*Disclosure: I don't hold or plan to trade any of the securities mentioned in this blog within the next 48 hours.
This week I will show you the latest retail data in the chart below on three retail segments of the consumer staples industry versus the rest of the U.S. Census Bureau's Retail Trade and Food Services Sales segments on the secondary axis.
In terms of consumer staples retail sales, health and personal care stores have the slowest growth while warehouse clubs and superstores grew rapidly from 1992 through 2008. In all cases the consumer staples retail sales aren't as volatile and significantly impacted by recessions as the rest of the retail trade and food services segments. Consumers will always purchase essential retail goods. Although the sales consistency of consumer staples companies are relatively boring investors will feel more secure owning them during recessions.
In terms of consumer staples retail sales, health and personal care stores have the slowest growth while warehouse clubs and superstores grew rapidly from 1992 through 2008. In all cases the consumer staples retail sales aren't as volatile and significantly impacted by recessions as the rest of the retail trade and food services segments. Consumers will always purchase essential retail goods. Although the sales consistency of consumer staples companies are relatively boring investors will feel more secure owning them during recessions.
The below chart shows the latest estimate of the Consumer Staples Select Sector SPDR ETF (XLP), my proxy for the consumer staples industry. With the stock market reaching new highs this week, my model increases the estimated price of XLP a few cents from $51.24 last week to $51.48 this week. The National Retail Federation's 4.1% retail sales growth 2015 projection provides a little bit of growth as the model predicts XLP's price will reach $52.83 by year end.
I saw three interesting articles today regarding the consumer staples industry that may impact XLP's performance.
I saw three interesting articles today regarding the consumer staples industry that may impact XLP's performance.
- U.S. west coast seaports are finally open as labor issues between dockworkers and their employers are resolved. This negatively affects both retail and inventory data from November to February and will probably boost March's data.
- Proctor & Gamble (PG), the largest holding in the Consumer Staples Select Sector SPDR ETF (XLP) announced they are divesting 100 brands. This will definitely impact PG's sales in the near term but the magnitude of impact on XLP will depend on whether other companies in the ETF will absorb the brands.
- The FTC is blocking Sysco's (SYY) acquisition of US Foods. Had the deal gone through we would expect Sysco's weight in XLP to increase.
The Consumer Staples Industry Investment Model uses merchant wholesaler data and stock market performance to estimate XLP's price. Merchant wholesaler data is highly correlated with retail sales data, but wholesaler data provides a better fit with XLP's performance.
This is it for this week's review of the consumer staples industry. For more information on the model please visit my website's Consumer Staples Industry Investment Model's page.
This is it for this week's review of the consumer staples industry. For more information on the model please visit my website's Consumer Staples Industry Investment Model's page.