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4 Consumer Products Stocks to Watch on Solid Industry Trends
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Players in the Zacks Consumer Products – Staples industry have been benefiting from favorable demand trends. Strategic pricing efforts, robust e-commerce operations and a focus on portfolio enhancement and innovation are working well for players in the industry.
However, companies are grappling with cost inflation, induced by escalated costs of inputs, transport and labor. Nonetheless, the abovementioned upsides keep Chewy, Inc. (CHWY - Free Report) , Albertsons Companies, Inc. (ACI - Free Report) , Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and Grocery Outlet Holding Corp. (GO - Free Report) well placed.
About the Industry
The Zacks Consumer Products – Staples industry consists of companies involved in marketing, producing and distributing a wide range of consumer products. These include personal care items, cleaning equipment, stationery, bed and bath products, and household goods like kitchen appliances, cutlery and food storage. Some of the industry participants also provide batteries and lighting products whereas some offer pet food and treats, pet supplies, pet medications and pet services. Companies in the Consumer Products – Staples universe offer products to supermarkets, drug/grocery stores, department stores, warehouse clubs, mass merchandisers and other retail outlets. Some companies sell products to manufacturers of perfumes and cosmetics, hair and other personal care products. Products are also sold through other distributors and the fast-growing e-commerce channel.
3 Trends Shaping the Future of the Consumer Products - Staples Industry
Revenue-Driving Initiatives: Consumer product players are focused on revenue-boosting initiatives to squeeze out more from their operations. To this end, companies’ solid focus on boosting e-commerce and digital operations has been a major driver to date. Also, innovation in areas witnessing increasing consumer interest enhanced the portfolio strength of companies. Industry players have been optimizing portfolios through meaningful buyouts and divestitures for a while, enabling them to intensify their focus on areas with higher-growth potential.
Higher At-Home Consumption Fuels Demand: As the industry participants mainly provide essentials used in daily lives, demand for most of the products remains fairly stable. In fact, companies have been witnessing improved demand (compared with pre-pandemic levels), thanks to consumers’ elevated at-home consumption. At-home demand is likely to remain elevated as a number of Americans have cultivated work and dine at home as a new habit. As a result, the demand for staple products has been high.
Cost Woes Persist: A number of industry participants are battling input cost inflation. Firms are also seeing increased labor, transportation and freight costs due to tough market conditions. Several companies are bearing the brunt of supply-chain disruptions. A number of companies had projected input cost inflation to persist in the near term in their last quarterly release. Apart from this, escalated SG&A costs, costs related to digital development and increased wages are eating into the margins of some companies. That said, restructuring plans and pricing actions should offer some respite.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #96, which places it in the top 38% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Let’s look at the industry’s performance and current valuation.
Industry Lags Broader Market & Sector
The Zacks Consumer Products – Staples industry has lagged the S&P 500 Index as well as the broader Zacks Consumer Staples sector over the past year.
The industry has declined 20.4% over this period compared with the S&P 500 Index’s decline of 10.9%. The broader sector has dipped 1.6%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing consumer staples stocks, the industry is currently trading at 17.56X compared with the S&P 500’s 17.35X and the sector’s 17.87X.
Over the last five years, the industry has traded as high as 26.11X, as low as 13.8X and at the median of 19.96X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Consumer Products Stocks to Keep a Close Eye on
Chewy: This pure-play pet e-tailer has been gaining from its robust customer value proposition and favorable demand for its food and healthcare categories. This currently Zacks Rank #1 (Strong Buy) player has been witnessing increased market share and an improved leadership position. CHWY’s strong product portfolio, compelling merchandise and a seamless shopping experience are steadily working well for it.
The Zacks Consensus Estimate for CHWY’s current fiscal-year bottom line has improved from a loss of 3 cents to a loss of 1 cent in the past 30 days. Chewy has an estimated long-term earnings growth rate of 20%. Shares of Chewy have risen 5.5% in the past year.
Ollie’s Bargain: This value retailer of brand name merchandise at drastically reduced prices is benefiting from its focus on store productivity and expansion of its customer reward program, Ollie's Army. OLLI's business model of “buying cheap and selling cheap” and cost-containment efforts also bode well.
This Zacks Rank #2 (Buy) stock has rallied 30.1% in a year’s time. The Zacks Consensus Estimate for OLLI’s current fiscal-year EPS has remained stable at $1.58 over the past 30 days. Ollie’s Bargain currently has an estimated long-term earnings growth rate of 12.1%.
Price and Consensus: OLLI
Albertsons Companies: This presently Zacks Rank #3 (Hold) player’s focus on providing efficient in-store services, enhancing digital and omni-channel capabilities, and increasing productivity bodes well. The Zacks Consensus Estimate for ACI’s current fiscal-year earnings per share (EPS) has been unchanged at $3.27 in the past 30 days.
This food and drug store entity constantly gains on its efforts to improve the store and digital operations. Albertsons Companies’ efforts to boost assortments continue elevating customers’ experience. Shares of ACI have declined 44.8% in the past year. The stock has an estimated long-term earnings growth rate of 5.4%.
Price and Consensus: ACI
Grocery Outlet Holding: This high-growth, extreme value retailer of quality, name-brand consumables and fresh products flexible sourcing and distribution business model offers products at exceptional values. Grocery Outlet’s opportunistic purchasing strategy, marketing efforts, store-growth endeavors and e-commerce initiatives to deepen customer reach appear encouraging.
The Zacks Consensus Estimate for GO’s current fiscal-year EPS has been steady at 99 cents in the past 30 days. GO has an estimated long-term earnings growth rate of 11.9%. This presently Zacks Rank #3 stock has declined 10.2% over the past year.
