Zacks Industry Outlook Highlights Kimberly-Clark, Albertsons Companies, Ollie's Bargain Outlet and Grocery Outlet Holding
For Immediate Release
Chicago, IL – August 22, 2023 – Today, Zacks Equity Research discusses Kimberly-Clark Corp. KMB, Albertsons Companies, Inc. ACI, Ollie's Bargain Outlet Holdings, Inc. OLLI and Grocery Outlet Holding Corp. GO.
Industry: Consumer Products
Link: https://www.zacks.com/commentary/2138529/watch-these-4-consumer-product-stocks-amid-industry-concerns
Players in the Zacks Consumer Products – Staples industry are facing challenges stemming from cost inflation triggered by increased expenses related to inputs, transportation and labor. Furthermore, some players within the industry are grappling with elevated SG&A costs.
However, thoughtful pricing strategies, strong demand trends and a commitment to refining the portfolio and driving innovation are proving advantageous for companies such as Kimberly-Clark Corp., Albertsons Companies, Inc., Ollie's Bargain Outlet Holdings, Inc. and Grocery Outlet Holding Corp..
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 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
Escalated Costs: Players in the Consumer Products – Staples universe are contending with rising input costs. Companies are witnessing heightened expenditures in labor, transportation and freight due to challenging market conditions. Many companies are experiencing the adverse effects of supply-chain disturbances.
Many companies had projected input cost inflation to persist in the near term in their last quarterly release. In addition to this, elevated SG&A costs, expenses linked to digital advancement and increased wages are exerting pressure on profit margins. However, restructuring strategies and pricing initiatives are expected to provide relief.
Volatile Currency Movements: Several industry players remain vulnerable to unfavorable currency movements due to their exposure to international markets. This is because a strengthening U.S. dollar may require a company to either raise prices or contract profit margins in locations outside the United States. Some industry players expect adverse currency fluctuations to affect their performances in 2023.
Initiatives to Enhance Revenues: Players in the consumer product space are prioritizing efforts aimed at squeezing out more from their operations. In this regard, companies have been placing a significant emphasis on enhancing their e-commerce and digital undertakings. Additionally, innovations targeting segments experiencing growing consumer demand have bolstered the overall strength of companies' portfolios. Industry players have been strategically refining their portfolios through impactful acquisitions and divestments, a strategy that has allowed them to concentrate more intensely on areas exhibiting greater potential for growth.
Zacks Industry Rank Indicates Drab Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #188, which places it in the bottom 24% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming less confident about this group's earnings growth potential. Since the beginning of July 2023, the industry's earnings estimate for 2023 has declined 9.3%.
Let's look at the industry's performance and current valuation.
Industry vs. Broader Market
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 27% over this period compared with the S&P 500 Index's growth of 6%. Meanwhile, the broader sector has declined 5.5%.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing consumer staple stocks, the industry is currently trading at 18.36X compared with the S&P 500's 18.98X and the sector's 17.73X.
Over the last five years, the industry has traded as high as 25.86X, as low as 15.73X and at the median of 20.06X.
4 Consumer Product Stocks to Keep a Close Eye On
Ollie's Bargain: This value retailer of brand-name merchandise is reaping the rewards of its concentrated efforts on store efficiency and the customer loyalty initiative, Ollie's Army. OLLI's business model of "buying cheap and selling cheap" and cost-containment efforts are also contributing.
This Zacks Rank #2 (Buy) stock has risen 25.1% in the past six months. The Zacks Consensus Estimate for Ollie's Bargain's current fiscal-year earnings per share (EPS) has increased by a penny to $2.62 over the past 30 days. Ollie's Bargain currently has an estimated long-term earnings growth rate of 25.1%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Grocery Outlet Holding: The company, carrying a Zacks Rank #2, remains well-placed due to its opportunistic purchasing strategy, marketing efforts, store-growth endeavors and e-commerce initiatives to deepen the customer reach. Grocery Outlet's adaptable sourcing and distribution business model, allowing it to provide products at a remarkable value, is another positive factor.
The Zacks Consensus Estimate for GO's current fiscal-year EPS has risen by 1 cent $1.05 in the past seven days. GO has an estimated long-term earnings growth rate of 12.3%. This Zacks Rank #2 stock has rallied 16.7% over the past six months.
Kimberly-Clark: This Zacks Rank #3 (Hold) company has been benefiting from its growth pillars, which include a focus on improving its core business in developed markets, speeding up growth in the Personal Care segment in developing and emerging markets and enhancing digital and e-commerce capacities. Also, this personal care and consumer tissue product company's pricing and saving initiatives have been aiding amid cost inflation.
The Zacks Consensus Estimate for KMB's current fiscal-year bottom line has improved from $6.23 to $6.42 in the past 30 days. Kimberly-Clark has an estimated long-term earnings growth rate of 8.2%. Shares of the company have declined 0.2% in the past six months.
Albertsons Companies: This food and drug store company has been reaping gains from its emphasis on delivering effective in-store services, improving digital and omnichannel capabilities and striving for better productivity. The ongoing endeavors by Albertsons Companies to enhance product offerings are consistently improving the overall customer experience. ACI has an estimated long-term earnings growth rate of 8%.
The Zacks Consensus Estimate for ACI's current fiscal-year EPS has increased by a penny to $2.81 in the past 30 days. Shares of this Zacks Rank #3 company have declined 16.1% in the past six months.
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Kimberly-Clark Corporation (KMB) : Free Stock Analysis Report
Albertsons Companies, Inc. (ACI) : Free Stock Analysis Report
Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
Grocery Outlet Holding Corp. (GO) : Free Stock Analysis Report
