Yahoo Finance 4 Consumer Staples Stocks to Buy on a Jump in Retail Sales
U.S. retail sales rose in April as consumer spending continued to increase in the face of economic headwinds, including higher commodity prices. This comes as inflation has lately been showing signs of easing.
However, economic uncertainties prevail, and markets remain volatile. Naturally, people are spending cautiously and primarily on necessities. Given this situation, it would be prudent to invest in consumer staple stocks.
Retail Sales Rebound
The Commerce Department said on May 16 that retail sales grew 0.4% in April after an upwardly revised decline of 0.7% in March. Although the figures came in below analysts’ expectations of a rise of 0.7%, the good sign is that the sector is trying to bounce back from its recent lows.
Core retail sales, which exclude autos and gasoline, jumped a solid 0.6% in April. Seven of the 13 retail categories recorded growth in April. These included solid advances at general merchandise outlets, online merchants and auto dealers.
People also spent more at restaurants. However, sales saw a decline at sporting goods, hobby stores, furniture retailers and appliances and electronics outlets.
One of the major reasons behind the jump in sales is the low employment rate and steady growth in wages. Higher wages are helping consumers spend more freely. Solid job additions to the economy in April helped in the revival of the retail sector.
Also, inflation has been showing signs of easing. The Consumer Price Index (CPI) reading for April showed that consumer prices increased 4.9% year over year compared to 5% recorded in March. This is also the lowest annual rate in two years.
Month over month, CPI increased 0.4% in April compared to a rise of 0.1% in March.
Separately, the Producer Price Index (PPI) reading showed wholesale prices growing 0.2% in April on a month-over-month basis, after declining 0.4% in March. However, it was lower than analysts’ expectations of a rise of 0.3%.
Core PPI, which excludes the volatile food and energy prices, climbed 0.2%.
Despite inflation showing signs of easing, it is still a lot higher than the Fed’s target level of 2%. Moreover, consumers have been spending more lately, but the purchases are primarily basic necessities.
The ideal thing to do in this situation would be to invest in defensive sector stocks, like consumer staples.
The consumer staples sector is fundamentally sound and mature, given that consumer demand for staples typically remains resilient to fluctuations in the economic cycle. The consumer staples sector includes companies that essentially trade in daily necessities. The sector is therefore considered defensive in nature.
Our Picks
The non-cyclical nature of consumer staples’ businesses protects them from the market's vagaries. Additionally, these companies pay out dividends, indicating the strength of their businesses and capacity to weather market volatility.
Krispy Kreme, Inc. DNUT, together with its subsidiaries, operates as a branded retailer and wholesaler of doughnuts, coffee and other complementary beverages and treats and packaged sweets. DNUT’s operating segments include Company Stores, Domestic Franchise, International Franchise and KK Supply Chain.
Krispy Kreme’sexpected earnings growth rate for the current year is 17.2%. The Zacks Consensus Estimate for its current-year earnings has improved 3% over the past 60 days. DNUT has a dividend yield of 0.93%. Krispy Kremehas a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McCormick & Company, Incorporated MKC is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors to the entire food industry across the entire globe. MKC’s key sales, distribution and production facilities are located in North America and Europe.
McCormick & Company’sexpected earnings growth rate for the current year is 3.2%. The Zacks Consensus Estimate for its current-year earnings has improved 1.6% over the past 60 days. MKC has a dividend yield of 1.72%. McCormick & Companyhas a Zacks Rank #2.
Conagra Brands, Inc. CAG is one of the leading branded food companies of North America. CAG offers premium edible products, with a refined focus on innovation. Conagra Brands maintains a highly dynamic product portfolio and incorporates alterations within it as per the preference pattern of its end users.
Conagra Brands’ expected earnings growth rate for the current year is 16.5%. The Zacks Consensus Estimate for its current-year earnings has improved 3.4% over the past 60 days. CAG has a dividend yield of 3.59%. Conagra Brands has a Zacks Rank #2.
Lamb Weston Holdings, Inc. LW is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries, and provides a range of appetizers. LW, along with its joint venture allies, is the top frozen potato products supplier in North America, while it also operates internationally, with a robust and growing presence in emerging markets.
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