Will the consumer goods bonanza continue?
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.
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)
|Name||Mkt. Cap. USD mn.||Return 5Y||ROIC||P/E|
|Reynolds Consumer Products Inc||6,494||30.50|
|Lululemon Athletica Inc||44,038||523.39||30.23||80.60|
|Monster Beverage Corp||41,754||74.43||28.00||37.08|
|Booking Holdings Inc||73,249||37.15||26.04||30.97|
|Herbalife Nutrition Ltd||7,506||82.82||23.33||16.76|
|boohoo Group PLC||5,487||928.09||22.26||47.98|
|Deckers Outdoor Corp||6,873||294.56||21.71||23.89|
|Taylor Wimpey PLC||5,720||-14.80||20.80||9.93|
|Levi Strauss & Co||6,180||20.65||34.59|
|Royal Unibrew A/S||5,062||194.18||18.26||28.90|
|Boston Beer Co Inc/The||11,233||307.64||17.57||80.90|
Source: Bloomberg and Saxo Group
High growth consumer goods companies (ranked on 1-year revenue growth)
|Name||Mkt. Cap. USD mn.||Return 5Y||Rev. growth 1Y||P/E|
|Delivery Hero SE||22,546||94.53|
|Fiverr International Ltd||5,452||81.88|
|Beyond Meat Inc||12,076||68.53||6738.21|
|boohoo Group PLC||5,487||928.09||44.51||47.98|
|Boston Beer Co Inc/The||11,233||307.64||42.00||80.90|
|Ocado Group PLC||23,486||596.49||34.98|
|Campbell Soup Co||14,636||9.84||18.43||16.30|
|Conagra Brands Inc||18,197||29.81||12.06||14.69|
|Nomad Foods Ltd||5,019||50.06||11.38||22.14|
|J M Smucker Co/The||13,361||14.65||10.84||14.73|
|Church & Dwight Co Inc||22,540||125.30||10.64||32.09|
|DR Horton Inc||28,263||169.55||9.86||14.47|
Source: Bloomberg and Saxo Group
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.