Companies in the Zacks Consumer Products – Staples industry are thriving through strategic optimization, with a strong focus on innovation, digital development and catering to evolving consumer preferences like healthier options. These initiatives drive growth and ensure competitiveness. However, rising raw material and labor costs, along with inflationary pressures, pose challenges to profit margins.
Despite these headwinds, demand for essential products remains robust, fueled by increased at-home consumption trends. Companies like Kimberly-Clark Corporation KMB, The Clorox Company CLX, Albertsons Companies, Inc. ACI and Ollie's Bargain Outlet Holdings, Inc. OLLI are well-positioned to capitalize on growth opportunities while managing cost challenges effectively.
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
Maximizing Revenues Through Strategic Optimization: Players in the consumer products space have been refining their operations to optimize revenue generation, which includes a strong focus on enhancing e-commerce and digital initiatives. They are also innovating to cater to evolving consumer demands, such as prioritizing healthier food options, incorporating eco-friendly packaging and leveraging technology to enhance convenience. These efforts not only fuel growth but also help maintain competitiveness in an ever-changing market. Many industry players are reshaping their portfolios by pursuing strategic acquisitions and divestitures, enabling a sharper focus on high-growth areas.
Resilient Demand for Essential Products: The consumer staples industry benefits from steady demand, as it offers products essential to daily life. This stability persists even during economic fluctuations. Demand for many staples has increased compared to pre-pandemic levels due to the rise in at-home consumption. With many Americans continuing to work and eat at home, this trend is expected to stay. Macroeconomic challenges like high inflation have driven consumers to cut back on discretionary spending and dining out, favoring home-prepared meals. These factors help maintain a strong demand for staple goods.
Encountering Rising Costs in a Challenging Landscape: The consumer goods industry is facing tough times due to high raw materials, labor and transportation costs. These rising expenses can put a squeeze on profit margins, especially if companies struggle to pass these costs on to customers through price increases. Adding to the strain is higher spending on selling, general and administrative (SG&A) expenses, as well as investments in digital upgrades and expanded marketing efforts. However, many companies are implementing restructuring initiatives and cost-saving measures to alleviate some of these pressures and protect profitability.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Consumer Products – Staples industry is housed within the broader Zacks Consumer Staples sector. It currently carries a Zacks Industry Rank #80, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates robust 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.
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 while outpacing the broader Zacks Consumer Staples sector over the past year.
The industry has risen 7.8% over this period compared with the S&P 500 Index’s growth of 26.2%. Meanwhile, the broader sector has declined 0.9%.
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 staple stocks, the industry is currently trading at 23.68X compared with the S&P 500’s 25.08X and the sector’s 17.83X.
Over the last five years, the industry has traded as high as 25.23X, as low as 19.6X and at the median of 22.37X, as the chart below shows.
Price-to-Earnings Ratio (Past Five Years)
4 Consumer Product Stocks to Keep a Close Eye On
Clorox: This consumer products company remains well-poised on a solid innovation pipeline, digital transformation, and pricing and cost-saving initiatives. Clorox has completed the implementation of a streamlined operating model. This new structure is expected to generate ongoing annual cost savings of approximately $100 million, significantly enhancing operational efficiency. CLX’s IGNITE strategy is well on track to achieve long-term financial targets.
The Zacks Consensus Estimate for Clorox’s current fiscal-year earnings per share (EPS) has increased from $6.85 to $6.87 in the past 30 days. This suggests growth of 11.4% from the year-ago period. Shares of the Zacks Rank #2 (Buy) company have rallied 14.8% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: CLX
Albertsons Companies: The food and drug store operator is well-positioned for long-term growth, courtesy of its "Customers for Life" strategy, which prioritizes customer-centric initiatives. The Zacks Rank #2 company’s commitment to improving in-store services, bolstering digital and omni-channel capabilities and enhancing productivity aligns with this strategy. Efforts to boost assortments, especially in the fresh and Own Brands categories, continue to elevate the customer experience.
The Zacks Consensus Estimate for Albertsons’ current and next fiscal-year EPS has increased by a penny each to $2.27 and $2.33, respectively, in the past 30 days. Shares of ACI have fallen 13.5% in the past year.
Price and Consensus: ACI
Ollie’s Bargain: This Zacks Rank #2 company excels in offering a wide range of brand-name products across multiple categories at significantly reduced prices. The company’s business operating model of buying cheap and selling cheap, cost-containment efforts, focus on store productivity and expansion of the customer reward program, Ollie’s Army, reinforce its position in the industry. Growing trade-down trends and favorable responses to deals with product offerings appealing to a broader customer base have also been contributing to its performance.
The Zacks Consensus Estimate for Ollie’s Bargain’s current fiscal year EPS has increased by 2 cents to $3.29 over the past 30 days. This calls for growth of 13.1% year over year. OLLI has seen its shares soar 57.3% in the past year.
Price and Consensus: OLLI
Kimberly-Clark: This Zacks Rank #3 (Hold) company’s Powering Care Strategy drives its transformation by focusing on growth, operational efficiency and streamlined organizational alignment. Through this strategy, Kimberly-Clark concentrates on three main areas: accelerating innovation, optimizing margin structure and restructuring for growth. KMB’s transition to a volume-and-mix-led growth strategy is also yielding results.
Apart from this, Kimberly-Clark is focused on productivity gains to counter inflationary pressures and currency fluctuations, aiming to maintain gross margin targets through strategic cost management and efficiencies. The Zacks Consensus Estimate for KMB’s 2025 bottom line has risen by 2 cents to $7.57 in the past 30 days. This suggests growth of 3.6% from the year-ago period. Shares of this consumer products giant have jumped 7.6% in the past year.'
Price and Consensus: KMB
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