Price and Consensus: GO
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4 Consumer Products Stocks to Watch on Solid Industry Trends
Players in the Zacks Consumer Products – Staples industry have been benefiting from favorable demand trends. Strategic pricing efforts, robust e-commerce operations and a focus on portfolio enhancement and innovation are working well for players in the industry.
However, companies are grappling with cost inflation, induced by escalated costs of inputs, transport and labor. Nonetheless, the abovementioned upsides keep Chewy, Inc. (CHWY - Free Report) , Albertsons Companies, Inc. (ACI - Free Report) , Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) and Grocery Outlet Holding Corp. (GO - Free Report) well placed.
About the Industry
The Zacks Consumer Products – Staples industry consists of companies involved in marketing, producing and distributing a wide range of consumer products. These include personal care items, cleaning equipment, stationery, bed and bath products, and household goods like kitchen appliances, cutlery and food storage. Some of the industry participants also provide batteries and lighting products whereas some offer pet food and treats, pet supplies, pet medications and pet services. Companies in the Consumer Products – Staples universe offer products to supermarkets, drug/grocery stores, department stores, warehouse clubs, mass merchandisers and other retail outlets. Some companies sell products to manufacturers of perfumes and cosmetics, hair and other personal care products. Products are also sold through other distributors and the fast-growing e-commerce channel.
3 Trends Shaping the Future of the Consumer Products - Staples Industry
Revenue-Driving Initiatives: Consumer product players are focused on revenue-boosting initiatives to squeeze out more from their operations. To this end, companies’ solid focus on boosting e-commerce and digital operations has been a major driver to date. Also, innovation in areas witnessing increasing consumer interest enhanced the portfolio strength of companies. Industry players have been optimizing portfolios through meaningful buyouts and divestitures for a while, enabling them to intensify their focus on areas with higher-growth potential.
Higher At-Home Consumption Fuels Demand: As the industry participants mainly provide essentials used in daily lives, demand for most of the products remains fairly stable. In fact, companies have been witnessing improved demand (compared with pre-pandemic levels), thanks to consumers’ elevated at-home consumption. At-home demand is likely to remain elevated as a number of Americans have cultivated work and dine at home as a new habit. As a result, the demand for staple products has been high.
Cost Woes Persist: A number of industry participants are battling input cost inflation. Firms are also seeing increased labor, transportation and freight costs due to tough market conditions. Several companies are bearing the brunt of supply-chain disruptions. A number of companies had projected input cost inflation to persist in the near term in their last quarterly release. Apart from this, escalated SG&A costs, costs related to digital development and increased wages are eating into the margins of some companies. That said, restructuring plans and pricing actions should offer some respite.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #96, which places it in the top 38% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Let’s look at the industry’s performance and current valuation.
Industry Lags Broader Market & Sector
The Zacks Consumer Products – Staples industry has lagged the S&P 500 Index as well as the broader Zacks Consumer Staples sector over the past year.
The industry has declined 20.4% over this period compared with the S&P 500 Index’s decline of 10.9%. The broader sector has dipped 1.6%.
One-Year Price Performance
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Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing consumer staples stocks, the industry is currently trading at 17.56X compared with the S&P 500’s 17.35X and the sector’s 17.87X.
Over the last five years, the industry has traded as high as 26.11X, as low as 13.8X and at the median of 19.96X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
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4 Consumer Products Stocks to Keep a Close Eye on
Chewy: This pure-play pet e-tailer has been gaining from its robust customer value proposition and favorable demand for its food and healthcare categories. This currently Zacks Rank #1 (Strong Buy) player has been witnessing increased market share and an improved leadership position. CHWY’s strong product portfolio, compelling merchandise and a seamless shopping experience are steadily working well for it.
The Zacks Consensus Estimate for CHWY’s current fiscal-year bottom line has improved from a loss of 3 cents to a loss of 1 cent in the past 30 days. Chewy has an estimated long-term earnings growth rate of 20%. Shares of Chewy have risen 5.5% in the past year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: CHWY
Ollie’s Bargain: This value retailer of brand name merchandise at drastically reduced prices is benefiting from its focus on store productivity and expansion of its customer reward program, Ollie's Army. OLLI's business model of “buying cheap and selling cheap” and cost-containment efforts also bode well.
This Zacks Rank #2 (Buy) stock has rallied 30.1% in a year’s time. The Zacks Consensus Estimate for OLLI’s current fiscal-year EPS has remained stable at $1.58 over the past 30 days. Ollie’s Bargain currently has an estimated long-term earnings growth rate of 12.1%.
Price and Consensus: OLLI
Albertsons Companies: This presently Zacks Rank #3 (Hold) player’s focus on providing efficient in-store services, enhancing digital and omni-channel capabilities, and increasing productivity bodes well. The Zacks Consensus Estimate for ACI’s current fiscal-year earnings per share (EPS) has been unchanged at $3.27 in the past 30 days.
This food and drug store entity constantly gains on its efforts to improve the store and digital operations. Albertsons Companies’ efforts to boost assortments continue elevating customers’ experience. Shares of ACI have declined 44.8% in the past year. The stock has an estimated long-term earnings growth rate of 5.4%.
Price and Consensus: ACI
Grocery Outlet Holding: This high-growth, extreme value retailer of quality, name-brand consumables and fresh products flexible sourcing and distribution business model offers products at exceptional values. Grocery Outlet’s opportunistic purchasing strategy, marketing efforts, store-growth endeavors and e-commerce initiatives to deepen customer reach appear encouraging.
The Zacks Consensus Estimate for GO’s current fiscal-year EPS has been steady at 99 cents in the past 30 days. GO has an estimated long-term earnings growth rate of 11.9%. This presently Zacks Rank #3 stock has declined 10.2% over the past year.
Price and Consensus: GO
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