Will the consumer goods bonanza continue? Will the consumer goods bonanza continue? Will the consumer goods bonanza continue?

Will the consumer goods bonanza continue?

Equities 3 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  In today's equity update we take a look at some of the consumer goods companies that are exposed to the bonanza that is taking place in consumer goods spending as consumers are diverting their spending from travel, leisure activities and gasoline towards consumer goods in general excluding cars. As a result some consumer goods companies are experiencing high growth and we present lists of consumer goods companies to consider.

August retail sales in both the US and Europe were strong hitting record levels. Part of it is a naturally bounce back from depressed levels during the early lockdowns due to Covid-19. As time has progressed our health care sector has become better at treating Covid-19 patients causing the second waves of Covid-19 in the US and Europe to have smaller impact on the health care sector. Only restrictions are enforced and thus retail sales activity can function normally again. On top of that many households are spending much less on travelling and leisure activities than before. Even gasoline consumption is still much lower due to work-from-home increasing disposable income for households. Our theory is that households are reallocating their spending towards consumer goods and delivery services of food and e-commerce packages, and not so much the big-ticket items such as cars.

Source: Bloomberg

Go for high quality and brand companies

Zalando’s Q3 numbers yesterday and raised FY20 outlook confirms that consumer goods are doing well, but also Tesco in the UK showed good results the other day. Consumer goods companies such as Nike has also been showing impressive levels of growth since the bottom in March. As a travel and leisure activities remain significantly below normal levels the bonanza in consumer goods will continue. The table below shows high quality consumer goods names (highest return on invested capital) and fastest growing consumer goods companies. Our assumption is that companies with high quality will be better to navigate the uncertain times and companies with a strong brand will be able to lift sales better online, so we recommend investors to incorporate those factors when getting exposure to consumer goods companies.

High quality consumer goods companies (ranked on ROIC)

NameMkt. Cap. USD mn.Return 5YROICP/E
Kimberly-Clark Corp51,26354.5633.3519.96
Colgate-Palmolive Co67,51234.3832.7926.13
NVR Inc16,099177.1231.3820.91
Reynolds Consumer Products Inc6,49430.50
Lululemon Athletica Inc44,038523.3930.2380.60
Monster Beverage Corp41,75474.4328.0037.08
Clorox Co/The26,828101.1627.8328.91
Booking Holdings Inc73,24937.1526.0430.97
Persimmon PLC10,82180.8925.4412.36
Herbalife Nutrition Ltd7,50682.8223.3316.76
Hermes International93,936134.3622.9071.06
boohoo Group PLC5,487928.0922.2647.98
Moncler SpA10,956132.3321.9735.51
Deckers Outdoor Corp6,873294.5621.7123.89
Hershey Co/The29,85366.9721.4224.51
Taylor Wimpey PLC5,720-14.8020.809.93
Levi Strauss & Co6,18020.6534.59
Pandora A/S7,707-25.7120.6333.46
Garmin Ltd18,766216.7120.4922.82
adidas AG65,358285.7620.0096.78
Brown-Forman Corp35,992100.4519.8643.31
eBay Inc36,450121.3418.3918.28
Royal Unibrew A/S5,062194.1818.2628.90
Boston Beer Co Inc/The11,233307.6417.5780.90

Source: Bloomberg and Saxo Group

High growth consumer goods companies (ranked on 1-year revenue growth)

NameMkt. Cap. USD mn.Return 5YRev. growth 1YP/E
Etsy Inc16,651928.30136.75113.83
HelloFresh SE9,326122.6538.20
Delivery Hero SE22,54694.53
Wayfair Inc29,006670.7783.71
Fiverr International Ltd5,45281.88
Farfetch Ltd9,07574.27
Beyond Meat Inc12,07668.536738.21
MercadoLibre Inc57,6821138.9561.10
Chewy Inc24,19747.36
boohoo Group PLC5,487928.0944.5147.98
Boston Beer Co Inc/The11,233307.6442.0080.90
Grubhub Inc6,817146.6041.29
Amazon.com Inc1,598,113498.4240.23122.67
Ocado Group PLC23,486596.4934.98
Zalando SE26,790188.3827.38189.13
Clorox Co/The26,828101.1621.8828.91
Prosus NV148,70818.9738.78
Campbell Soup Co14,6369.8418.4316.30
eBay Inc36,450121.3418.2418.28
Conagra Brands Inc18,19729.8112.0614.69
Nomad Foods Ltd5,01950.0611.3822.14
J M Smucker Co/The13,36114.6510.8414.73
Church & Dwight Co Inc22,540125.3010.6432.09
ASOS PLC6,82783.2210.2698.92
DR Horton Inc28,263169.559.8614.47

Source: Bloomberg and Saxo Group


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