the company starts to implement various initiatives to drive topline traffic, the analysts said they see "considerable" potential upside to the metric.

"Ultimately, we think the challenge of creating and maintaining strong ties with customers is another reason why retail is becoming a sector where the chasm between the winners and all of the rest is widening," UBS said. "Thus, we advocate sticking with the stocks of those best positioned to capitalize on this trend, including: Walmart ( WMT ), Costco, Home Depot ( HD ), Lowe's, Target ( TGT ), and Ulta."

Price: 66.72, Change: +0.02, Percent Change: +0.02